400 Jobs to Be Cut at UCLA Healthcare
The financial condition of UCLA Healthcare, the largest medical complex in the University of California system, is deteriorating rapidly, and it will soon eliminate about 400 full-time positions to improve its bottom line, according to university officials.
In addition to the immediate financial difficulties, construction on new UCLA hospitals in Westwood and Santa Monica is running behind schedule and over budget.
State regulators halted some work on the hospitals last summer after finding that UCLA had not received proper approvals for its plans.
The urgent cost-cutting moves, which will probably include some layoffs, come just months after the university awarded performance bonuses totaling $343,000 to 13 health system executives for the last fiscal year.
The rewards were given even though UCLA did not come close to meeting its budget goals. Three of the executives have since left.
One senior official hired last summer, Mitch Creem, also has been guaranteed a 20% performance bonus this year -- amounting to more than $83,000 -- regardless of how the health system performs financially, according to a document obtained by The Times. Creem is chief financial officer for the hospitals, medical school and faculty practice plan.
Steven A. Olsen, UCLA’s vice chancellor of finance and budget, said the system would carefully evaluate performance and pay its managers accordingly.
“Over a period of time, there’s definitely going to be accountability for a lot of our senior executives here,” Olsen said.
UCLA officials attributed the recent financial woes to an unexpected spike in the number of indigent patients seeking care at UCLA hospitals.
The university loses money on such patients because Medi-Cal, the state-run public insurance program for the poor, often pays the hospital less than it costs to provide services.
Officials also said the medical center lost some profitable business to competitors and failed to secure more lucrative contracts from insurance companies.
UCLA Healthcare’s profit last year was $11.7 million, well below its budgeted goal of $30 million. This year, the system’s financial performance looks even worse -- and it’s uncertain whether it will turn a profit, let alone the $20 million it expected.
The primary reason UCLA Healthcare had cash in the bank at the end of last year is because of a long-term $75-million loan from the university’s central administration.
“We’re in a very difficult market,” said Dr. David Callender, who took over as associate vice chancellor for the UCLA hospital system in July. “We need to reconfigure our operations to manage this change.”
UCLA’s chief competitor, Cedars-Sinai Medical Center, said it also has seen an increase in the number of Medi-Cal and uninsured patients in the last two years. But it remains profitable and is not contemplating layoffs, Chief Executive Thomas Priselac said.
As recently as a year ago, UCLA officials believed they were on track to turn around their financial problems. The university had posted disappointing results for several years, giving it the worst financial record of any medical center in the UC system.
The improvements, in part, were attributed to a plan developed by the Hunter Group, a consulting firm hired in 2002 to study the health system and help implement changes.
One of the firm’s key recommendations was to cut 475 positions over three years.
But data provided last week by UCLA show the number of full-time employees actually increased during the Hunter Group’s engagement.
The system employed 6,800 full-time workers in December, compared with 6,565 in June 2003.
All told, the university paid $4.7 million to the Hunter Group, now known as Navigant Consulting, which has been hired by the Los Angeles County Board of Supervisors to fix Martin Luther King Jr./Drew Medical Center. One Navigant consultant remains on the UCLA campus as the hospital system’s acting chief operating officer.
The lead consultant, John Stone, said the upswing in the number of uninsured patients and those enrolled in Medi-Cal could not have been predicted.
“If we were able to anticipate it, we would have taken action,” said Stone, who served as the hospital’s acting chief executive from October 2003 to last summer. “It almost started overnight about nine months ago, 10 months ago.”
Callender said he didn’t blame the consultants for the hospital’s current financial woes. He said UCLA had been hurt by cutbacks and closures at other hospitals throughout Los Angeles County in the last year.
Though UCLA hopes to cut most of the 400 full-time jobs through attrition and retirements, “it’s going to be difficult to do this without some sort of a layoff,” Callender said.
He added that the hospitals would not reduce the number of workers in “front-line hands-on care positions,” instead focusing on other areas and management ranks.
Health system spokeswoman Dale Tate said in an e-mail that the number of people laid off probably would be closer to 150.
In addition to staff cuts, Callender said all services provided by UCLA would be reviewed for their efficiency and profitability. Some may be curtailed, others expanded.
“Maybe we don’t do as many kidney transplants, maybe more interventional cardiology,” he said.
The union representing many UCLA employees said it was hypocritical for the health system to award bonuses to its executives as it prepares for layoffs.
“Their incentive awards are supposed to reward excellent performance, and anyone looking at the books would see very clearly that that’s not what’s been happening,” said Brian Rudiger, lead organizer for the American Federation of State, County and Municipal Employees Local 3299 at UCLA.
Aside from its operating issues, UCLA has confronted problems that have slowed its efforts to build its two new hospitals in Westwood and Santa Monica.
The Office of Statewide Health Planning and Development issued stop-work orders covering some of the activities at both construction sites last summer because documents and changes had not been approved. The order has been lifted for Santa Monica, but remains in place for Westwood.
Paul Coleman, the state agency’s deputy division chief for facilities development, said the number of problems at the UCLA sites was greater than at other hospital projects he has seen.
“I was a little surprised by the level of disregard that we’ve had in this project,” he said.
Most of the problems have been resolved, Coleman and UCLA officials said. But the move to the new hospital in Westwood won’t happen until mid-2006, months later than expected.
The Santa Monica hospital is not expected to be fully completed until 2008.
The cost of building and equipping both hospitals has also increased. The estimated cost of building the Westwood hospital has grown from $597.7 million in 1999 to $677.7 million.
The cost of the Santa Monica hospital has increased from $205.9 million to $275.9 million.
The UC regents last year established a $40-million contingency fund in case of additional cost overruns, but the campus has not needed to use it yet, vice chancellor Olsen said.
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UCLA lags
UCLA Healthcare continues to struggle financially compared to other University of California hospitals. Here are results from the 2004 fiscal year:
Net income in millions and as a percent of revenues
UC hospitals
San Francisco: $55.5 (5.2%)
Irvine: $42.1 (10.5%)
San Diego: $37.8 (7.8%)
Davis: $33 (4.1%)
Los Angeles: $11.7 (1.3%)
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Source: Audited financial statements
