Firm Offers to Manage UC Irvine Hospital : Document Reveals Proposal to Take Over the Debt-Ridden Facility

IRVINE —  American Medical International would pay UC Irvine a minimum of $3 million a year to take over the university’s debt-ridden medical center, according to a preliminary draft of the national hospital chain’s management proposal. A copy of the draft proposal was obtained by The Times.

Officials with AMI and UCI refused to discuss specifics of the draft because the matter is still in negotiation. Further, they cautioned that the document is a “discussion draft” that has changed many times in recent months and is bound to be revised before a final proposal is presented.

However, the document-- excerpts of which are being circulated for discussion by the medical school’s faculty and some medical center officials--offers the first glimpse of what is being contemplated for the teaching hospital, which was about $10 million in debt last fiscal year.

According to the draft, the lease agreement would last for four years, with an option for AMI to renew. The company’s lease payment to the university would be adjusted by the consumer price index yearly, and the university’s proceeds from the lease would be restricted to providing support for education and research at the teaching hospital in Orange.

In other provisions of the company’s draft proposal:

- All medical center employees would be transferred to AMI’s payrolls for at least one year. The employees would retain their seniority acquired from the university and carry it over into AMI’s retirement and benefits system, the document says. However, physicians would remain on the staff of the College of Medicine and their salaries would not be paid by AMI, officials said. Also, the university would be responsible to provide, supervise and control the training of doctors.

- UCI Medical Center would continue to provide medical care for the county’s poor. The draft proposal states that AMI would “continue to support the care of indigents to the extent that resources are made available by local, state and federal governmental agencies.” But if indigent patients require care beyond the services paid for by the government agencies, the indigents would “also be treated to the extent medically required,” the document continues. It further states that an indigent requiring emergency admission would not be denied care due to the patient’s inability to pay.

AMI’s interest in the former county hospital in Orange is intertwined with its partnership in a venture to build a hospital complex in Irvine, which also will be affiliated with the university.

Today, a growing number of teaching hospitals like UCI are affiliating with private hospital chains. These teaching hospitals are at a competitive disadvantage with community hospitals because they must grapple with debts caused by large indigent patient loads, inadequate government reimbursement and the higher costs associated with research, teaching and complicated medical cases, authorities have said.

About 70% of UCI Medical Center’s patients are covered by federal, state or county health care programs which do not fully reimburse the hospital for the cost of care. UCI is attempting to enhance its image and attract more privately insured patients to boost its finances.

However, the proposed agreement between UCI and AMI has drawn flack from an employees’ union representative.

Edward Edwards, council representative for the American Federation of State, County and Municipal Employees, charged that UCI employees would not be treated fairly under the agreement. He also questioned Thursday how the hospital chain could care for the poor and still produce a profit.

“There’s 101 back doors to take on this. There’s just no way they (AMI) are going to enter into an agreement that allows for their profit to be affected by it,” said Edwards, whose union represents the hospital’s clerks and patient care technicians.

Edwards explained that the union was surprised to find out only recently that, if AMI is successful in its negotiations with UCI, all the hospital workers will leave the university’s employment and be transferred to AMI’s payroll. Edwards said he had been under the impression that the negotiations involved turning over only management of the hospital to AMI.

He also criticized UCI for not giving his organization a copy of the draft proposal.

Edwards called the one-year employment guarantee for the medical center employees “garbage . . . . The university offers that as a bouquet of flowers. If I was contracting, I would keep everyone for one year, just for transitional purposes,” he said. At a meeting with university medical center management this week, he asked about AMI’s pay scales, benefits and retirement programs but got no answers, he said.

“We’re being sold down the river,” added one employee who asked not to be identified.

“The employees have been kept in the dark,” Edwards said. “The basic nuts and bolts have been kept secret from employees and the people. At the meeting we asked for all the relevant information, we asked for a forum for the union . . . and for the community. We said it is a responsibility for the university to have a forum for the community. The medical center is an integral part of the community.”

However, Dr. Marvin R. Dunn, director of AMI’s division of academic medical centers, said the draft proposal is “only a discussion document” that has undergone many changes.

He declined to comment on the specifics of the draft and added that the figures in it could change before a final proposal is presented to the university.

In answer to Edwards’ charges that indigent care would be cut back, AMI’s Dunn referred to a recent New England Journal of Medicine article by Dr. Richard L. O’Brien, dean of Creighton University’s medical school in Omaha, Neb. The school’s teaching hospital, St. Joseph Hospital, was acquired by AMI last November.

Care for the indigents at St. Joseph--an important mission for the Catholic facility--has not suffered under AMI’s management, the article said.

St. Joseph’s contract with AMI spells out that “needed health care” is provided regardless of the patient’s ability to pay, O’Brien said in a telephone interview Thursday. He added there has been “not one word” from AMI in an attempt to influence the physicians’ judgments on how much care is necessary.

The AMI takeover has been well accepted by physicians and was, in fact, a boon to the school, he said.

“AMI wanted to acquire St. Joseph because it was a teaching hospital,” he said. The feeling was that “if some big outfit from Beverly Hills comes to Omaha, we must be doing pretty good.”

AMI has provided an “enhanced commitment to the academic mission” and a “more aggressive and heightened approach to planning. I see a significant effort to increase physician input into decision making. That’s quite positive,” he said.

John Gaffney, previously executive director of St. Joseph before the takeover and now director of AMI’s Great Plains division, added that there were no employee cutbacks at the Omaha hospital. Wages remained at their previous levels, employees were pleased with their new benefits, and attrition has remained at the normal, pre-acquisition rate, he said.

St. Joseph employees are not represented by unions.

Both O’Brien and Gaffney said the university and hospital kept employees and community leaders advised of progress during the negotiations with AMI. “We thought it was best not to surprise them and to keep them informed of the progress,” O’Brien said. “We gave them the opportunity to raise their fears and doubts.”

Back in Orange County, Dr. Gerald D. Weinstein, acting dean of UCI’s College of Medicine, said he has received a generally “positive reaction” from the faculty, and that one department has already informally voted to endorse the lease arrangement. There will be a formal vote by the physicians on the draft proposal in a few weeks after it has been fully studied, he said.

Weinstein added that several faculty members went to Creighton University several months ago to examine how AMI’s acquisition was affecting the hospital’s management and patient care. “The feedback they got was positive,” but the visit was just a few months after the chain had acquired the hospital, he said.

The acting dean said he is satisfied that indigent care will not be cut back. “The language in the document is pretty clear,” Weinstein said. He did not believe AMI would attempt to influence the extent of care to a poor patient. “It’s a physician’s decision,” he said.

Leon Schwartz, UCI Medical Center acting director, said the AMI proposal will be presented to the regents at the October meeting, at the earliest, and defended the negotiating proceedings.

“I think the appropriate people who should be a party to this will be involved in making the decision,” he said.

Dunn said AMI foresees no cutbacks in jobs at the medical center; conversely, it hopes to expand. AMI will build a “regional integrated health care system” with the to-be-built Irvine hospital and the existing medical center in Orange, he said. New patients will be drawn to the system because of the specialized care offered by the university and the two hospitals, he said.

“Those two are linked. . . . If you start from that point, the system will cause a growth,” Dunn said. “There will be no need for diminishing employees. It will be the other way around.”