Facing New Demands, UCSF Looks to Grow Patient Access and Provide Better Value

By Dan Fost

Mark Laret, chief executive officer of UCSF Medical Center and UCSF Benioff Children's Hospital

Overcoming financial challenges that take a budget balance sheet from the red into the black is nothing new to Mark Laret, chief executive officer of UCSF Medical Center and UCSF Benioff Children’s Hospital. He’s been there, done that.

Laret came to the University in 2000, in the aftermath of the de-merger with Stanford Health Services. Back then UCSF Medical Center suffered a $60 million annual loss. Laret executed a remarkable turnaround that, within five years, produced a $70 million annual gain.

Strong financial performance ever since has enabled the self-supported, nonprofit medical center to pursue an ambitious expansion at Mission Bay and ongoing modernization of its facilities, equipment and electronic medical records system at Parnassus and Mount Zion that contribute to advances in quality of care, patient safety and patient satisfaction.

Now, with impending opening of UCSF Medical Center at Mission Bay and the implementation of the federal Affordable Care Act (ACA), UCSF is facing new demands at every level of its health care delivery system. These challenges — including projected Medicare reimbursement cuts to hospitals every year through at least 2020 — require Laret and his leadership team to once again steer the medical center through turbulent times. 

“It will be hard,” Laret says of the few years ahead. “We will add new employees at Mission Bay before we have additional patients. That means we will have additional expenses before we have the revenue to offset them.”

In addition, when the new medical center at Mission Bay opens, it will require new staff to serve the women, children and cancer patients and their families when the doors open on Feb. 1, 2015. Not only will the new hospital complex cost $1.5 billion to build and equip, but like a new car, it will also depreciate as soon as it opens.

Laret says that means the medical center will begin carrying $100 million in additional expenses on its books next year — $80 million in depreciation, and $20 million in interest payments.

UCSF’s other hospitals, at Parnassus Heights and Mount Zion, will move practices and patients to Mission Bay, and their reconfigured spaces and programs will take time to be remodeled, reach capacity and generate income.

On top of those issues, Laret says, new laws and regulations bring further new costs to the clinical enterprise.

Using Systems of Modern Management

The medical center is taking the imperatives of the ACA to heart, Laret says. He is using systems of modern management, including those pioneered by Toyota in its manufacturing process, to implement continuous process improvement and bring greater efficiency to the clinical enterprise operations. 

These efforts are getting recognized. Fiatech, an international consortium focused on improving the design, engineering, construction, and maintenance of large capital projects, honored the Medical Center Design and Construction team with its Celebration of Engineering and Technology Innovation — or CETI — Award for using computer modeling and other innovative measures to reduce construction costs by more than $100 million without reducing the scope of the project.

Once operational, UCSF Medical Center at Mission Bay will make extensive use of the latest technology. UCSF already uses a robotic pharmacy, which has reduced errors in dispensing medicine. The new medical center will add robotic carts that will deliver food and linens to patient’s rooms. The new hospital complex also will have the ability to use videoconferencing technology to provide faster, more efficient access to a variety of interpreters.

“Lower cost, higher quality — that’s the general theme,” Laret says as he looks to the future.

The new hospital at Mission Bay will be a major component of UCSF’s vast clinical enterprise, which accounts for $2.164 billion — more than half of UCSF’s $4.14 billion revenue for 2013-2014. The clinical enterprise comprises two major sites at Parnassus and Mount Zion campuses, as well as a large number of specialists who see patients of all stripes. The medical center and UCSF Benioff Children’s Hospital together have 722 licensed beds and generate about 763,000 outpatient visits per year. 

Drawing More Patients to UCSF

Laret and School of Medicine Dean Sam Hawgood, MBBS, who will take on the role of interim chancellor on April 1, are leading a clinical enterprise strategic plan, and one top priority will be to grow patient volume to recoup the costs of opening up the medical center at Mission Bay as soon as possible.

In a recent effort to bring scale and efficiency, UCSF Benioff Children’s Hospital and Children’s Hospital & Research Center Oakland (Children’s Oakland) affiliated, effective Jan. 1, 2014. The hospitals will not only work together to care for children and advance medical discovery and treatment, but the new partnership will also strengthen their abilities to meet marketplace expectations, including changes coming under the ACA, also known as Obamacare. 

“We are small relative to other hospitals of our stature nationally,” Laret says of the medical center. “Scale matters in these facilities. We can become more economically efficient if we can care for more patients with the same small management and IT infrastructure.”

At UCSF, Laret also is looking to boost business in areas where the medical center’s clinical expertise is greatest as having potential to draw more patients to “destination” services in San Francisco.

“We have very strong programs in organ transplantation, neurosurgery and neurosciences in general, children’s and women’s health, and cancer,” Laret says. “Strategically, we’d like to make those programs even more desirable for health plans and physicians to refer patients to us, and for people to come here on their own.” 

Among the ways he hopes to accomplish that are improving access, so that patients don’t have to wait so long to see the doctor of their choice, and reducing costs, so that insurers will have a greater incentive to send patients to UCSF. And he plans to continue to “focus on our outcomes. We do have terrific results to share.” 

The medical center is working with the schools of medicine and pharmacy to create a group of health care providers who come together to give patients coordinated high-quality care, which reduces duplication and saves costs. 

Similarly, the schools of medicine and pharmacy, have teamed up to respond to health delivery changes prompted by the ACA and a recent state law enabling pharmacists to become health care providers. This week, UCSF opened a Walgreens store on the Parnassus campus to explore new models for improving care. The collaboration builds upon Walgreens’ leadership in pioneering new approaches to pharmacy care, as well as UCSF’s long history of collaboration in teaching, research and patient care between the School of Pharmacy and UCSF Medical Center, which together piloted the first hospital-based clinical pharmacy program in the nation, in the 1960s.

“These kinds of programs hopefully will provide stability in our clinical enterprise, which will allow us to free up resources to put into the research enterprise,” says Jeffrey Bluestone, PhD, executive vice chancellor and provost at UCSF.

The clinical enterprise and research enterprise are operating in much closer alignment, focusing on how to implement a new clinical enterprise strategic plan in the near term and in the long term, the UCSF 2.0 initiative which focuses on emerging fields such as precision medicine, which encompasses virtually the entire spectrum of UCSF — from basic science to patient care. 

“Being able to determine our joint investment strategies is a strength we have,” says Hawgood, who as interim chancellor will lead the University as it pursues the big and bold ideas generated in UCSF 2.0.