Hospital finances worry UC regents

University of California regents Thursday expressed support and financial trepidation about a proposal that the university play a key role in reopening Martin Luther King Jr. Hospital near Watts in 2012.

Several regents said they want ironclad assurances from Los Angeles County supervisors and state officials that UC would not be held responsible for any costs or liabilities for what is expected to be a 120-bed facility with an emergency room. The hospital, which once had 233 beds, was shut down in August 2007 after repeated failures in patient care, including some that led to deaths.

UC President Mark G. Yudof said he hoped that the details could be worked out by the fall, when the university’s governing board is expected to vote on a final contract for the hospital plan.

“I think they’d like to move forward, but there is nervousness,” he said of the regents, who met Thursday at UC Riverside.

Under the proposal, UC and the county would create a nonprofit entity to run the hospital. The university would provide physician services and medical oversight but no financial support, and UC’s name would not be part of the hospital, according to the plan presented to the regents.

Regents Chairman Richard Blum and others said they were drawn to the idea of UC helping to deliver medical care to a low-income area in dire need of extra hospital beds. Yet they were wary that even written promises from the state and county might not be enough to guarantee that the university would bear no costs. They said a large reserve fund should be created and other revenue streams locked in, even with an agreement that would allow UC to back out if things don’t go well.

“I think once we get committed to this, it will be very difficult and maybe almost morally irresponsible to walk away from it,” Blum said. “I worry a lot about that.”

Regent Odessa Johnson agreed, saying that the UC officials negotiating the hospital plan should “proceed carefully and cautiously.”

John Stobo, UC’s senior vice president for health sciences and services, said he would present the concerns to county and state officials as talks about the hospital proceed. Despite the regents’ caution, Stobo said he did not foresee any deal-breakers.

County Chief Executive William T Fujioka said he was confident that UC’s worries could be addressed with assurances that the county would cover all costs. Fujioka said the county was willing to consider establishing a reserve fund. “The concept is fine with us,” he said. “It depends on the amount.”

In other matters, the regents Thursday endorsed Proposition 1A, one of the measures California voters will decide in the May 19 election under an agreement between legislators and Gov. Arnold Schwarzenegger to help close the state’s budget deficit. The proposition would put limits on spending revenue windfalls when California’s economy is booming and would create a rainy-day fund to plug future deficits.

Most regents said they feared that if the proposition failed, UC could face even deeper budget cuts than under the current Sacramento deal. UC already has reduced freshman fall enrollment by 6% and its 10 campuses are planning for other austerities, including course reductions. In May, the regents will consider a 9.3% hike in undergraduate fees.

Regent Frederick Ruiz and others called the measure imperfect but said they supported it for the sake of the university’s financial health.

“I think it needs to pass and I fear it might not pass,” he said.

However, Lt. Gov. John Garamendi, a UC regent by virtue of his elected office, cast the sole vote Thursday against the endorsement. Garamendi, who is considering a race to become the next governor, said the proposition would make the state budget too inflexible.

The regents also hired Peter J. Taylor, a public finance expert, to be the system’s executive vice president and chief financial officer. Taylor, whose base salary will be $400,000, has held senior positions in investment banking firms, most recently at Barclays Capital, and is a former alumni representative on the regents board. He led a recent campaign among UCLA’s African American alumni to raise scholarship money to help boost black student enrollment at UCLA.

In addition, the board gave formal approval to a new nursing school at UC Davis, which is to start enrolling students next year. The school is funded mainly by a $100-million grant from the Gordon and Betty Moore Foundation; Gordon Moore was a founder of Intel Corp., and the school will be named for his wife, Betty.

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larry.gordon@latimes.com

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Times staff writer Garrett Therolf contributed to this report.