The University of California is backpedaling as fast as it can to get out of the business of providing healthcare to indigent people.
The university now believes that the safety-net function of its hospitals in Sacramento, San Diego and Irvine is the "single greatest risk to its educational mission," said William H. Gurtner, vice president of clinical services development for the nation's largest public university.
"If institutions are in economic trouble, where is it written that the University of California as an educational organization is responsible to supplement what the government has not taken on?"
What is happening in California can serve as a primer on what may happen to county hospitals across the country as states commercialize the Medicaid market.
The university operates eight hospitals in California, and several are in the process of altering their governance, market position or mission.
By July, UC San Francisco Medical Center will merge with Stanford University Hospital to form University of California Stanford Healthcare System. UC Irvine Medical Center in Orange County is discussing a possible affiliation with either Columbia/HCA Healthcare Corp. or Tenet Healthcare Corp. UC Davis Medical Center in Sacramento has bought an interest in an HMO with Sacramento-based Mercy Healthcare called Western Health Advantage. It has a license to serve patients of Medi-Cal, California's Medicaid program.
Only UC Los Angeles Medical Center is really thriving, Gurtner said, because it has a lot of managed-care contracts and a stable market position.
UC San Diego Medical Center lost $23 million in 1995 and was projected to lose an additional $26 million in 1996. Instead, over the past 12 months it reached a break-even point in "a very painful . . . experience," Gurtner said in a speech at a recent conference of the California Association of Public Hospitals and Health Systems in Santa Monica.
In California, counties are legally obligated to care for the poor. Some of those counties operate hospitals, which now are at risk because the marketplace has segmented their traditional revenue streams.
Many county hospitals have been struggling to stay solvent since the state commercialized the Medicaid market by inviting private providers to bid on serving that patient base. County hospitals had used Medicaid reimbursements to cover the care delivered to the uninsured, of whom there are an estimated 6.5 million to 7 million in the state. Now the county facilities must compete for Medicaid patients against more experienced and better capitalized private organizations.
In certain counties, including Orange, Sacramento and San Diego counties, the responsibility of treating the indigent has been passed to the UC hospitals.
The proper mission of the university in healthcare is teaching and research, Gurtner said. If the state won't reimburse University of California hospitals for taking care of the poor, or if it encourages private operators to penetrate the insured part of that population, then the university will have to retrench to preserve its essential mission.
Denise Martin, president of the California Association of Public Hospitals and Health Systems, commented: "If the UCs truly get out of the business of providing indigent care, we'll have an opportunity to see whether the remaining private-sector providers-profit and nonprofit alike-are prepared to provide a much larger share of care to the medically indigent and uninsured than they do now. We'll see whether the champions of privatization and market-driven reforms are right in their assumption that the private sector can do it better."
Gurtner said as market segmentation leaves the public hospitals high and dry, private operators will hear the following argument: "If you take part of the business, take it all."
Public and academic medical centers continue to confuse their mission and responsibility with bricks and mortar, Gurtner said. "We continue to define our lives around buildings. And it will kill us."
One of the complications for public hospitals is that they are not separate from the political realm. "In the political mind we are first and foremost employers, not deliverers of healthcare," he said.
High unionization means workers can organize protests and try to sway public opinion if they don't like what is happening, he added.
The California Nurses Association, for example, has filed suit to block the merger of UCSF with Stanford.
The first six months of the combined operation will probably have to be devoted to negotiating with unions, Gurtner said.
Gurtner sees two dramatic shifts taking place in the general healthcare marketplace:
First, he sees a narrowing of benefits and growth in the individual insurance market.
Second, Gurtner questions the validity of hospital system mergers in the western United States. "Hospital integration without consolidation does not change the marketplace," he said. "To be successful as a hospital system, you must have critical mass."