Mark Laret
Mark Laret, chief executive officer of UCSF Medical Center, says that despite the major challenges facing academic medical centers, he and others working in the UC health care system are inspired by "the knowledge that we are making a difference in people's lives."
Laret was among the UC officials to testify on Sept. 15 before State Senator Jackie Speier (D-SF) and her colleagues in the Senate Education Subcommittee on Higher Education during an informational hearing on the UC academic medical centers at UCLA Medical Center.
The purpose of the hearing was to highlight the role of UC's academic medical centers and the obstacles faced in the light of cost pressures from public and private payers, increasing care of the uninsured and balancing teaching and research with the delivery of patient care.
This was the second informational hearing that the Senate Education Subcommittee on Higher Education has held at the University of California. Senator Speier will hold three more hearings across the state and submit recommendations and observations at a press conference in January 2006.
UC medical centers are the fifth largest health care delivery system in California and the leading provider of certain specialty services and medical procedures. Annually, the five UC academic medical centers provide patient care services valued at more than $3.3 billion. At all five medical centers, Medicare, Medicaid and uninsured patients make up more than half of all patients.
Here is Laret's entire speech.
It's a special honor for me to be here today, and to be part of the University of California. I'm a native Californian who attended public schools, graduating from this very UC [Los Angeles] campus in 1976. I have enjoyed a tremendously gratifying career in the University since 1980, working side by side with the brightest, most dedicated and genuinely caring individuals: 15 years at UCLA Medical Center, five years at UC Irvine Medical Center and the past five years at UCSF Medical Center. Because of the investment our State has made in the UC system, we are not only the shining star of all higher education but the national standard for medical research, education and patient care.
I would also like to specially thank Senator Jackie Speier for hosting this event. Jackie, no one in the legislature is more knowledgeable, principled or energetic when it comes to health care issues. You appreciate the importance of the UC academic medical centers to the State's health care system and economy, and we deeply appreciate your leadership.
My assignment today is simple: To discuss the challenges facing the UC medical centers. I asked my UC colleagues to give me their list of challenges, and to do their items justice I would need about six hours - but instead I'll do my best in 15 minutes.
In fact, I have condensed my list of challenges to a top ten list: the first six apply to the challenge that every CEO of every not for profit hospital in California faces, including the UC medical centers; and the final four relate specifically to the challenges facing the University of California academic medical centers. Let's get started.
Challenge number one is the big one that envelops everything else: society - including federal, state and local governments - is confused about what it wants hospitals to do and be. On one hand, society expects hospitals to run like businesses; be efficient, cut waste, make the tough decisions to raise prices, or reduce labor costs, or stop providing services that aren't profitable. On the other hand, at exactly the same time, society expects hospitals to keep their doors open to everyone who comes through our doors, to write off the accounts of those who cannot (or sometimes choose not) to pay, to have enough spare beds and staff to be ready in case of a disaster, and to spare no cost when it comes to providing medical services even when the outcome is highly doubtful.
Every day, every hospital CEO faces difficult resource allocation choices. A big one facing many hospitals today is whether to continue to provide emergency services that the community needs even though it is causing the hospital to spill red ink, meaning layoffs, the shutdown of other vital services or even threatening the viability of the hospital. Until the United States as a society comes to a common ethic about health care - and appropriates resources consistent with that ethic -- hospitals will struggle to simultaneously satisfy fundamentally competing expectations about our business.
Challenge number two is more pragmatic, and that is assuring that we have enough workers to staff our hospitals. At UCSF Medical Center, like many hospitals across California, the number of patients we care for has soared over 20 percent in 5 years. As a result, we have a severe shortage of nurses, but also pharmacists, laboratory technicians, radiology technologists and a host of other specialized allied health care professions. We have taken many stopgap approaches - UCSF and other hospitals in the Bay Area are paying SFSU [San Francisco State University] to keep its medical technologist program open; and all the hospitals are supporting the nursing education programs as well. But at the same time, hospitals are competing with each other for the same few staff, so we keep bidding up the salaries. UCSF's latest offer to our nurses would take the pay of an entry-level nurse - two years of college, not a BA - to a base of $91,000 by 2007. Our aging population is creating demand faster than we are producing these health care professionals, and we desperately need help from the state in order to avert what is a looming health care people-power crisis.
Challenge number three is how to absorb the costs of new, medically necessary technology. The advances in imaging technology in the past decade are stunning: CT, MR and PET (invented by UCLA faculty member Mike Phelps, incidentally) have changed the standard of care such that most "exploratory surgery" is a thing of the past. Yet the cost of purchasing and installing any one of these pieces of equipment is usually in excess of $5 million and can often approach $10 million. Installing an electronic medical record system, sorely needed to prevent medical errors and reduce the paperwork burden, is also extremely expensive. At UCSF, we will spend in excess of $60 million to bring our system up.
Challenge number four is the counterpart of challenges two and three: How do we pay for the people and equipment that hospitals must have in order to provide the care the public needs and wants? Put yourself in the CEO's chair of any hospital in California and here is what he or she sees: On the expense side, labor costs, drug costs and equipment costs are going up fast. On the revenue side, there are only three sources:
• First, Medicare is either paying less than hospital costs or barely covering hospital costs, and there are frequent rumblings that hospitals should expect a major cut in Medicare payments to offset some of the federal budget deficit.
• Second, Medi-Cal has always paid hospitals less than the cost of care - expecting that hospitals would make up those losses from other payers.With California's new Medi-Cal waiver, none of us really knows what is going to happen with current Medi-Cal payments that fail to cover hospital costs, but most CEOs are simply hoping that Medi-Cal payments don't get worse.
• And the third source is commercial insurance. As employers have pressured the insurance carriers to reduce premiums charged to the employers, the insurance plans (some recording record profits, incidentally) pressure hospitals to accept lower rates. Further, some employers and health plans are asking their employees to pay more of their portion of the hospital bill. Unfortunately, this usually means that hospitals have to write off many of these dollars. So as CEO, you find yourself wondering how you can cobble together enough cost-plus paying patients to offset the patients whose insurance does not cover costs, and keep your hospital financially viable and able to provide quality medical care. This is a major challenge faced by every hospital in the state.
Challenge number five is the increasing number of uninsured people. As companies shed pensions and benefits in order to remain competitive, nearly every hospital including UC medical centers is caring for more patients who do not have, nor qualify for any coverage. Hospitals need two things from the state: first, getting coverage for more individuals; and second, an end to disingenuous tinkering with Medi-Cal or section 17000 qualification requirements that the state and many counties have engaged in over the years to remove Medi-Cal beneficiaries from the rolls by changing documentation or reporting requirements, with the ultimate goal being to reduce the costs to the state or counties. In the end, these costs do not go away and the burden is quietly shifted instead to hospitals.
And challenge number six is the seismic upgrade requirements that most hospitals face. The $25 billion price tag to retrofit or replace hospitals that was staggering a few years ago has now soared out of sight as construction costs have increased so extraordinarily in the past few years. As I told the Assembly Health Committee this summer when I testified in support of Senator Speier's enlightened bill on this issue, I know firsthand what it is like to live through a "big one" - I was the administrator on call of UCLA Medical Center during the Northridge earthquake. However, if we are serious about using precious capital dollars to best serve the health care needs of Californians, I share Senator Speier's view that there are many higher and better uses. That having been said, without immediate relief of the 2013 SB1953 requirements, UCSF Medical Center and many other hospitals must find and spend hundreds of millions of dollars now, at the height of the construction market, in competition for architects, contractors and trades in order to begin and complete construction by the 2013 deadline.
The final challenges are unique to the UC academic medical centers.
Challenge seven relates to our complex missions and funding. It is simply more complex to run a hospital where hundreds of students and residents are training and hundreds of clinical trials and protocols are taking place. At the UCSF Medical Center new employee orientation every month, I ask where the $3 million we need each and every day of the year to run our medical center comes from. Some will say patients, some will say grants, and some will say the state. I explain that grants go to the medical schools, and that the state provides UCSF medical center with $9 million to support teaching - in other words, three days of our operation. For the other 362 days, our revenue comes from seeing patients just like any other self-supporting not-for-profit hospital - except that we have a more complex mission. We must balance the needs of patient safety and quality - that always comes first -- with the voracious and increasing demands of the medical education and clinical research missions. Some day, it is likely that we will need the medical education functions to be funded independently when those costs can no longer be absorbed by clinical revenue.
Challenge eight is reimbursement problems associated with providing high-end medical care. I'll provide two examples: for years, Medicare has paid a single amount for a hip replacement, whether or not the hip replacement was a simple one being done for the first time, or a complex one that was being replaced or was infected. The costs associated with the complex cases could be as much as double those of a simple case, yet the payment was the same. So UCSF and every UC medical center receive many, many referrals of complex hip replacement cases from community hospitals. We'd like to believe it is because community physicians and hospitals recognize the skill level we have in dealing with these cases, but we know that economic factors are at play as well.
A second example of these reimbursement problems was a hemophiliac patient referred to us from a community hospital for surgery. UCSF has special expertise in this area and no other hospital would accept this patient. This patient, in his 40's, was allergic to normal blood clotting factors, so our physicians needed to use the hypoallergenic Factor 7 manufactured by Novo Nordisk. Three weeks after the patient was sent to UCSF at death's door, he was discharged but much alive from UCSF. However, UCSF had to pay over $1.5 million for the blood clotting factors that helped keep this patient alive. The patient was covered by Medi-Cal, where our reimbursement came in at less than $70,000 for every aspect of his care, including the blood clotting factor. Obviously, this kind of situation is not sustainable in the long-run, but it is reflective of a more generic problem where life saving technology is out in front of the reimbursement system.
A ninth challenge relates to the UC medical centers' role as referral centers; that is, we take the most costly, complex patients. That is a role, and a responsibility to the physicians and citizens of California, we eagerly accept. Over the years however, we believe that some hospitals have taken advantage of our open doors and the regulatory rules governing transfers of patients to send patients to us for reasons that appear to be more economic - that is, for insurance reasons - than quality of care related. While the regulatory rules governing these problems are mostly federal, it is a challenge mostly particular to the UC medical centers.
The tenth challenge is that the UC medical centers find themselves overwhelmed with demand for our beds and services. We know that some of this is the result of our aging population, and patients we are keeping alive, who a few short years ago, might not have lived. We also believe that many community hospitals and physicians are appropriately referring more complex patients to major referral centers that specialize in complex care. And many patients are informing themselves, and asking where the "best" hospital is to have a procedure done. The results of all of this have been an unprecedented volume of patients. Each of the UC medical centers is doing its best to cope with this demand, and at UCSF, we are trying to add additional beds as quickly as we can to meet this demand.
Having listed all of these concerns that we deal with every day, I want to tell you that what inspires each and every one of the tens of thousands employees and physicians in the UC medical centers it the knowledge that we are making a difference in people's lives. Every day, there are hundreds of truly heartbreaking stories of terminally ill children, or lives tragically shortened by terrible diseases. But what inspires all of us are the even greater numbers of people whose lives were saved -- like the inspired story from the UCLA liver transplant patient this morning -- or lives dramatically improved because of the medical technology we invented, or the brilliant clinicians or caring staff who nursed patients through their darkest hours. In short, those of use who work in these UC academic medical centers will do whatever it takes to work through the challenges I just described -- one way or the other, with or without help from the federal, state or local governments - because every day we are reminded why we come to work every day.
Thank you, Senator Speier.
Source: Lisa Cisneros
Links:
UCSF Medical Center
More on Mark Laret
