THE GOLDEN COMPROMISE : How the Irvine Co., the University and the City Agreed to Stop Disagreeing and Begin Building a Community Hospital

Former Irvine Mayor Gabrielle Pryor has no difficulty summing up the 15-year battle over location, construction and control of the city’s first hospital.

“Everybody beat everybody, and nobody got what they wanted,” she said. “The city lost . . . , the Irvine Co. lost and UCI lost.”

To some people in the city, the company and the university that share the name Irvine, Pryor’s assessment is overly harsh. After all, construction will start next year to finally provide a hospital for the largest city in California without one. And UC Irvine and Irvine Co. officials--who were on opposite sides of the battle--have been aglow with optimism about what the future holds since their rapprochement.

In the heat of the controversy, it was difficult to find two people who agreed publicly on what it was really about. One university official, who asked not to be identified, insists: “It’s always been a real estate deal. . . . It had nothing to do with medicine.”

While it raged, “the hospital struggle contributed to the failure of many other things in the relationship” between UCI and the world that surrounds it, according to one physician and longtime observer.

But all of that now seems to be changing.

Flow of Contributions

The Irvine Co. stands to benefit from use of land whose profitability once was in doubt. The university gave up its dream of an on-campus hospital but since the settlement has seen corporate and civic contributions flow into its coffers at an increasing rate, especially from the Irvine Co.

The growing intimacy of the ties between UCI and local economic interests is clear. Some examples:

- UCI is engaged in delicate negotiations with the Irvine Co. over development of 500 acres of campus property and 150 acres of contiguous land for a biotechnology park, which the company hopes will not compete with a similar project it plans for the “Golden Triangle” at the confluence of the San Diego and Santa Ana freeways.

These negotiations include a possible $10-million package of university chairs endowed by the Irvine Co.

- The university’s lead negotiator in these discussions, John Miltner, has use of an Irvine Co. membership in the Big Canyon Country Club. Lease payments for the car he drives are paid for in part by the UCI Foundation, a nonprofit organization that serves as the university’s main community support group and is directed by an executive committee that includes Irvine Co. Chairman Donald Bren and the heads of other big Irvine-area companies.

On Medical Center Board

- Miltner, Irvine Mayor David Baker, philanthropist/industrialist Arnold Beckman and Gary Hunt, Bren’s longtime personal aide and vice president of the Irvine Co., serve on the board of the Irvine Medical Center, the long-sought community hospital.

While some within the city and academic community bemoan the increasingly close ties of the three main players on the Irvine scene, Chancellor Jack Peltason believes the intimacy helps rather than hurts the university.

“Nobody owns us or controls us,” Peltason said. “The experiment (involving UCI and the Irvine Co.) is still being tried and the outcome is still in doubt.” What is evolving, he said, is “a more realistic coincidence of interests. It is not a conflict of interest for us to help the Irvine Co. if what helps them helps us.”

To understand the current atmosphere, it is necessary to look into the background of the hospital controversy.

The idea of a community hospital for Irvine was first proposed in 1970 by more than 100 doctors in private practice in and around Newport Beach, some of whom also practiced at Hoag Memorial Hospital Presbyterian in that city. Plans were already drawn for a university research hospital on the UCI campus, to be part of the medical school, but founders of the Newport Community Hospital Foundation had plans for a complex of their own--a $400-million biomedical park, to be located on 150 acres of Irvine Co. land adjacent to the campus, at the intersection of MacArthur Boulevard and University Drive.

By 1975, the Newport Community Hospital Foundation had become the Western World Foundation, and the proposal had gained some powerful partners, including Hoag Hospital and Beckman, founder of Beckman Instruments Inc., a medical equipment manufacturer. The Irvine Co. offered to donate 18 acres adjoining the campus to the foundation for a hospital site and to sell at a bargain rate an additional 115 acres for health-related industrial, commercial and research enterprises.

The question facing county and state authorities, which have the power to regulate the number of hospital beds, was whether the young city needed two hospitals, one hospital or no hospital, since there are several hospitals just outside its city limits, including Hoag, which was known to suffer a high vacancy rate.

During the 1970s the efforts of the private doctors were blocked by UCI, largely in the person of Stanley van den Noort, dean of the medical school, who was single-mindedly pursuing his goal of having a hospital built on the UCI campus as part of the California College of Medicine. Initial appropriations for a campus medical center were included in the University of California’s 1976 budget.

Van den Noort, a compact, combative man of strong will, believed that a teaching and research hospital, operated by the faculty on the campus, was essential to the survival and success of the medical school, and he was convinced that Irvine could support only one new hospital. He also believed that it could thrive in a region glutted with hospital beds only by drawing patients from outside the immediate Irvine area. The way to accomplish this, van den Noort reasoned, would be to provide the only university medical research center between UCLA and Scripps/UC San Diego in La Jolla.

The dean was hesitant to compromise with Hoag and the Newport Beach doctors, who were betting that rapid expansion of Irvine would sustain a community hospital.

Over the decade, van den Noort also learned how to maneuver the levers of power in both the public and private sectors--including the Irvine family. Repeatedly, he would find a way to block or undermine efforts to build a community hospital.

Supporters of the community hospital were not without political clout of their own and were, in turn, able to thwart van den Noort’s efforts to build a campus hospital. When appropriations for the campus hospital were cut out of the budget, van den Noort supported the takeover of the county hospital in Orange as UCI’s teaching facility--renamed the UCI Medical Center--while never giving up on the idea of a campus medical center.

As the battle dragged on, it became personal, drawing Irvine Ranch heiress Joan Irvine Smith, Arnold Beckman and others into stormy confrontations. The two sides fought to near exhaustion--but never victory--at the local, county, state and federal levels, and before the UC Board of Regents and the state’s medical community.

In his crusade for a campus hospital, van den Noort enjoyed the complete backing of UCI’s founding chancellor, Daniel G. Aldrich Jr. Still, Aldrich said in an interview, the breach with the community created by the hospital fight made him uneasy, particularly because it threatened a dream of his own for the university. The chancellor hoped that some of the 500 acres sold to the university at a reduced rate by the Irvine Co.--so-called “inclusionary land”--might one day be developed commercially and provide an independent endowment for UCI.

Such development was unlikely, however, as long as the hospital battle raged, because under the terms of sale, the Irvine Co. retained the right to veto or restrict any non-educational use of the inclusionary land. The university, meanwhile, had a reciprocal power over 150 acres owned by the company--the land that Western World wanted to use for its own hospital-medical park complex.

As the war dragged on, the Irvine Co. was itself torn by upheaval, first by a contentious divestiture of the company by the controlling Irvine Foundation and then by several changes in ownership from which developer Donald L. Bren emerged as chairman and majority stockholder.

Company officials acknowledge that during this period, the Irvine Co. lost commercial impetus to C. J. Segerstrom & Sons, which developed the South Coast Plaza shopping mall in Costa Mesa, and to the Laguna Hills Mall. South Coast Plaza in effect outflanked the Irvine Co.’s Fashion Island shopping center in Newport Beach, and the Laguna Hills development undermined long-range plans for a major commercial center in the so-called “Golden Triangle” in southeast Irvine, bounded by the San Diego and Santa Ana freeways and Sand Canyon Road.

Under these unsettled circumstances, the Irvine Co. was in no position to undertake the kind of major cooperative venture with UCI envisioned by Aldrich.

And then, to further complicate matters, along came PICH.

In June, 1980, David Baker, an attorney and former UCI basketball star who in a few years would become mayor of the city, lost a race for the Irvine City Council by 62 votes. Shortly thereafter, Baker was contacted by a community activist named Sharon Ellis, who had been involved in his campaign. She suggested that the issue of health care in Irvine had not been adequately addressed in the previous campaign.

Baker, a large, soft-spoken man who often describes Arnold Beckman as his “idol,” was interested and met for lunch with Ellis and several others to consider the matter. A subsequent meeting of a larger group at Ellis’ home produced the name People of Irvine for a Community Hospital--PICH.

For some reason PICH struck a chord. “It was one of those things that kind of snowballed,” Ellis said.

Financial backing came from some of the earliest Newport Beach supporters of the off-campus hospital. Ellis and Baker said that more than $3 million came directly from Hoag Hospital. PICH offered a means of blocking a larger university medical center virtually on Hoag’s doorstep. Additional contributions of about $150,000 came from Arnold Beckman, who later pledged a $5-million challenge grant toward construction on behalf of the Beckman Foundation.

Much of this money went into a sophisticated and effective advertising campaign, developed by Portman Communications, which focused on the time it might take an Irvine parent with an injured child to reach a hospital emergency room.

It didn’t take long for powerful members of the community--developers Bren and Donald M. Koll and Fluor Corp. Chairman J. Robert Fluor, who died last year--to climb aboard the bandwagon with Beckman, Hoag and the Greater Irvine Industrial League.

Opposition Mounted

In late 1981, the organization selected a site for their proposed Irvine Medical Center (IMC) near the intersection of Barranca Parkway and Jeffrey Road. Van den Noort responded with a concerted effort--aided by his allies in the Legislature--to block PICH’s acquisition of the site for a medical center.

Nielsen Entered Fray

In stepped Irvine Co. President Thomas H. Nielsen, who in February, 1983, offered on behalf of the company a gift of 15 acres adjoining the Golden Triangle. The idea was that the community hospital--if the cooperation and participation of the UCI Medical School could be secured--would form the nucleus of the company’s proposed bioscience complex.

Van den Noort and his supporters, already caught off guard by the growth of PICH, were blind-sided by the land offer. In the meantime, the dean, a Democrat with strong ties to former Gov. Edmund G. Brown Jr. and Assembly Speaker Willie Brown, had lost some clout in Sacramento with the arrival of the Deukmejian Administration.

The Orange County “hospital war” seemed at last to be nearing a conclusion. Chancellor Aldrich began to sense that the time was near to end the estrangement with the Irvine Co., its corporate allies and the Irvine community, all of which he perceived to be solidly behind the proposed Irvine medical center. In the months that followed, he continued to support the idea of a hospital on the UCI campus. But he was also beginning to listen more to his new vice chancellor for university advancement, John Miltner, a forceful advocate of reconciliation.

Board of Overseers

At the time, Aldrich recalls, he was feeling the need to reach out in a concrete way to the community. In early 1982, he established a Board of Overseers that included Beckman, Koll, Henry T. Segerstrom and Athalie Clarke, widow of Irvine Ranch patriarch James Irvine.

And in early 1983, Miltner came on board with a perceived mission to “provide leadership” for “a dramatic step on the part of the university toward the outside.”

Miltner said that among his early priorities when he arrived in Orange County was to “build some linkages--political, economic and social,” making greater use of the overseers. He found, however, that whenever he stepped off the campus, the only thing people wanted to talk about was the hospital battle. “It was the overwhelming, overriding issue wherever I went,” he recalled. “It took months of communication to get people talking about anything else.”

Aldrich, Bren, Nielsen Meet

In the spring of 1983, Aldrich had lunch with Irvine Co. Chairman Bren and President Nielsen, during which Aldrich outlined what he thought were the mutual interests of the company and university. The topics discussed were the still-competing hospital proposals and the plans the Irvine Co. had for the Golden Triangle.

There was, Aldrich said, “much interest on the part of the Irvine Co. to locate the hospital out there in order for it to be the catalyst for its high-tech area.” The chancellor brought up the subject of his own aspirations for development of the inclusionary land. No commitments were made, but Aldrich came away with the feeling that progress was being made, a feeling that was confirmed by a follow-up letter from Bren.

The thrust of these discussions, Aldrich said, was that all the ingredients were present for successful cooperation: “a climate, a company, a community interested in attracting high tech and a developing research university of considerable capacity.”

Still, however, there was the troubling dispute over the hospital. The PICH and UCI plans for a medical center were competing for county and state approval, and as late as June of 1983, Aldrich was telling the Orange County Health Planning Council that the university’s hospital proposal was “superior” to PICH’s. Yet a month before, Aldrich was considering the possibility of moving the entire medical school down to the Golden Triangle.

For the Irvine Co., the idea of a university-affiliated medical center--instead of a modest community hospital--as the anchor for development in the area was so important that company officials were willing to invest as much as $50 million to move the medical school from the campus to the Golden Triangle, next to the proposed hospital site. But van den Noort balked. Figuring replacement costs for existing structures, construction of a medical center and endowment, he said the move couldn’t be done for less than $300 million. That was too steep for the Irvine Co.

UCI Withdraws Land Request

If the rapprochement between the university and the Irvine Co. was going to go anywhere, something had to give. In August, 1983, something did.

According to the former medical school dean, Aldrich called van den Noort to his office and, in the presence of Edmund Buster, chairman of the medical school board of trustees, and several other university officials, announced that he was withdrawing the university’s request to the Regents for campus land to build the hospital.

Van den Noort says Aldrich indicated that his major concern for the withdrawal was an offer from the Irvine Co. to lift the deed restrictions on the inclusionary land.

“I was shocked, I was nonplussed,” van den Noort said. “The chancellor said he had been trying to get the deed restriction lifted for the past 20 years.”

Van den Noort was also angry. “Dan, that’s a bribe,” he recalled saying. “I don’t mean that personally. I mean the university is trading a hospital for the deed restriction.”

Buster recalled van den Noort’s remarks and said Aldrich “heatedly denied that there was any trade-off.” Rather, Buster said, Aldrich “felt that it was time to close ranks with the community and that this (the fight over the hospital) was getting him nowhere.”

Aldrich denied mentioning the deed restrictions at the meeting but confirmed van den Noort’s reaction to his decision, as well as Buster’s recollection of Aldrich’s own response. “I said that the way things were going, the community was not going to end up with any hospital,” Aldrich said.

Finally, it was clear where the hospital would be and who would operate it. The war appeared over. Still, some people were far from happy.

Marines Dislike Site

Maj. Gen. Richard Cook, commandant of the Marine Corps Air Station at El Toro, disliked the choice of the Golden Triangle as a location for a medical center because it would be in the flight path of training jets.

Marshall Houts, a member of the UCI Medical School board of trustees and a staunch van den Noort supporter, said the proposed Irvine Medical Center site was “the worst place to put a hospital in Orange County.”

Larry Agran, a member of the Irvine City Council and yet another former mayor, called the hospital site “the worst piece of real estate on the Irvine Ranch.” Even PICH organizer Baker acknowledged that Woodbridge would have been a better location. But he noted that location of the facility was never more than a “disguised control issue” between the community and the university.

Finally, the critics pointed out that at the hospital’s proposed location, parents of the injured Irvine child referred to in PICH’s advertising campaign would have just as far to drive for emergency care as they do now.

Despite the carping, the weeks that followed Aldrich’s announcement were the start of a new period of cooperation. Miltner and Gary Hunt, Irvine Co. vice president and Bren’s longtime personal aide, joined Beckman and Baker on the IMC board, along with five other UCI representatives. And word started to circulate from Irvine to Berkeley to Sacramento that van den Noort--UCI’s most visible combatant in the hospital war--was on the way out as the medical school’s dean.

Relations Improve

With that rumor, spread by at least one top Irvine Co. official, the era of good feeling between the Irvine Co. and the Irvine campus began to pick up speed:

- On Oct. 26, 1983, a joint statement titled “Uses of Inclusion Area Land” was issued by UCI and the Irvine Co. The document appeared to be Aldrich’s dream come true. It announced that the university and the company would “jointly undertake a planning process” to develop the land in a way that would produce the kind of independent “income stream” necessary “if UCI is to continue its development as a major research university.”

- Meanwhile, consultant Fred Hyde was hired by the Irvine Co. to suggest ways the company and the campus could assist one another. Or as UCI’s Miltner told a reporter at the time: “how we can be part of the team that markets Orange County.”

- In the spring of 1984, upon the announcement of Aldrich’s retirement as chancellor, the university disclosed the establishment of a Daniel G. Aldrich Jr. endowed chair. Chief among the contributors were the Irvine Co. ($100,000), Fluor Foundation ($50,000) and the C. J. Segerstrom & Sons development company ($25,000). A smaller contribution came from the Los Angeles Times.

- Six months later, the Irvine Co. formally announced its grand plan for the Golden Triangle. The 3,000-acre, billion-dollar complex--called the Irvine Spectrum--would be accompanied by a major corporate reorganization. Irvine Co. officials clearly hoped that the project, with the hospital as its centerpiece, would resuscitate the Golden Triangle, where very little development had taken place.

As part of the reorientation, the Irvine Co. said it would depart from its previous strategy of preparing industrial land for use and then selling it to others to build on. “Our emphasis now will largely be to undertake our own industrial building programs,” company President Nielsen said, “in most instances working with joint-venture partners, with long-term ownership as our motivating philosophy.”

Announcing the establishment of a new subsidiary, the Irvine Industrial Research & Development Co., Nielsen said: “I think we have an increasing awareness of the industrial growth that will occur in biosciences and other high-tech fields, especially in relation with UCI.”

Van den Noort Loses Post

On Jan. 18, 1985, the rumors about van den Noort proved true. UCI’s new chancellor, Jack Peltason, informed him that he would not be reappointed dean of the medical school when his term expired on June 30. Peltason said the decision was made “in the best interests of the university” and declined to elaborate. “When push came to shove,” said Pryor, the former mayor and a longtime supporter of the dean, “it was easier to get rid of Stan van den Noort than upset this consensus dynamic.”

Peltason had no intention of dropping the development ball that Aldrich had handed him. At a meeting of UCI’s Academic Senate on Feb. 7, the chancellor outlined the negotiating process with the Irvine Co. on the inclusionary land and, according to the minutes, voiced “the hope that the land will generate income to support teaching and research.” He also announced that the Board of Overseers, of which Bren had recently become a member, would become the executive committee of the UCI Foundation, working as a fund-raising and policy board and supported by a full-time professional staff.

According to minutes of the Academic Senate meeting, no mention was made that, as part of the discussions concerning uses of the inclusionary land, the Irvine Co. and other major corporations would endow between 20 and 40 faculty chairs, at an estimated value of $250,000 each, a gift potentially worth $10 million. As the shape of the package became known on campus, there developed a feeling--even among those not entirely comfortable with the increasing closeness of the relationship between UCI and the Irvine Co.--that the new chancellor was managing to drive quite a hard bargain with the company.

Good Mood Continues

The celebratory mood continued through to the mid-March inauguration of Chancellor Peltason. On March 14, a dinner in honor of the event was held at the Hotel Meridien in Newport Beach. Bren, Nielsen, Hunt and others attended on behalf of the Irvine Co. Arnold Beckman was there. Athalie Clarke represented the Irvine family, and Board of Supervisors Chairman Thomas F. Riley was there for the county. The City of Irvine’s banner was carried by Mayor David Sills and the mayor pro tem--PICH’s David Baker.

The ground-breaking ceremonies the next month for the Donald L. Bren Events Center on the campus of UCI illustrated just how successful the young university has been in its recent wooing--some say wooing back--of the powerful economic and political interests that helped bring the public institution into being.

Sitting together in a line of folding chairs under the bright sunlight on April 11, 1985, were Bren, who donated $1 million of his own and $500,000 of the Irvine Co.’s money to the center; Nielsen, who also made a personal contribution; Chancellor Peltason and Mayor Sills. Standing off to the side, chatting amiably, were Baker, Miltner and Hunt, the three men thought to be the primary behind-the-scenes architects of the new relationship among the three Irvine standard-bearers.

Gifts and pledges to the Bren Center in excess of $100,000 were acknowledged at the podium from C. J. Segerstrom & Sons and Koll Construction Co.

But the $3.8-million, 5,000-seat Bren Center was only one example of UCI’s ardent efforts at courting donors in the past two years. In April, 1984, the Irvine Co. gave $200,000 to establish an executive master of business administration program. Already under construction on the campus is the Beckman Laser Institute, financed by a $2.5-million gift from Arnold Beckman, $1 million from SmithKline Beckman Co. (Beckman Instruments’ corporate parent) and yet another $500,000 from the Irvine Co.

Question of Independence

Such largess has raised questions on the campus and in the community over the cost of these fund-raising efforts to the integrity and independence of the university. “There is a kind of euphoria about campus-community relations,” said Spencer Olin, a professor of history, of the flood of money pouring to the campus. But, he asked, “will the university survive this kind of collaboration?”

He, like some others, is concerned that the university’s research and curriculum will be influenced by the local economic interests.

Harris Moyed, a professor of microbiology and former executive associate dean of the medical school, characterizes it as “institutional bribery.”

Moyed pointed out that benefactors who endow chairs may direct the field of study for those chairs and in some cases may influence the selection of the professor holding the position. Since the university now only has four endowed chairs, the prospect of as many as 40 such professorships coming from a single corporate entity worries him.

UCI, Moyed said, represents “a huge public investment by the state” of more than $1 billion, and “the perception exists that a small percentage of the community is in a position to leverage that investment. . . . It’s like the song, ‘Whatever Lola wants, Lola gets.’ ”

For all the cooperation, some hurdles remained for the community hospital. The same day that ground was being broken for the Bren Center, Hoag Hospital announced that it was withdrawing from the Irvine Medical Center agreement and from its commitment to raise the $67 million for construction, once again putting construction in doubt. The next day, Nielsen said that the previously highlighted biotechnology phase of Irvine Spectrum, while “part of our plan,” would not be “singly dominant” and that the company was prepared to “adjust to ups and downs” and “changes in the market.”

Two months later, American Medical International Inc. (AMI), a private, Beverly Hills-based chain, agreed to take over construction of the 177-bed, acute-care facility, now estimated to cost $87 million. Under terms of the agreement AMI, one of the world’s largest hospital chains, would own the facility, but it would also be affiliated with a teaching program at UCI and the Saddleback Community College District. As part of the package, AMI agreed to provide up to $1 million a year to the UCI Medical School and an additional $1 million to underwrite indigent care at the hospital. Ground breaking is scheduled for sometime in 1986.

Lease Proposal Circulated

A spokesman for AMI said at the time of the announcement that the chain was also exploring the possibility of taking over management of the deficit-ridden UCI Medical Center (UCIMC) in Orange. Since then, a draft of the proposed AMI-UCIMC agreement, under which UCI would lease the medical center to AMI for $3 million a year, has been circulating within the university medical community. Lease payments from the hospital chain would underwrite medical research, the proposal’s backers say, while eliminating from the university system and UCI’s budget the estimated $10 million lost each year by UCIMC.

Is UCI’s relationship with the Irvine Co. about to take off?

“I hope so,” Peltason said in an interview, although he acknowledged that the growing closeness between the university and local corporations, particularly the Irvine Co., could again lead to conflict.

The difficulty, he said, is that “we’re all locked in the same county,” which means “dealing with a small number of local entrepreneurs.” The Irvine Co. is “a major player around the table, but not the only player,” the chancellor said. “I can’t deliver the university to the Irvine Co.,” he said. “You can’t buy the university by giving us money” because the relationship is “based on self-interest. We don’t need each other that much that a veto (by the company of commercial development on the inclusionary land) would slow down our growth.”

CHRONOLOGY 1970: Newport Community Hospital Foundation, a group founded in the 1960s with heavy representation of industrialists and Newport Beach doctors, plans an Irvine hospital as the centerpiece of a 300-acre, $400-million medical park; Irvine Co. offers them an option on 150 acres.

1975: Gov. Edmund G. Brown Jr. cuts $200,000 in planning money for an on-campus hospital; Legislature cuts $12 million in construction funds for hospital.

1975: Irvine Co. offers to donate 18 acres adjoining the UCI campus for a hospital site and to sell at a bargain rate an additional 115 acres for health-related industrial, commercial and research enterprises.

1981: PICH (People of Irvine for a Community Hospital), a grass-roots organization later supported by influential county business and political leaders, spearheads a drive for an off-campus hospital. Van den Noort responds with a yearlong effort to block PICH’s acquisition of a proposed site.

1983: Irvine Co. offers a gift in February of 15 acres adjoining the so-called Golden Triangle at the confluence of the Santa Ana and San Diego freeways. The firm hoped that the community hospital would form the nucleus of its proposed bioscience complex.

1983: UCI Chancellor Daniel G. Aldrich Jr. informs van den Noort in August that the university is abandoning plans for a campus hospital.