Stanford, UCSF to end
merger of med centers
BY RUTHANN RICHTER
Stanford and UCSF have begun the official separation
process following the Oct. 28 request from Stanford
President Gerhard Casper that they dissolve their
two-year-old partnership -- UCSF Stanford Health Care.
In a letter to University of California President
Richard Atkinson, Casper said few had worked harder than
he had in the last two and a half months in seeking an
organizational model that would allow the merger to go
forward with strong central leadership and full faculty
support. But it was of no avail.
"With great anguish, I have concluded that, in
our efforts to find bold solutions to the problems of
academic medical centers, we have taken on too much. We
have failed to achieve a new common UCSF Stanford Health
Care culture that would provide the whole-hearted support
needed," he said in the letter to the UC president.
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Atkinson accepted Casper's request for termination of
the merger the same afternoon, although the move still
must be officially sanctioned by the UC Regents, who will
consider the matter at their Nov. 18 meeting.
Representatives from the two universities now are
expected to meet with Isaac Stein and Howard Leach, chair
and vice chair respectively of the UCSF Stanford Board of
Directors, to develop a plan to disengage the two
operations.
Stein and Leach issued a statement saying the merger
was coming to an end "not because of the lack of
hard work and perseverance of our employees, but rather
because of the very different and complex structures and
cultures each of our institutions brought to the new
entity."
When UCSF Stanford was formed in November 1997, it was
recognized as a groundbreaking enterprise, as it meshed
public and private universities. The goal of the venture
was to help steer the world-class medical centers through
a period of crisis in health care, in which government
and private support and managed care reimbursements were
on the decline.
"We and UCSF entered into this venture with the
very best of intentions -- to position our medical
centers in the best possible way," said Eugene
Bauer, MD, dean of the School of Medicine and the
university's vice president for medical affairs.
But UCSF Stanford faced financial pressures that were
even greater than anticipated, including staggering
Medicare cuts mandated by the federal Balanced Budget Act
of 1997. At the same time, the transaction costs of the
merger proved to be higher than expected, Casper said. By
the end of fiscal year 1999, the merged enterprise had
accumulated an annual operating loss of $86 million. Of
this amount, some $66 million was related to operations
at UCSF, particularly at the UCSF/Mount Zion Medical
Center, while the remaining $20 million was associated
with operations at Stanford and Packard hospitals. A $13
million investment revenue gain brought the total
shortfall of the merged enterprise to $73 million for the
1999 fiscal year.
Moreover, the faculties at the two institutions never
integrated in the way initially envisioned by the merger.
Faculty members remained loyal to their home
institutions.
Bauer said it was not a conflict of cultures, as both
sides shared the same values going into the venture.
"If there is a failure to be ascribed, it's that
UCSF Stanford Health Care didn't present a vehicle to
which the UCSF and Stanford faculties could transfer
their loyalties," he said.
He noted that when two Harvard-affiliated hospitals in
Boston -- Massachusetts General Hospital and Brigham and
Women's Hospital -- formed an alliance, it was through a
holding company, a less ambitious organizational model
that gave faculty members greater opportunity and time to
shift their allegiances.
At UCSF Stanford Health Care, Bauer said, "We
tried to do way too much too soon."
By the end, some 58 percent of the UCSF faculty
indicated in a recent poll that they favored dissolution,
Lawrence Pitts, MD, chair of the UCSF Academic Senate,
told Stanford faculty at the School of Medicine Faculty
Senate meeting Oct. 26. While no similar poll was
conducted at Stanford, as many as 90 percent of the
faculty were thought to favor dissolution, Peter Gregory,
MD, chief medical officer at Stanford, told the Faculty
Senate.
Given the venture's faltering ability to meet its
goals, Casper and Atkinson had asked on Aug. 3 for a
reassessment of the structure of the merged organization.
That review involved intensive discussions, jointly and
separately, between the leadership and faculties at both
sites.
In the end, the conclusion was that "our unitary
management structure has not given us the flexibility and
resources that we needed for managing the north and south
sites effectively," Casper said in his letter.
Bauer said Stanford will now enter a "period of
analysis" as to its current position vis-à-vis the
local and national health care marketplace. He said it's
now projected that the Stanford and Packard hospitals
will earn a $15 million operating profit for the current
fiscal year, which began in September. Nonetheless, given
the unrelenting financial pressure on academic medical
centers, Stanford cannot afford to be complacent, he
said.
"There is no doubt that we will have to make hard
choices that will take into account our educational
needs, our research mission and the public that we
serve," he said.
Bauer noted that the two schools are expected to
continue academic collaborations fostered by the merger.
The two campuses also will pursue the integration of
children's services to preserve and enhance initiatives
formed as a result of the merger, he said.
The dismantling of the merger is expected to cause no
disruption to patient care and academic activities, Bauer
said. "Both Stanford and UCSF are strong and remain
deeply committed to education, to our research enterprise
and to the health care community we serve," he said.
"This will not affect the commitment our
institutions have -- not one iota."
Bauer said Malinda Mitchell, chief operating officer
at Stanford Hospital, Peter Gregory, the chief medical
officer, and Christopher Dawes, chief operating officer
for LPCH, will continue to direct Stanford medical
center. "We will go forward with the benefit of a
very strong leadership," Bauer said.
UC San Francisco Chancellor Michael Bishop, MD, said
he expects a cordial dissolution process. While officials
develop a long-term plan, Bishop said, members of the
Hunter Group, the health care consulting firm that has
been managing UCSF Stanford Health Care for the last
three months, will continue to manage the UCSF hospitals,
which they have been doing since August. SR
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