Medical Center’s Link to Private Firm Backed

University of California regents Thursday gave cautious support to UC Irvine’s negotiations to affiliate its debt-plagued medical center with a national hospital chain.

Several regents characterized the negotiations with American Medical International (AMI) as “exciting,” but they also warned UCI Chancellor Jack Peltason that health care for the poor--whose patronage at the university medical center contributes greatly to the hospital’s debts--should not be jeopardized.

“I think it’s a very exciting idea. It’s a plausible way of meeting that deficit you’re faced with, and it offers a real possibility for offering mainstream medical care to indigents,” said Regent Yvonne Braithwaite Burke. Still, she added, affiliation with a private, for-profit hospital chain will have to be arranged in a way that ensures that the poor are not turned away.

The largely positive comments Thursday contrasted sharply with the regents’ remarks at a meeting four months ago, when they gave little support to UCI’s plans to seek private affiliation for fear that poor patients would be turned away.

UCI has been exploring affiliation with a private company as a way of erasing some of the red ink at UCI Medical Center, which is located in Orange. Peltason told the regents Thursday that the deficit for the fiscal year just ended is expected to be between $9 million and $10 million. Earlier this year, officials had predicted that the deficits could run as high as $12.5 million, but costs declined during April and May, Peltason said.

Hospital officials have said the primary cause of the deficit is that UCI does not receive full reimbursement from federal-, state- and county-financed medical programs for its treatment of poor patients.

The only other UC teaching hospital showing a deficit for the first 11 months of last fiscal year was UC Davis, which reported an $85,000 loss, according to a report to the regents.

Peltason told the regents’ Hospital Governance Committee that it is not known yet what form the AMI affiliation would take, but he said it could provide new sources of revenue and referrals of privately insured patients.

Private Management

In an interview, Peltason said the affiliation could involve private management of the 493-bed hospital. If the negotiations are successful, UCI Medical Center would be the only UC teaching hospital to be affiliated with a private hospital, although such affiliations have occurred elsewhere in the country to bolster financially ailing teaching hospitals.

The negotiations with AMI, Peltason told the regents, are linked to the recent agreement involving AMI, the Irvine Medical Center (a citizens’ group that has worked to bring a hospital to Irvine) and the Irvine Co. to build a hospital in Irvine seven miles from the UCI campus.

Peltason said that the three groups believe the Irvine facility has the “potential to become a major medical center.” University involvement, he added, “is absolutely critical for them to achieve their overall goal.”

The university, by courting AMI’s affiliation with UCI Medical Center while also becoming a partner in the yet-to-be-built AMI Irvine hospital, will strengthen the financial stability of the hospital in Orange, Peltason declared.

Teach at Both Hospitals

UCI doctors will teach at both hospitals, and patients can be referred from one medical center to the other, he said, adding that the two hospitals will not be in competition with each other but will support each other.

Frank W. Clark Jr., chairman of the regents’ Hospital Governance Committee, described the affiliation arrangement outlined by Peltason as “exciting, realistic and constructive,” and said it had the potential to not only solve UCI’s financial problems, “but also to afford us the opportunity to participate in a (project with) exciting potential for the benefit and welfare and medical care of the Orange County area.”

While there has been concern that UCI’s medical school may not survive if the medical center’s debts continue to mount, Clark said the IMC-AMI group “has a common goal . . . to keep the UCI medical facility in existence, to increase its importance to the community, to provide the services the community needs and wants, and at the same time expand the opportunities afforded to our students and to our people in research, as well as patient care.”

The affiliation could provide “financial resources that we’ve not had access to until now . . . the potential for millions of dollars that may very well assist us in accomplishing the goals you would like to see and I would like to see,” he told the other regents in addressing their concern about care of the poor.

Other Affiliations

Peltason said there have been further discussions about affiliating with IMC with the aim of developing a psychiatric hospital, an oncology (cancer) center, doctors’ offices and a sophisticated diagnostic center. These could be built at the IMC site, at the UCI campus, at the medical center in Orange, or anywhere in between, he said.

If those negotiations are successful, medical services to the poor could actually improve, Clark said.

The new services “would be available to the indigents and would provide an unequaled medical facility for the county. Instead of diminishing access (of medical care for the poor), it would enhance it. . . . I think the scale of medical care to the indigents would be unequaled in the state,” Clark said.

Peltason said he hopes to present an affiliation agreement to the UC president and regents in the fall.

The regents thanked Peltason for consulting them while the negotiations were going on.

“Our experience has not always been (to be given) early information. Sometimes we try to catch up when things are in concrete,” Burke said.

“We’re operating under a new environment since Chancellor Peltason arrived (last fall),” Clark said. “The manner in which the medical school and hospital operated is the difference between day and night since Peltason arrived on the scene.”

‘Hospital Wars’

The allusion apparently was to UCI’s former involvement in the Irvine “hospital wars.” The battle was waged between former UCI medical school dean Stanley van den Noort, who wanted to build a hospital on campus, and the IMC group, which ultimately won approval from a health planning agency.

According to the regents’ financial report, UCI Medical Center’s occupancy rate was the highest of the UC system’s five teaching hospitals. And while all five showed a drop in use since last year, UCI’s patient load was the most stable, with bed occupancy dropping by less than 1%.

Admissions to UCI Medical Center dropped from 14,977 at this time last year to 14,876 this year. The average stay for a patient decreased slightly, from 7.2 days last year to 6.9 days this year, roughly comparable to declines seen at the other four teaching hospitals.

Outpatient visits to UCI Medical Center decreased while they increased at the other four hospitals.