Northern California's largest academic medical center is running behind financially-way behind.
The four-hospital UCSF Stanford Health Care had planned on approximately $40 million in profits for the fiscal year that will end Aug. 31. Instead, it posted a nearly $11 million operating loss in the first quarter alone.
The system is just the latest example of newly merged hospitals not realizing the promised savings of consolidation (See related story, p. 76). And it is blaming the usual suspects: Medicare, Medicaid and managed care.
Academic medical centers have been hit hard by cuts in Medicare payments resulting from the 1997 Balanced Budget Act, including reduced funding for graduate medical education and care for the poor, said UCSF Stanford spokesman Daniel Berman.
Phased-in Medicare cutbacks from the budget act will total $170 million by 2003, he said, and the system's shortfall from the state's Medicaid program, MediCal, is about $80 million annually.
About 50% of the system's annual revenues of more than $1 billion are derived from Medicare and Medicaid.
Contrasting with recent losses, UCSF Stanford posted an operating profit of $20 million on revenues of $1.5 billion in its first full year of operations, which ended Aug. 31, 1998. Investment income pushed its total profit that first year to about $40 million.
The hospitals that make up UCSF Stanford are Stanford Hospital and Clinics, UCSF/Mount Zion Medical Center and the University of California San Francisco Medical Center, all in San Francisco; and Lucile Salter Packard Children's Hospital at Stanford, in Palo Alto. The hospitals merged to create the 1,350-bed system in November 1997.
When touting the benefits of the merger, UCSF and Stanford officials predicted the consolidation would generate more than $100 million in savings over its first three years.
The budget shortfall has reignited controversy over the merger, particularly because the four hospitals boasted cumulative premerger profits of nearly $80 million in 1996, according to the California Office of Statewide Health Planning and Development.
Critics, including the California Nurses Association, said the combination eliminated competition without cutting costs. The CNA has also come out against layoffs to balance the system's books.
Officials said first-quarter losses make layoffs almost inevitable, although they declined to say how many jobs were on the line. The system, one of San Francisco's largest employers, employs 12,500 people.
Officials hope to bring the system's budget into balance by the end of this fiscal year and return it to profitability in fiscal 2000.
"We're looking at ways to cut costs, starting with administration and support, but we're looking at everything at this point," Berman said.
So far, no significant consolidation of services has taken place.