A group of turnaround specialists told UCLA faculty Wednesday that the university's struggling health-care system needs to substantially overhaul its unprofitable physician clinics and cut its workforce.
The Hunter Group, a consulting firm paid $1.9 million by UCLA to suggest reforms, also said billing practices need revamping. They are so haphazard that the system billed 300 different amounts for the same procedure.
Although the gathering of 250 faculty and staff was not open to the news media, details were reported by attendees and most were confirmed by UCLA administrators.
The consultants were hired to help improve the bottom line and cash flow at UCLA Healthcare, the largest medical system in the University of California chain. As of Dec. 31, it had only $20,000 cash in the bank and officials were forced to borrow $7 million from the UCLA chancellor's office to help pay bills.
The consultants found fault with many financial practices at UCLA's three hospitals in Westwood and Santa Monica and its network of 18 primary-care clinics on the Westside. They did not evaluate the quality of care for patients.
Hunter Group officials told the gathering Wednesday that UCLA has been overpaying its 105 primary-care physicians and that those physicians' productivity falls below national benchmarks. The firm concluded that it took more than 80 of UCLA's primary-care doctors to perform the work of about 70 in a more efficient system.
The consulting group recommended that UCLA link pay with performance and improve coordination between clinics and hospitals, said Steven A. Olsen, UCLA's vice chancellor for finance and budget. He said the findings do not mean that "we're going to retrench" from the primary-care network or that the clinics will be privatized.
"I don't know if that's going to result in a reduction in physician compensation," Olsen said. "I would hope that they'd be so productive that we'd have an opportunity to increase their compensation."
The Hunter Group suggested that 475 full-time positions would have to be eliminated within the medical system in the next three years to save $31 million. UCLA officials said most of that could be achieved through attrition, not layoffs.
The firm said UCLA's main hospital in Westwood was spending about 5% more than comparably sized hospitals to care for patients. But costs at UCLA's Santa Monica hospital vastly exceeded those of similar facilities. Contacted after the meeting, UCLA officials said they could not provide the exact figure.
Olsen said the Hunter Group's report does not indicate that UCLA needs a massive turnaround, but rather a fine-tuning. The firm has a reputation nationally, however, for recommending significant layoffs and major changes in hospital operations.
"On balance, this was a positive message," Olsen said, "one that left me with a strong feeling that we had enough to work with that we could overcome the challenges."
Other attendees said, however, that the consulting firm clearly was calling for significant changes.
UCLA Healthcare's financial performance last year was the worst compared with UC's four other medical systems. It netted $7.2 million on operating revenue of $825 million. By comparison, UC Irvine earned $36.5 million, Davis $35.3 million, San Diego $30.3 million and San Francisco $29 million.
The Hunter Group said UCLA Healthcare was still $305 million short of the $1.3 billion needed to build and equip two replacement hospitals it is building in Santa Monica and Westwood. With plans to borrow $45 million, that still leaves the campus in need of $260 million for the hospitals, which will open in late 2005.
There are some signs of improvement. The health system earned $570,000 in the first half of fiscal 2003, compared with a loss of $3.4 million at the same time a year earlier. Officials said they expect to end the year with at least $10 million in net income.
Among the Hunter Group's other recommendations:
* The hospitals need to renegotiate insurance contracts that pay a fixed amount each month to provide all hospital services for HMO members. Instead, they must demand to be paid a fee for each service.
* Send out bills faster. Nationally, hospitals send out bills within five days of providing care. UCLA sends bills after 14 days, which hurts cash flow.
* Reduce the reliance on expensive temporary nurses and shift some responsibilities from registered nurses to less costly licensed vocational nurses, nurses aides and housekeepers. The hospital also should cut supply costs, particularly prescription drugs and operating room equipment, although exact solutions were not described.
* Reduce the length of patients' stays. Stays for congestive heart failure patients and those in critical care units, for instance, were higher than national benchmarks.
Saying that the recommendations were a work in progress, UCLA officials have refused to give a copy of the consultants' report to The Times.