UC-Stanford Hospital Merger Advances

Eliminating a key obstacle to the proposed merger of hospitals run by Stanford University and UC San Francisco, a University of California Board of Regents committee agreed Thursday to allow the new medical complex to be operated as a private institution.

By a 9-3 vote, the regents’ health services committee approved the concept of a 17-member governing board to run the merged hospital. That board of directors would include six University of California and six Stanford representatives, as well as five other executive members. That composition would allow it to meet as a private, rather than public, entity and not be subject to the state’s public meetings and records laws.

Thursday’s decision was a victory for Stanford President Gerhard Casper, who has insisted that the new hospital be run as a private institution and last month threatened to abandon the project if the regents could not produce an “agreement in principle” on the merger by mid-July.

Some regents at Thursday’s meeting said they resented what they considered Casper’s strong-arm tactics.

“We’re doing this today as a result of the president of Stanford’s ultimatum to us?” asked Regent Frank W. Clark Jr., who voted against the proposal, calling it “the first step on the part of the regents to privatizing our hospitals. . . . That is something I can’t agree with.”

The landmark merger would privatize the UC San Francisco Medical Center, regarded by many as the crown jewel of the UC hospital system, by joining it to the private Stanford University Medical Center. The resulting corporation would create the largest medical complex in the West.

Proponents of the merger at UC San Francisco and Stanford believe it would allow the two hospitals to better survive the fierce competition in the health care marketplace.

But some question not only the prospect of privatization, but the financial wisdom of the deal for the University of California.

UC San Francisco’s hospital has delivered a solid financial performance over the years, while Stanford’s hospital has a “history of extremely large operating losses,” Clark said in a recent confidential memo to fellow regents.

“Such a differential is alarming,” Clark wrote, “when we are considering the possibility of merging the two entities together on the basis of an equal partnership and equal liability for possible losses, and even the consequences of insolvency of the merged entity.”

On Thursday, board Chairman Tirso del Junco said that although he supports the concept of a merger, he believes UC’s financial interests cannot be protected if the university does not have at least 50% of the seats on the new corporation’s governing board.

He voted against the governance proposal, which goes to the full regents board for approval today.

Regent Howard Leach urged the committee to defer to UC San Francisco administrators who, after more than a year of discussions, are urging the board to approve the merger.

“I don’t hear dissension. I hear support,” Leach said, stressing that there would be more time for scrutiny before the board is asked to give final approval of the merger early next year. “We should take this first step. . . . We may get to the end of the walk, we may not.”