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1st appeared 1 September 1999 Audit Reveals Benefits and Challenges of UCSF Stanford Merger The California State Auditor issued a report Tuesday on UCSF Stanford Health Care, suggesting potential benefits, as well as revealing shortcomings, of the two-year-old merger. The report, titled "The New Entity Has Not Yet Produced Anticipated Benefits and Faces Significant Challenges," states that UCSF Stanford could generate $47 million in operating income over the next two years if its hospitals remain merged and the cost reduction and performance improvement efforts succeed. "The audit report confirms the tremendous financial pressures on our academic medical centers and UCSF Stanford Health Care's potential to respond if the merger is given sufficient time to succeed," said UCSF Stanford board members Isaac Stein and Howard Leach in a statement. "In particular, we note the auditor's conclusion that in the next two years with the successful implementation of the cost reduction plan and other performance improvement efforts, the merger could result in a $47 million net operating gain compared to a collective loss of up to $93 million if the hospitals were operated separately." The 80-page audit report also made the following conclusions:
"We estimate the merger contributed $19 million in losses during the first two years, but it may generate $140 million in profits in the next two years if portions of the $270 million in revenue enhancements and cost savings that we allocated to the merger are achieved," the auditor stated. The auditor concluded that the merger led to a loss that's greater than the loss that would have been incurred if the hospitals had operated separately during the first two years -- $27 million separately versus $46 million merged. Under the auditor's calculations, the merger resulted in an additional $19 million loss. However, the report includes in its analysis the merger-related expense of $17 million a year of new pension costs due to the move of UCSF hospital staff out of the University of California's fully funded pension plan. If that expense were not included, the merger would have performed better in the first 22 months than the hospitals separately, according to the auditor's estimates. The report acknowledges UCSF Stanford's commitment to patient access to health care, quality of health care and support of community programs. "Based on several indicators, patients in the Bay Area appear to have more access to care since the merger," the report states. "Furthermore, a survey of 25,000 patients and referring physicians conducted by the hospitals indicates that patient satisfaction with the quality of care appears just as high as it was before the merger. In concert with its emphasis on access and quality of care, (UCSF Stanford) continues to furnish services to the low-income and vulnerable populations in the community." The report includes three chapters, two appendices (which include charts and graphs), and a UCSF Stanford response to the audit. Titles of these sections are:
The state auditor has made the 80-page report, as well as a summary, available on the web at www.bsa.ca.gov/bsa/summaries/99128sum.html. Links: |
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