UCIMC Warns Red Ink May Follow 2 Good Years

The cost of treating poor patients will put UCI Medical Center into debt by up to $9 million this year, some of which may not be recovered from the state, hospital director Leon Schwartz said Thursday.

Gov. George Deukmejian’s newly signed state budget provides up to $8 million to cover the possible $9-million deficit at the hospital, Schwartz said.

In 1983-84, the medical center suffered multimillion-dollar deficits that similarly necessitated special state bailouts. But in the past two years, the hospital has shown a profit.

No Medi-Cal Increases

About 60% of the medical center’s patients do not have private health insurance and thus rely on government aid. State Medi-Cal aid, even in past years, has not met actual hospital costs. But this year, the state budget includes no increases in Medi-Cal funding, and again the program will come in substantially below the cost of patient care, Schwartz said.

In a “State of the Hospital” address to medical center employees, Schwartz said that there appears to be no way to escape the red ink and that he knows of no efforts in the Legislature to supplement Medi-Cal support in the next 12 months.

The medical center thus seems certain to need some, or all, of the $8 million in “emergency money” earmarked by the governor for the center, Schwartz said.

He added that the looming debt is especially disappointing because of the hospital’s turnaround in the last two years.

In 1984, the university medical center had a deficit of about $3 million, and in 1985, the loss escalated to $9.6 million. Both years, the state Legislature provided special funds to cover the deficits there and at medical centers at UC Davis and UC San Diego.

Schwartz became acting hospital director in 1985. UCI officials credit his leadership with helping the center to turn a profit. That profit in 1986 was about $700,000. Schwartz told the hospital employees on Thursday that the profit for the fiscal year that ended June 30 is about $1 million.

But without increases in Medi-Cal payments, Schwartz said, those profit days are over.

“Our revenue next year will be about the same as this year,” he said. “But our costs will be going up.”

The medical center will also buy about $6 million in badly needed new equipment next year, Schwartz said, but the net overall loss, at worst, would be about $9 million. In an interview after his talk to hospital employees, Schwartz said: “That loss is entirely attributable to no state increase for public-pay patients.”

In hospital jargon, public-pay patients are those whose bills are paid either by the federal government, with Medicare; the state, with Medi-Cal, or the county, with supplemental funds for poor patients. UCI Medical Center over the years has had the largest proportion of public-pay patients in Orange County. In the past two years, the center has been successful in its efforts to achieve a more equal balance of patients with and without private insurance.

Three years ago, 30% of the hospital’s patients had private insurance, Schwartz said. Today, that ratio has risen to 40%.

Schwartz praised the medical center employees for their help in attracting a larger share of patients who are able to pay their own bills. “We need to continue to improve the mix, because with each 1% change our net savings for the medical center is about $1 million,” Schwartz said.

In predicting a $9-million loss, Schwartz told the employees: “I hope, and I believe, that this amount will be the worst case. I want it to be better. . . . This (deficit) was, perhaps, predictable after two good years. This is what we told the UC Board of Regents and the state Legislature.”

Schwartz said he was “very pleased that during the past fiscal year we didn’t need any state subsidy.”

“That $1-million profit we made this year was without any state subsidy. But in the governor’s budget this year, there is a $3-million appropriation as a subsidy, if needed, with another $5 million available, again, in case of emergency. We’re going to do our best to minimize our need for those state subsidies, but I have to tell you it’s very comforting to know that it’s there.”

During a question period, one employee suggested that UCI Medical Center might benefit from a name change. Schwartz said he agreed.

Noting that the hospital grounds were once the site of the now-defunct “County Hospital,” which suggests a hospital only for the poor, Schwartz said that a marketing study planned next year may well recommend a name change.

“Our name could be something like ‘University Hospital of Orange County,’ ” he said. “That’s the message that we have. That we’re the university hospital. That we provide quality. That’s how we’re known in this county.”