UCI Hospital Threatens to Drop Medi-Cal Contract

Times Staff Writers

UC Irvine officials threatened Thursday to stop treating the county’s poor at UCI Medical Center--other than for emergencies--in order to save the hospital from financial disaster.

Chancellor Jack W. Peltason told the University of California Board of Regents that the debt-burdened medical center in Orange is the victim of a breakdown in the mechanism for treating the county’s poorest patients.

“Our hospital is in jeopardy because of what can only be described as a collapse of the health care system established in Orange County to provide for the needs of the indigent and the working poor,” Peltason said.

The medical center, which has only 6% of the county’s hospital beds, is treating more than half of the county’s indigent patients, he said. The hospital, which has a total of 493 beds, is reimbursed for less than half of what it costs to care for those patients.


As a result, Peltason said, every additional Medi-Cal patient who enters the facility adds to its rising operating deficit. That deficit is projected to top $13 million in the fiscal year that ends June 30, and it could reach $15 million next year.

If UCI cannot obtain more funds from Medi-Cal--the university is seeking a 17% increase--and cap the number of such patients it must treat, the medical center will have no choice but to end its contractual relationship with the state-run medical program, Peltason said. In that case, the center would treat only those indigent patients who are critically ill or about to give birth.

Non-emergencies now represent about 15% of the hospital’s Medi-Cal caseload, university officials said.

Deciding to end the Medi-Cal contract is something the university would not “do lightly,” Peltason said.


“Such a termination would disrupt our teaching programs, threaten the health of those we serve and heighten short-term financial difficulties as we make a transition to more private patients,” he said. “But it is an option that we must and are seriously considering.”

Questions, Criticism

UCI’s declaration was generally well received by the regents, who met at UC San Francisco. They asked university officials about the continuing deficits for the medical center, and several criticized the county government for not having done something to distribute the burden of treating non-paying patients among more hospitals.

From his office in Orange County, Thomas E. Uram, director of the Orange County Health Care Agency, applauded UCI’s stand in the Medi-Cal reimbursement issue but declined to comment on the matter of whether the county contributes its share.

A year ago, the county, which has no public hospital for the poor, had five major Medi-Cal contractors. Two of them--United Western Medical Centers and Chapman General--have already terminated their Medi-Cal contracts. Fountain Valley Regional Hospital and Medical Center has notified the state that it intends to cancel its contract June 30. The only other remaining hospital still to have a Medi-Cal contract is Martin Luther Hospital in Anaheim. Officials there said Thursday that their hospital will not drop out.

“We have to do everything possible to change the orientation of the county toward the importance of this institution,” said Regent Frank W. Clark Jr. of UCI Medical Center. “They have an asset there for which it is absolutely impossible to quantify the benefits to their constituents.”

Regent Roy T. Brophy said the county government wants the medical center to be “a county hospital under a different name.” He predicted that the crisis in care for the poor is “only going to get worse.

“I applaud you for taking this step,” he said to Peltason.


‘Good for UCI’

Uram said UCI’s ultimatum may force the state to raise its Medi-Cal reimbursement rates to UCI Medical Center and other hospitals in Orange County.

“I think it is about time someone stands up to the state. Good for UCI,” Uram said. “I have been telling the state they cannot keep ratcheting the prices down. There is a crisis coming, and the state is causing it.”

The reimbursements provided for in Medi-Cal contracts, which are negotiated with each hospital, have not kept up with rising medical costs and the increase of poor patients, he said.

Uram said that if Orange County’s two remaining major Medi-Cal contractors drop out, the state will end up paying out more because hospitals will bill on a daily basis for emergency and other treatments rather than bill by the discounted contract rate. He would not respond, however, to UCI Medical Center complaints that the county is contributing to its deficit because of its reimbursement rate for treatment of indigent patients who do not qualify for Medi-Cal. The rate is about 40 cents for each dollar of hospital services. UCI Medical Center estimated that it lost $11 million caring for these patients last year.

“We negotiate rates at the table with these hospitals, so I’ll reserve my comments for the negotiating table,” Uram said. “If I had more money to pass out, I’d love to do it.”

Other Orange County hospital executives expressed concern that as the trend to drop Medi-Cal contracts snowballs, one or two hospitals would be flooded with Medi-Cal emergency cases and that, therefore, poor patients whose illnesses are not critical would simply not be treated. Officials at Fountain Valley Regional Hospital, which is participating in negotiations to prevent its withdrawal, said that a decision by UCI Medical Center to drop out would make Fountain Valley’s withdrawal certain.

“Without UCI in the program, it would put an additional burden on us, and quite frankly, I don’t know if we could handle the volume,” said Thomas Ways, chief financial officer of the for-profit hospital.


“And if everybody is dropping the program, where will the Medi-Cal patients go? Hospitals are being squeezed all over the state, and there has to be a revamping of the program to make it fair and equitable for hospitals to participate.”

The problem for UCI Medical Center is that the more public patients it treats, the fewer private patients it will be able to attract or accept.

This year, UCI expects about 47% of its patients to be Medi-Cal members and nearly 70% of all its patients to be public patients of some sort.

But a flood of public patients is a problem that can affect rich as well as poor, said Dr. Walter Henry, who is about to take over as dean of the UCI College of Medicine. Henry also addressed the regents. He said that about seven times a month, the hospital has been forced to curtail admissions because there were too many patients in the emergency room.

“I personally think that what we are witnessing is not only the collapse of the indigent care system, but we are potentially witnessing in Orange County what has been threatened in Los Angeles County--the collapse of the emergency care system as well,” Henry said.

“It doesn’t matter whether you are wealthy or poor; if a hospital is on paramedic bypass and your ambulance can’t find a hospital to admit you, you are being affected by that very directly,” he said.

If the university does cancel its contract, a step hospital director Mary Piccione said is “imminent,” it will take about 2 years for the medical center’s finances to stabilize, Peltason said. He said the medical center could lose another $6 million to $10 million a year for 2 years because although it will have fewer Medi-Cal patients, it will not have rebuilt a base of private patients.


1988-89 (projected) 1987-88 1984-85 Medi-Cal patients 8,910 7,108 5,991 Privately insured patients 4,900 4,960 4,205 Medicare patients 1,660 1,909 1,676 Other* 4,220 4,645 4,301

*Includes Orange County’s indigent medical services patients, whose care is funded through the county at 40 cents per dollar of actual cost.

Source: UC Irvine