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UCI Medical Center Seeks Prescription for Fiscal Health

UC IRVINE MEDICAL CENTER Excellence and Red Ink Last of series

June 15, 1985|BILL BILLITER and MARCIDA DODSON | Times Staff Writers

SACRAMENTO — Amid the gloomy talk of debts and emergencies, suddenly there was laughter in the Assembly committee room.

Witnesses had been testifying about the mounting deficit at the UCI Medical Center--a debt expected to be close to $10 million by June 30. The money problems, said the witnesses, were legion. What to do?

"Maybe," said Tom Dooley, of the legislative analyst's office, "maybe we can get Humana interested in buying it."

Dooley's reference to the profitable Louisville-based Humana Inc. hospital chain was in jest, and the joke produced the round of laughter from UC officials and legislators in the hearing room.

But the idea of a for-profit hospital chain at least managing one or more of the University of California's debt-ridden medical centers is not being laughed at by all state officials. These officials note that permanent solutions are needed for the chronic money problems at teaching hospitals operated by the University of California at Irvine, Davis and San Diego.

And despite statements by some UC regents in opposition to commercial operation of university hospitals, officials at UCI Medical Center have been quietly investigating the possibility of a private, for-profit hospital chain leasing and managing its aging hospital complex in the city of Orange.

American Medical International, one of the largest hospital chains in the nation, has confirmed that it is talking with UCI Medical Center.

"We've had discussions with UC Irvine, and we continue to do so," said Dr. Marvin Dunn, an AMI vice president. "We're very flexible."

AMI, with corporate offices in Beverly Hills, is one of several hospital corporations that have been talking to UCI Medical Center, Dunn said. Leon Schwartz, the medical center's acting director, declined to name others UCI has contacted.

But AMI appears to be the chief contender. The hospital chain announced Friday it has agreed to build a new $86-million, 177-bed community hospital in Irvine and that the commitment only increases the hospital chain's interest in securing a possible lease-management arrangement for the money-troubled UCI Medical Center in Orange.

"We at AMI were the first to get into ownership of former academic hospitals," said Royce Diener, chairman and chief executive officer of AMI. "That occurred when we bought St. Joseph's Hospital in Omaha (Neb.), the teaching hospital of Creighton University there."

An increasing number of university-owned teaching hospitals in the nation have either been sold--or the management has been turned over--to for-profit corporations. In addition to Creighton University, hospitals that have moved to for-profit chains, or are in the process, include the University of Louisville (Ky.), University of Kansas at Wichita, and George Washington University (Washington).

"Until recently, few academic health centers would have considered being owned or leased by an investor-owned chain. Those now negotiating admit that the most pressing reason for their new, more friendly attitude is access to capital . . . ," Medicine & Health Perspectives, a Washington-based industry newsletter, said in its March 4 edition.

UCI Medical Center, according to Schwartz, badly needs funds to build and renovate, but he said no decision had been made on the issue of having a private group take over management and operation of the hospital. Sale of the hospital isn't considered likely.

Former medical center director William Gonzalez said that a key goal in the university's talking to private hospital chains was to see if they could pump in capital for building and renovations.

Added UCI Chancellor Jack Peltason: "The situation (at UCI Medical Center) will not substantially improve until we improve our physical facilities. That will require about $25 million to $30 million."

UCI Medical Center cannot immediately count on state government for all that renovation money, university officials point out. Gov. George Deukmejian's 1985-86 budget calls for about $10 million for building and renovation at the three debt-plagued UC medical centers. But that $10 million must be divided among the medical centers at Irvine, San Diego and Davis.

"It's only a part of what we need," said Gonzalez, who is now Chancellor Peltason's special assistant.

Nonetheless, the governor's so-called "bailout bill" for the UC medical centers is the only solution UC is publicly discussing. The state Senate added $1.6 million to the $10-million building and renovation money Deukmejian proposed; another $15 million is in Deukmejian's hospital "bailout bill" to cover operating debts of the medical center. The total bailout is thus $26.6 million.

Dooley, of the Legislative Analyst's Office, told the Senate that the $26.6 million might keep the ship afloat a while longer. But he warned that the hospitals' money leak is bigger than the bailout.

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