It was an unprecedented merger of private and public university medical centers, a marriage designed to help both sides weather the financial pressures of managed care. But the two-year-old partnership between the prestigious Stanford and UC-San Francisco medical centers has turned rocky. In July, financial analysts predicted a $60 million loss for UCSF Stanford Health Care in fiscal 1999. In August, the corporation's two top executives resigned to clear the way for a reassessment of the venture.
The departures of chief executive officer Peter Van Etten and chief operating officer Bill Kerr came less than a week after the presidents of the two universities announced plans to "reassess the structure" of the merged hospital system. In an August 3 letter to the chair of the corporation's board of directors, Isaac Stein, Stanford President Gerhard Casper and UC President Richard Atkinson said they had asked their staffs to review by October 1 the merger of Stanford's patient care services (Stanford Hospital, Stanford Clinics and Lucile Packard Children's Hospital) with UCSF's Parnassus Heights and Mount Zion facilities.
The best way to overhaul the separate, not-for-profit corporation still is not clear. "We are talking about restructuring rather than dissolving," said UC Vice President William Gurtner. One thing seems certain: there will be major changes. The Hunter Group -- a Florida-based health care consultancy with a reputation for cost-cutting -- will run the hospitals in the interim.
The shake-up followed weeks of highly publicized bad news about the corporation's financial health. The shortfalls, first announced in February, have forced UCSF Stanford to trim 2,000 of its 12,500 jobs and have threatened the survival of UCSF 's Mount Zion Hospital -- a prospect that has enraged San Francisco politicians. Lawmakers have ordered a state audit. Critics have suggested that the merger should be dissolved. Short of that, restructuring could allow UCSF to accept public funding for Mount Zion, which is responsible for nearly all of the anticipated loss.
So what brought on the change in fortunes? Hospital officials have blamed lower reimbursements from Medicare and Medi-Cal. Others note that the expected efficiencies didn't materialize because UCSF Stanford had to add a layer of managers to run the combined operation. In a presentation before a committee of the uc Board of Regents, Warren Gold, a merger critic and professor of medicine at UCSF, blamed simple mismanagement. "Instead of efficiency, there was waste," he said in July.
An important factor in the present trouble may be that the industry problems that prompted the merger in the first place have worsened. With this in mind, the two university presidents say, the answer is therapy -- not divorce.
