UCI Medical Center Faces $13-Million Loss : Report Blames Projected Operating Deficit on Thousands of Patients Who Can’t Pay Bills

Awash in red ink and burdened by thousands of patients who cannot pay their medical bills, UC Irvine’s medical center has projected a $13.1-million operating loss for the current fiscal year, more than any other University of California hospital.

Top UCI officials will meet with UC regents in San Francisco Thursday to explain why the 1987-88 annual report on their troubled medical center also shows an operating loss of $8.6 million for last year--about eight times greater than its operating loss in 1986-87.

The medical center, a former county hospital located in Orange and the youngest of the UC system’s five teaching hospitals, operates under “severe financial constraints, i.e. lack of available medical/surgical beds and operating rooms” as well as a “disproportionate” number of Medi-Cal and indigent patients, the report said.

The center will face a financial “crisis of growing proportions” and similar, continued losses “unless major changes in operations are possible and funding for new facility expansions are obtained,” the report said.

University officials say its ratio of “public” patients to those with private insurance is 70% to 30%. By comparison, UC San Diego’s Medical Center, also a former county hospital, has a 50%-50% ratio but operates in the black.

UCI Medical Center’s great number of public patients makes it difficult to continue its mission as a top-flight center for teaching and research, the report and university officials said. County and state reimbursement rates for indigent patients are far below the actual cost a hospital incurs, officials have said.

“The issue is we have a public service mission--making sure the publicly funded patients are cared for,” said Kathy Jones, associate vice chancellor for university advancement. “But we are not in the hospital business. We are in the research and teaching business.”

The report does not recommend halting admission of public patients but notes that the medical center cannot successfully increase the number of patients who have private insurance and are able to pay their bills “without a decline in under-funded admissions.”

Despite the medical center’s problems, the report describes UCI’s College of Medicine as “strengthened under the leadership of the new (medical school) dean and vice chancellor Edward J. Quilligan.” However, the document, which was apparently prepared last year but mailed to regents last week, does not mention that Dr. Quilligan resigned from his post Feb. 15.

Dr. Walter L. Henry, chief of cardiology, will replace Quilligan as dean and vice chancellor on Wednesday.

UCI Chancellor Jack W. Peltason declined to be interviewed but said in a prepared statement that “the 1987-88 report was written in the perspective of that fiscal year and intended as a statement of our fiscal position at that time. There have been changes since then, but it would be inappropriate to rewrite history to reflect those changes.”

Associate vice chancellor Jones said that there would be no addendum to the report to reflect recent fiscal and managerial changes since it was written. But at Thursday’s regents meeting, Peltason, medical center administrator Mary Piccione and Henry are expected to discuss last year’s budget and future plans for the medical center.

University spokeswoman Linda Granell explained that Piccione and Henry would not discuss the budget report beforehand because “they (the regents) have this thing about liking to hear things first.”

The Regents Committee on Hospital Governance on Thursday will also consider 1987-1988 reports on medical centers at UCSD and UCLA, and the Neuropsychiatric Institute and Hospital at UCLA. The regents previously reviewed budget reports of medical centers at UC Davis and UC San Francisco.

According to UC public information officer Paul West, medical centers at UCLA, UCSD, UCSF and UC Davis operated in the black last year. Their balance sheets cited operating gains ranging from $21.9 million at UCLA Medical Center to $1 million at UC San Diego. The Neuropsychiatric Institute had an operating loss of $740,000.

UCI’s report showed that its medical center actually had a net gain for last year of $2,871,000 despite its $8.6-million operating loss. That came in part from appeals of Medi-Cal bills, other adjustments and an $8-million operating subsidy from state funds. At the same time, however, the medical center reported a year-end deficit of $3,051,000 in hospital reserves.

In the budget report’s statement of goals, UCI administrators promised “to pursue sound financial-management practices,” promote quality care and work to place both the College of Medicine and the medical center in “the top 10% of U.S. medical schools in the next decade.”

The report also noted many pluses in the fiscal year that began July 1, 1987, and concluded June 30, 1988.

Among the highlights: the hiring of medical center director Piccione, the appointment of cardiac surgeon Richard Ott to UCI’s cardiac-transplantation program, the start of a new heart-transplant program, the opening of a new outpatient clinic on the UCI campus, and designation of UCI as the only medical center on the West Coast to participate in a national brain tumor research group.

Among the problems the report detailed were declining reimbursement from both public and private payors as well as “growing hostility in the hospital community regarding services for the medically indigent patient population.”

The hospital’s more than 400 beds were often full, the report indicated, noting, “By the second half of the fiscal year, the stress of managing the increase in daily admissions to a limited number of available beds frequently grew to crisis proportions.”

A study by the medical school faculty and administration as well as a report by Peat Marwick Main & Co. “confirmed an immediate need for more beds and operating rooms to meet existing demand.”

The report mentioned that under former vice chancellor Quilligan, the medical center had “a vision for the future of UCI Health Sciences.” Also, it said, Quilligan had appointed Dr. Philip J. DiSaia associate vice chancellor to “strengthen” faculty clinical services.

However, since the budget report to the regents was written, DiSaia became ill and both he and Quilligan have now resigned their posts. Some faculty members say, however, that Quilligan was fired by Chancellor Peltason after a faculty disagreement over what portion of doctors’ outside earnings should be given to UCI.