UCI Hospital Debt Reaches $10 Million

Despite cost-cutting efforts that have included staff layoffs, UC Irvine’s Medical Center in Orange slipped another $1 million into debt in February.

“As of the end of February, our deficit was $10 million,” said Leon Schwartz, acting medical director of the hospital, in an interview last week. “It will take a while for the effects of the layoff to show in our budget.”

Schwartz said he believes the deficit can be kept in check for the rest of the fiscal year. He also said in the interview that no more staff cuts are planned.

William Gonzalez, the medical center’s director for seven years, resigned March 7 and Schwartz, who is UCI’s vice chancellor for administrative and business affairs, stepped in.

The Medical Center’s January figures, presented at the UC Board of Regents meeting on the UC Irvine campus earlier this month, showed about a $9-million deficit. The regents expressed concern then, since UCI Chancellor Jack Peltason had told them last fall that the Medical Center’s deficit for the fiscal year to end June 30 would be contained at $9 million.

Reasons for Lower Costs

Yet with four months to go in the current fiscal year, the Medical Center’s losses have already well surpassed that figure. Schwartz acknowledged that it would be difficult to reduce the deficit. But he said it probably can be contained at its present level because of:

- Lower operating costs in April, May and June as a result of the layoff of 75 hospital staff members on March 15.

- Continued efficiency in hospital operations. He noted that UCI Medical Center, according to UC system statistics, has the lowest operating costs of the five hospitals owned by the university.

- Gradually increasing the number of private-pay patients and reducing slightly the percentage of poor patients and others whose care is subsidized by federal, state or county government.

The medical complex is the teaching hospital of UCI’s School of Medicine. It has a nationally recognized staff and several highly regarded specialties, including its world-famous burn center, facilities for premature babies and a poison-control center.

The medical center was Orange County’s general hospital until the university took it over in 1976, and it remains the main medical facility used by the poor. It is this service, however, that has caused the financial problems.

Proportion of Poor Patients

Schwartz noted that government cuts in medical reimbursements since 1982 make it impossible for the medical center to hospitalize a poor person without losing money. The center is hit especially hard, he said, because almost 70% of its patients rely on government programs to pay for their care--the highest percentage in any university hospital in the nation.

Schwartz said the university’s 10-year contract with Orange County, signed in 1975, to care for the poor expires June 30, and a new contract is being negotiated. Schwartz would not be specific about the talks, but he said the university hopes the new arrangement will ease the financial burden on the medical center.

In an interview Thursday, Schwartz talked about the medical center’s situation since he took over.

“Our (hospital) occupancy level continues to fall--not dramatically, but it continues to fall,” he said. “The amount of private patients is growing, in very small increments--about 2% a year. What I think appears to be happening is the total number of private patients might be stabilizing, but as total occupancy falls, that percentage (of privately insured patients) will go up. That is a favorable trend for us.”

Workload May Be Cut

Schwartz said that a slightly reduced patient load at the hospital might be desirable. “That is certainly one strategy,” he said. “The trends are certainly pushing us in that direction, anyway . . . . But it’s a little premature, after my being here (as acting director) only two weeks, to say that’s what I’m going to propose to the chancellor.

“The chancellor has been very clear in the long-term strategy, and that is that we have to continue to improve this place and make it as attractive to private patients as we can. We also need to do a better job of marketing. There are many good things happening here, and good medical care that the public is not aware of.”

Schwartz said the medical center can attract more private-pay patients if it expands facilities for its staff doctors’ private offices. “One area of emphasis,” he said, “is to improve the private-practice facilities for university physicians. We have a private-practice clinic here, but we’ve virtually outgrown the facility.”

He said a new, separate building on the medical center grounds might be built for doctors seeing private patients.

“We’re also looking to develop some outpatient private facilities for our physicians in Irvine,” he said. “There are very clear statistics that reveal that from your private-practice patients, you get increased referrals to the hospital.”