UCI’s Hospital Hurt by Fund ‘Crisis,’ Official Warns

Times Staff Writer

There are no diplomas, no paintings, no mementos or miscellaneous clutter to testify to Dr. Walter Henry’s distinguished career in his new office at the UC Irvine College of Medicine.

There hasn’t been time.

“I’ve just finished what I hope will be the most difficult week and a half of this job,” Henry said, only a little bit facetiously.

Henry, 48, stepped into a storm last week when in his first days as vice chancellor of health services and dean of medicine he told the governing UC Board of Regents that UCI Medical Center in Orange is on the brink of financial collapse. To revive the 493-bed hospital, he said, the medical center might be forced to cancel its Medi-Cal contract and halt treatment of the poor except in emergencies.


In his first interview since taking the helm, Henry on Thursday stressed “a sense of urgency and a sense of crisis” at the medical center and called on the state and county governments to increase reimbursement rates to hospitals that treat the poor, the homeless and the chronically ill. To reverse a $13.1-million deficit, he said, UCI must dramatically reduce its burden of “public” patients, who now make up 65% of all those treated.

“We need to get our indigent percentage probably in the 20% range, which is where UCLA (Medical Center) is, it’s where UC San Francisco is,” Henry said. “We need to get to that point in order to have the kind of research and teaching hospital which is fundamental to our mission as a medical school.”

Henry, a member of the UCI faculty since 1978, was president of the medical center’s staff when Chancellor Jack Peltason asked him to take over after Dr. Edward J. Quilligan, former vice chancellor, suddenly resigned last month. Henry is regarded as a top heart researcher and an astute administrator, but his first and most difficult problem is the one primarily responsible for Quilligan’s downfall: the ballooning medical center deficit.

UCI officials estimate the hospital will lose $24.3 million in unreimbursed care for Medi-Cal clients this year and $11.4 million in expenses for patients covered by the county’s Indigent Medical Services program. With 6% of the county’s hospital beds, the university hospital treats 50% of the county’s poor.

The problem is growing--two of five major hospitals that have contracted to provide care for the needy in Orange County terminated their Medi-Cal contracts earlier this year, and a third announced plans to drop out of the state program in July. The resulting flood of poor patients to UCI is squeezing out privately insured patients and is so overloading the hospital that it is forced to curtail emergency room admissions and send ambulances elsewhere several times each month.

“We must resolve the problems of the UCI Med Center as our first priority,” Henry said. “I think just for financial reasons we must resolve this problem within the next 2 to 3 years. If we do not make changes, the kind of projected operating losses that the medical center faces will in the very near future become intolerable. . . . It is not the mission of the University of California to underwrite indigent care in Orange County.”

He acknowledged that “the alarm could have been sounded sooner” and said the unraveling of the network of medical care for the poor affects even the affluent.

“When hospitals close emergency rooms and go on paramedic bypass, if you happen to have an accident on the freeway and are seriously injured, it makes no difference whether you can afford to pay or not. You are affected if the ambulance that you are in cannot find a nearby emergency room that’s open.”


UCI officials will bring specific proposals to reduce the medical center’s indigent load to state and county executives in the next few months, Henry said. In the meantime, UCI has requested a 17% increase in its Medi-Cal contract. Henry also called on Orange County supervisors to “re-examine their priorities and reconsider” the level of county support that he described as one of the lowest in the state.

Cutbacks in Care

If no accommodation is reached, he said, “indigent patients will be treated on an emergency basis, and (indigent) patients who do not constitute an emergency will not be admitted.”

Daunting as the medical center problems are, Henry said he accepted the vice chancellor’s post because he believes the university’s land, faculty and community assets give its medical program potential to become one of the best in the nation.


“The prospect of helping to implement a vision is something that I find very exciting,” he said. “I believe I can help guide the faculty through what is admittedly a difficult period and I am doing that because I have considerable optimism that we can solve these problems and get on with the much more exciting aspect of this job, to develop this outstanding health science complex.”

Henry said he has begun work on a strategic--and certainly controversial--plan that will chart the course of the medical school for the next 5 to 10 years.

Under consideration, he said, is resurrection of plans to build a campus hospital, a proposal that was officially abandoned in 1985, when the UC Regents bowed to fierce community opposition. Then-medical school Dean Stanley van den Noort refused to drop his campaign for the campus hospital, a stand that led to his replacement.

Henry said that he has not “prejudged” the issue but added that the current separation of medical operations at the hospital and science and biology departments on the Irvine campus grows increasingly unmanageable as freeways linking the two sites grow more congested.


“One of the solutions could be development of an on-campus clinical facility of some sort,” Henry said.

Also up for review is a faculty policy that allows UCI doctors to admit their private patients--those most likely to have insurance--to other area hospitals. No other UC hospital allows its faculty this option. For now, Henry said, faculty admitting restrictions would not work at UCI because there is no room for additional private patients.

Faculty Support

“We will look at our affiliations with other hospitals as part of the strategic planning process. But my personal opinion is that as we reverse the trend of increasing numbers of indigent patients and free up beds, I am absolutely confident that the faculty will be supportive of the medical center.”


The response is an example of Henry’s studied and open management style. He is a consensus builder, and this strength made him the choice of the usually fractious medical faculty when Peltason sought recommendations for a dean last month.

Henry said he plans to continue to see a small number of private patients and will remain active in the American College of Cardiology. His plate is full, he agreed, but he said he is encouraged by the positive feedback that he has received during a turbulent first 10 days.

Soon, Henry said, he will get around to hanging a few paintings in his bare office.

“Things certainly aren’t boring here,” he said. UCI MEDICAL CENTER FISCAL WOES


1987-88 1988-89 (projected) MEDI-CAL Total cost of Medi-Cal clients $45.3 million $51.5 million Medi-Cal reimbursement $25.9 million $27.2 million Shortfall $19.4 million $24.3 million INDIGENT MEDICAL SERVICES Patients funded by Orange County $23.7 million $28.8 million IMS reimbursement $18.7 million $17.4 million IMS shortfall $5 million $11.4 million

Source: UCI Medical Center

UC MEDICAL CENTERS’ FINANCES Projected profits and losses for the University of California’s five teaching hospitals in the fiscal year ending June 30:

Center Profit/Loss UCI Medical Center $13.1-million loss UC San Diego Medical Center $3.4-million profit UC Davis Medical Center $4.7-million profit UC San Francisco Medical Center $7.2-million profit UCLA Hospital Medical Center $20.1-million profit


Note: UCI Medical Center, UC Davis Medical Center and UC San Diego Medical Center were formerly county hospitals.

Source: UC Board of Regents