UCI Medical Center Is in Black After 5 Losing Years : Finances: Normally sedate UC Regents applauded the teaching hospital's change of fortune, a stark contrast.

By KRISTINA LINDGREN

June 21, 1991 12 AM PT

TIMES STAFF WRITER

LOS ANGELES — UCI Medical Center, under threat of closure earlier this year over chronic budget deficits, is in the black for the first time in five years, UC officials announced Thursday.

The UC Irvine teaching hospital in Orange was $111,000 in the black as of April 30, in stark contrast to its $10.4-million deficit at the same time last year, University of California Vice President Cornelius L. Hopper told members of the Board of Regents meeting on the UCLA campus.

But Hopper cautioned that the razor-thin margin was reached through a patchwork of measures, including special state and county subsidies, tobacco tax dollars, increased fees to paying patients and agreements to shift more indigent patients to other Orange County hospitals.

“What this means is that we are not at the absolute brink of crisis that we were a few months ago,” Hopper said. “But it will only take a fraction of a 1% change in any of these things and we could be right back where we were last year.”

Still, after years of hand-wringing over the only financial loser among the five UC teaching hospitals, the normally sedate Board of Regents broke into applause for UCI Chancellor Jack W. Peltason, who has been struggling with the hospital problem since he took over the Irvine campus in 1984.

“We’re pleased that we don’t have an immediate financial crisis on our hands,” Peltason said after the meeting and a hearty round of congratulations from individual board members. “But the structural problems remain to be solved.”

The problem, University of California officials say, is that the former county hospital treats more indigent patients than other hospitals in Orange County.

This year, 52% of the medical center’s patients were on Medi-Cal, up from 49% last year, and their care is only partially paid for by the state and county, Hopper said. If Medi-Cal and indigent patients were spread more evenly across other hospitals in the county, no one hospital would bear the total financial burden.

Yet, more hospitals have been closing trauma-care facilities and withdrawing from county health-care contracts, in part because of the financial drain involved in treating indigent patients.

UCI officials have contended that this trend has put a greater burden on their hospital and one that the University of California system cannot continue to subsidize. The last time the medical center broke even was in fiscal year 1985-86.

Although owned and operated by the UC system, UCI Medical Center has in effect served as a county hospital.

The medical center handles both Medi-Cal patients and those who qualify for state-funded Indigent Medical Services.

The reason for the center’s disproportionate share of poor patients is rooted in its history. The 493-bed medical center was owned by the county until July, 1976, when the Board of Supervisors sold it to the University of California for $5.5 million.

Last year, the hospital embarked on a controversial diversion policy, turning away pregnant women when the delivery room became too crowded. The ensuing publicity and negotiations with state Medi-Cal officials eventually led other hospitals to agree to take indigent maternity patients.

As the number of indigent patients continued to rise at the medical center late last year, the Board of Regents began to lose patience and even warned publicly that they may be forced to close the facility.

As recently as March, Board of Regents Chairman Roy T. Brophy said: “We simply can’t keep funding what is truly a county hospital. It is not the job of the UC system to take education funds and use them to pay for indigent medical care.”

The threat touched off a series of meetings between university and county health officials. Ultimately, the county agreed to turn over an additional $3 million for indigent care, about $1.8 million of which would go toward patient costs at the medical center, Peltason said.

When reports surfaced that UCI might not spend all of the $3-million grant for its medical center but might instead share the money with other hospitals in the county, some county officials said they were appalled. Peltason at first downplayed the idea, saying, “We’re not about to give away money given to us.”

But earlier this month the university approved a plan to share the county grant with two other hospitals that are large providers of indigent care--Western Medical Center-Santa Ana and Fountain Valley Regional Hospital and Medical Center--and to use some of the money to start a program for referring indigent patients to physicians and clinics for primary care.

In addition to the county grant, the medical center also has received $4 million in special state subsidies and funds from state tobacco revenues. Combined with aggressive cost-cutting measures and increased fees for paying patients, Hopper said the medical center has been able to staunch the flow of red ink so far this year.

As of April 30, the medical center had net operating revenues of $167,523,000 versus operating expenses of $167,412,000, according to UC hospital records. Hopper said no change was expected by the end of the fiscal year on June 30.

But given the massive state deficit, Hooper said, there is no way to guarantee that the medical center won’t slide back into financial trouble in the coming fiscal year.

“The basic arithmetic hasn’t changed,” Hopper said. “There are still large numbers of indigent patients for whom there is inadequate reimbursement.”

But prospects are good, Peltason said, that an emerging coalition of county health officials can work with the medical center to solve the crisis in indigent care.

“We’re more hopeful than we have been in a long time that we can create a system to take care of the indigent of Orange County,” Peltason said. “Because it can’t be just our hospital doing it.”

Times staff writer Leslie Berkman contributed to this report.