UCI Director’s Practices, Priorities Are Questioned

IRVINE — She was hailed as a health industry turnaround artist, brought to UC Irvine to yank the medical center from its sea of red ink.

She was praised as a pioneer, the driving force behind Orange County’s newfangled Medi-Cal system intended to expand health care for the poor. Drawing an annual salary of $176,000 a year, she is one of the most highly compensated women in the UC system.

But Mary Piccione, UCI Medical Center’s executive director, has suffered a precipitous fall from grace.

At a state Senate hearing Wednesday, this top administrator recruited personally to UCI by Jack Peltason, now president of the UC system, was reduced to tears and recriminations. A management audit released earlier that day concluded that Piccione tried to squelch the scandal at UCI’s renowned fertility clinic and retaliated against a key whistle-blower.

“I have a history of being a public servant for a very long time. I have never been so heartbreakingly attacked,” said Piccione, 60, who denied any retaliation or cover-up.

The question, for many inside and outside the UC system, is whether the buck stops at Piccione’s desk.

Some say the medical center chief has only herself--and what the auditors termed her style of “management by fear”--to blame. But others say responsibility for the crisis may extend well above and beyond Piccione, to Peltason, who was UCI’s chancellor in 1992, when allegations of financial and medical wrongdoing first surfaced at UCI’s Center for Reproductive Health.

“It goes higher, of course it goes higher. It’s further evidence of the regime of Dr. Peltason and his deficiencies,” said state Sen. Quentin L. Kopp (I-San Francisco), a member of the Senate’s Select Committee on Higher Education. “It’s further evidence of the ugliness of academia.”

The UC president has declined repeatedly to discuss specifics of the scandal, saying only that he knew nothing of any wrongdoing during his tenure.

“It was all brand new to me,” Peltason said after a meeting of the UC Board of Regents on Friday.

Regent Howard Leach of San Francisco said the board will investigate Piccione’s role in the retaliation, but he said he had no indication that the alleged cover-up reached Peltason.

“I think that he shares our dismay and disappointment,” Leach said. “To the best of my knowledge, he was not aware of it at the time. He is one of the most honest, straightforward people that I know.”

The fertility controversy at UCI Medical Center has mushroomed into a nationally publicized scandal with profound implications for the country’s top educational institutions and medicine in general. Three doctors at the medical center’s fertility clinic have been accused of egg-stealing, research misconduct, financial wrongdoing and insurance fraud.

In the audit issued this week, two University of San Diego law professors concluded that Piccione retaliated against a key whistle-blower in the controversy by placing her on leave about a week after the woman complained to university auditors that Piccione had told her to keep her “loose lips” sealed.

Piccione’s attorney, Gary Overstreet, said Friday that his client has been made a scapegoat. He said Piccione was merely following the advice of UC lawyers in Oakland when she took action against whistle-blower Debra Krahel, and did not even know the contents of Krahel’s complaint at the time.

Piccione blasted Krahel during the Senate hearing as “an opportunist” who made her complaint to mask poor work performance.

Some critics on the UCI faculty say the seeds of the scandal were planted well before whistle-blowers came forward.

They stopped short of alleging Peltason had direct knowledge of wrongdoing at the university’s Center for Reproductive Health while he was chancellor. But several said he set an agenda that focused too much on shoring up UCI’s bottom line, and not enough on quality patient care. That, they said, kept the university from reining in the lucrative clinic’s doctors as it should have.

“It’s just a continuation of the same set of policies and structures that encourage the commodification of health care in the areas where high incomes and profits can be created,” said Dr. Howard Waitzkin, a professor of internal medicine at UCI. “These policies all were implemented during the period when Peltason was chancellor.”

Some UCI faculty and staff members say Peltason maintained close ties with Piccione, even after the former UCI chancellor took over the top post in the UC system in October, 1992.

“I think the impression has been that she’s been reporting to the office of the president [and] . . . bypassing local control,” said one medical faculty member who asked not to be named for fear of retribution.

Peltason’s close professional relationship with Piccione dates back to 1988, when she was recruited from her position as special assistant to the acting chancellor of the State University of New York system. She previously worked at University Hospital in Brooklyn, where she stabilized its faltering budget.

Peltason, then UCI’s chancellor, hired her to work the same financial wizardry at the teetering UCI Medical Center, which had a $10-million deficit the day she arrived and a $17-million hole a few months later.

It didn’t take long for Piccione to fill that hole, largely by finding other medical facilities to care for the county’s poor. When she arrived, the nonprofit hospital was overwhelmed by a “disproportionate” number of indigent and Medi-Cal patients, which translates to high costs and little return, according to UCI’s 1987-88 annual report on the troubled medical center.

Piccione soon pushed for higher Medi-Cal reimbursements, at one time stationing guards at the hospital’s doors to dissuade pregnant women from visiting the overcrowded obstetrics ward.

Her hardball tactics paid off. She got the higher reimbursements and, in time, the hospital got a new birthing center. She has continued her push to spread the cost of caring for the poor by promoting Cal-OPTIMA, a new managed care program in Orange County for Medi-Cal patients, which is set to start in October.

But she was criticized in 1993, when Peltason endorsed and the regents approved substantial raises for her and other top administrators, while other employees were receiving pay cuts and told to tighten their belts. Piccione’s raise was 25%, and her deputy, Herb Spiwak, received a pay raise of more than 32%.

At the time, UCI Chancellor Laurel L. Wilkening defended the increases, saying they were necessary to keep a team that had brought profits to the hospital. “It was my judgment we would lose the team if we were not able to compensate them adequately.”

Piccione’s manner has rankled many faculty and staff members, who saw her as concerned too much with cutting costs above all else.

“Mary’s management style has been a closed management style. . . . The closed style has led to the impression by people that the hospital administration was not responsive to the concerns of the medical faculty and the staff and . . . in fact there has been considerable paranoia on both sides,” said Dr. Steven Armentrout, a professor of hematology and oncology at UCI.

“Her instructions were to eliminate the deficit, and that was it,” said former administrator who asked not to be identified for fear of jeopardizing his current position. “Jack [Peltason] made clear that that’s what the regents wanted, and she took her marching orders entirely from him. It caused a deep schism within the faculty.”

The source described Piccione as “just brusque. She never bothered to create an affable, positive relationship with the faculty. It was just, ‘Get that bottom line in order.’ It was a strategic error to piss off the faculty. You just don’t do it and expect to succeed, but she cared only about what Peltason said, what Peltason wanted.”

Dr. Waitzkin said he and others were particularly grieved by cuts to primary-care programs in which UCI had the potential to excel.

“Her approach was to present a warm and caring face while in fact implementing the most Draconian financial cutbacks in the history of the institution and fostering a management style that has been identified by [auditors] as a climate of fear,” he said. “That characterization is completely accurate.”

Piccione, several employees and faculty members said, is reclusive by nature and had a “closed-door policy.” She typically talks to a small coterie of trusted advisers, including Spiwak, who was her top assistant in Brooklyn as well.

“Nobody could approach these people,” said a medical center nurse and former manager. “The normal, the average worker, they wouldn’t give you the cold shoulder. They would not give you the time of day.”

But Piccione, who last year won the Clara Barton Spectrum Award for her contributions to Orange County health services, has her admirers as well.

She’s “very professional and quick on the uptake,” said Richard Butler, chief operating officer of Fountain Valley Regional Hospital and Medical Center. “She’s a person who has some vision of how things should be. She’s a mover and a shaker; she likes to get things done. I’ve always really enjoyed working with her.”

Butler said Piccione is in a tough spot. “Like anyone else who runs a major business, you’re going to have people who aren’t pleased with your management style. . . . I was just surprised and not pleased to see that the [recent audit] report characterized things in a way that sounded, well, quite negative.”

Michael Stephens, president of Hoag Memorial Hospital Presbyterian in Newport Beach, said he had come to know Piccione through hospital associations.

“I think she is extremely capable, bright and intuitive,” Stephens said. “The financial turnaround made at UCI Medical Center under her direction has really been remarkable.”

But several regents members said Friday that the investigation into misconduct allegations against Piccione, and possibly others, is far from complete.

“The matter is not closed and there are more chapters to unfold,” board member Leach said.