The University of California Board of Regents has approved the creation of a board for a private, not-for-profit corporation to oversee the planned merger of UC San Francisco and Stanford University medical facilities.
Earlier this month, Stanford threatened to call off the proposed merger because of mounting opposition from the regents and a coalition of unions representing University of California employees (July 8, p. 18).
In June, the unions filed suit in Superior Court in San Francisco seeking an injunction barring the regents from moving ahead with plans to privatize UCSF Medical Center and five other university medical centers in the state. Opponents said taxpayer assets should not be turned over to a private company and cited reports that Stanford's hospitals were losing money. The suit is pending.
But the regents voted 14-4 to approve a 17-member board of directors for the new organization, with equal representation from UCSF and Stanford. The board also would have a chief executive officer, a medical officer and three outside directors.
The board would make reports on its finances and programs to the regents and Stanford trustees to provide accountability.
"The single purpose of the nonprofit public benefit corporation would be to generate revenue for the UCSF and Stanford medical schools and their missions of teaching, research and public service," according to a written statement issued by the regents.
Officials at Stanford, a private university, wanted to form a private corporation and did not want the new organization subject to state open-meeting and conflict-of-interest laws.
In addition, Stanford said a private organization would have more flexibility and the ability to make quick decisions. "The ability to be quick on your feet in this market is very important," said Stanford spokesman Terry Shepard.
"Reports that Stanford lost money are inaccurate," he said. In one recent year, an accounting change was made to write off some bad debt, he said. Apart from that, Stanford has been in the black, "and we're having a pretty good year this year," Shepard said.
In 1994, Stanford lost $14.7 million on $4l6.7 million in net operating revenues, according to HCIA, a Baltimore-based healthcare information company.
"Operating costs are one thing," Shepard said. But Stanford's hospital endowment and investment income contribute to its bottom line and will transfer to the new organization, he said.
Objections to public assets being turned over to a private organization are "off the mark," he said. The assets are going to a public benefit corporation to which Stanford will be contributing hundreds of millions in assets. The medical schools will remain separate. At the beginning, the organization will only be leasing most of the assets and the title will remain with the university, he said.
"As sole members of the (new) corporation, UC and Stanford would have the right to terminate it if they thought it wasn't working or if the assets were being misused," Shepard said.