Losses Force Cuts at UCI Medical Center

With midyear losses reaching $2.5 million, UCI Medical Center has launched an immediate effort to halt its financial slide by consolidating and cutting programs, hospital officials announced Wednesday.

Layoffs are a certainty, although no specific cuts have been decided and no targets set, said Mark Laret, the medical center’s executive director.

In a letter to medical center employees Wednesday, Laret said top officials will conduct a review over the next two weeks to see “where we can consolidate, streamline, reduce or eliminate functions.” Citing the hospital’s “poor” performance in the last two months--when most of the $2.5 million was lost--he asked employees for help in suggesting cutbacks and making “our patients feel welcome.”

“We will be healthier when we have gone through this,” Laret said in an interview, “but getting through this is probably going to be painful. . . . There are some programs that we have cherished that maybe aren’t essential to our mission. We’ll get rid of those.”

The net loss for the budget year ending in June could exceed a preliminary estimate of $4 million given to the UC Board of Regents, Laret said.

The news comes as another blow in a bad year for the medical center, which has been beset since last spring by a fertility scandal that sullied its reputation nationally. Three doctors are accused of stealing eggs and embryos from scores of women and implanting them in others.

Laret, a former deputy director at UCLA’s medical center, was hired to replace Mary Piccione, who was fired amid allegations of mismanagement in the scandal.

A combination of circumstances have led to what is expected to be the hospital’s first net loss in about five years, Laret said. Perhaps most significant, UCI lost $20 million this year in government funds for hospitals that serve a disproportionate share of the poor. The federal program that provides that money has been drastically reduced, creating a pinch at many hospitals nationwide.

In his letter to employees, Laret attributed the losses to pressures facing “every hospital in Southern California.”

“We are getting paid less and less by patients, health insurance companies, HMOs, Medicare and Medi-Cal to provide the same care that we have provided in the past,” he wrote.

Managed care has driven down payments for hospitals and doctors, Laret said. Teaching hospitals such as UCI are squeezed even more because managed care providers do not contribute to the costs of medical education. The Medicare program for the elderly and disabled, which is destined for cutbacks itself, is the only one to subsidize these costs.

UCI also has been hurt financially by the start-up of Cal-OPTIMA, Orange County’s new managed care program for Medi-Cal patients, in October.

The program, intended to expand access to care for low-income residents, has caused UCI to lose many of its traditional patients to competitors and has reduced payments for those Medi-Cal patients the hospital continues to treat, Laret said.

UCI enrolled only about 24,000 of the more than 30,000 patients it had hoped to enroll in the Cal-OPTIMA program, Laret said. More than a third of the hospital’s revenue traditionally comes from Medi-Cal.

UCI’s College of Medicine--to which the hospital contributes money--is hurting as well. Dr. Thomas Cesario said Wednesday the school also has suffered from the reduction in payments to doctors under managed care.

Total revenue last year sank by $3 million, to $39 million, with as many as nine departments reporting losses, Cesario said. In the last three years, salaries have been reduced and some staff members have been laid off. The dean’s office alone has cut staff by one-third.

Cesario and Laret will be working with business officials at the medical center to reduce expenses at the hospital and medical college.

In the early 1990s, UCI enjoyed a few prosperous years, earning more than $17 million in 1993-94 and more than $22 million a year earlier. But Laret pointed out that a significant portion of those gains was attributable to the now-slashed program for hospitals treating a large number of poor people.