UCI Gets Down to Business : New Hospital Chief Makes Changes With Eye on Bottom Line
Cut the payroll. Go after customers who pay. Don’t rely so much on those who can’t. Launch ads that slam your competitors.
If that sounds a bit cutthroat for UCI Medical Center, a nonprofit institution devoted to medical research, training and providing health care for Orange County’s poor, executive director Mark Laret makes few apologies.
“We’re first and foremost a business--a business in an industry undergoing significant consolidation. Those who don’t make the kind of measures we’re taking will be out of business,” said the former UCLA Medical Center executive, who was hired last year to lead scandal-scarred UCI out of its financial morass.
Laret has taken a number of steps to secure UCI’s place as an efficient competitor against lower-cost hospitals in the era of managed care.
There have been job cuts--200 so far this year, with possibly dozens more in the next month--to shore up the bottom line.
Laret has initiated an aggressive marketing effort to lure more patients on employer health plans. He’s also cutting deals with local medical groups to refer those patients to UCI’s 462-bed hospital, clinics and experimental treatment programs. UCI recently announced, for example, that it will provide specialty care to women with high-risk pregnancies and for premature babies referred by La Habra-based Friendly Hills HealthCare Network.
“You must diversify your customer base,” said Laret. “We learned the hard way what it means to have not done that.”
Like hundreds of academic medical, clinical and research centers across the country, UCI has been struggling.
UCI’s annual funding for treating more local indigent residents than other hospitals in the county plummeted by $20 million. The cut, triggered by a federal rule change, cost UCI 10% of its total budget of about $200 million for the year ended June 30.
In addition, the medical center also suffered a significant loss of MediCal patients, whose treatment is subsidized by the government, when the county switched to a managed-care program for these patients last year.
The financial setbacks caused the medical center to post a loss of nearly $8 million for the year.
UCI is now reaching out for more lucrative business--no easy task for an institution with image problems.
The medical center is still recovering from last year’s nationally publicized scandal involving three doctors at its Center for Reproductive Health who allegedly stole human eggs from patients and implanted them in others without permission.
Laret took over last year from former executive director Mary Piccione, who was fired for her handling of the scandal. The new director, who earned his stripes in UCLA’s Marketing Department, has quickly moved to repair the image and build business with local managed-care organizations.
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Last spring, his staff persuaded Anaheim-based Gateway Medical Group Inc. to refer pediatric patients requiring specialty care to UCI. Gateway had been looking to replace its former provider, Children’s Hospital of Orange County, with one more willing to contain costs, said Deidra Benson, Gateway’s contract manager.
UCI agreed to accept a flat monthly payment for certain types of those pediatric specialties--a move that saved Gateway about 30% of its expenses for such care, Benson said.
Children’s executive Jaynie Boren would not comment on specific contract negotiations with Gateway, but said the hospital makes “every effort to be competitive in the managed care marketplace.”
UCI also worked to allay Gateway physicians’ fears about referring patients to a scandal-plagued institution. A dozen Gateway pediatricians toured UCI’s pediatric facilities and met with the medical staff and residents. The pediatricians came away “pleasantly surprised,” said Benson.
In a more sweeping move, UCI recently announced that it is expanding its relationship with the larger Friendly Hills HealthCare Network. Earlier this year, UCI began dispatching its ear, nose and throat specialists to see patients at Friendly’s clinics in Los Alamitos and Irvine. Friendly, which pays a monthly retainer to UCI, also promised to send any of those patients requiring surgeries or other procedures to UCI’s hospital.
These agreements with Friendly Hills and Gateway have added about $2.5 million in revenue since last spring.
Meanwhile, Laret has increased UCI’s annual marketing budget by 50% to about $1.5 million this year. In the hope of being heard above competitors’ marketing pitches during the fall sign-up season for people on employer’s health plans, UCI has launched a campaign that trumpets its doctors’ standings in a West Coast edition of the highly publicized “Best Doctors in America.”
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Recent newspaper ads have hyped the fact that 57 UCI physicians made the listings, while rival Hoag Memorial Hospital Presbyterian in Newport Beach had 15 and St. Joseph Hospital in Orange had seven. Another round of ads, which are scheduled to appear soon, advise readers: “If choosing a health plan is keeping you awake, then read a book--’The Best Doctors in America.’ ”
Sister Mary Therese, St. Joseph’s vice president of communications and marketing, said the hospital isn’t fazed by UCI’s ads. She said St. Joseph’s surveys consistently show it does the best in serving its market.
Stacey Barck, a spokeswoman for Hoag, characterized UCI’s ads as “an image-building campaign.” She said the book actually lists 18 Hoag physicians, not 15, and questioned its authors’ criteria for selecting top doctors.
As part of UCI’s campaign, representatives also are scheduled to appear this fall at a dozen health fairs at school districts and employers around the county. Within weeks, UCI will mail out promotional brochures to 150,000 county residents.
Separately, UCI is taking a softer sales approach to drum up more referrals from local medical groups. Three weeks ago, it mailed a resource guide listing its 350 doctors and their specialties to 16,000 doctors across Orange County, as well as parts of Los Angeles, San Bernardino and Riverside counties. It’s also promoting its speakers bureau, lining up 120 engagements for its research and medical professionals over the next few months.
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Overall, UCI aims to boost the number of patients it serves on employer plans by about 50% this year to 9,000, still a fraction of its total.
Still, local health care experts say UCI’s best chance of surviving in the era of managed care is to bring off its plan to link up with a corporate partner--a diversified health care network such as Columbia/HCA Healthcare Corp., based in Nashville, Tenn., or St. Joseph’s health system.
Laret, who plans to present the UC Board of Regents a list of possible partners next month, said the ideal candidate would have its own medical group, a couple of high-quality hospitals, and a range of other providers including skilled nursing and home care. While plenty more changes appear to be in store, Laret said, “I think we’re on our way.”
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Hospital Hurting
UCI Medical Center, beset by economic difficulties, is taking steps to ensure it can compete in the future with lower-cost competitors.
UCI Medical Center at a Glance
Location: Orange
Executive director: Mark Laret
Total beds: 462
Average occupancy rate: 62.2%
Major functions: Health care facility, medical school, research institution and treatment of indigent patients
Bottom Line
UCI posted its first loss in fiscal 1995-96 after recording a profit of $11.5 million in fiscal 1994-95. Dollar amounts in millions:
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1994-95 1995-96 Net patient service revenue $200.4 $179.4 Total operating revenue $215.7 $196.7 Total operating expenses $205.0 $205.5 Net income/loss $11.5 ($8.0) Patients admitted 13,684 13,269 Average length of stay 6.8 days 6.6 days
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Patients and Payments
The composition of “patient days”--why people are receiving treatment--did not change much in the last two fiscal years. But the type of insurance patients have, with a large decrease in Medi-Cal treatment and increased Cal-Optima activity. Division of patient days by service and type of insurance:
Patient Days
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1994-95 1995-96 General medicine 30% 31% Surgery 21 25 Obstetrics 8 6 Gynecology 5 4 Pediatrics 19 19 Psychiatry 17 15 Total days 92,726 87,215
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Insurance Coverage
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1994-95 1995-96 Medicare 14% 17% Medi-Cal 52 45 Cal-Optima - 5 County 9 10 Private insurance 12 8 Managed care contract 8 12 Uninsured 5 3 Total days 92,726 87,215
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Source: UCI Medical Center; Researched by JANICE L. JONES / Los Angeles Times
