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The employee groups filed a complaint with the Public Employee Relations Board and a lawsuit against the regents in San Francisco Superior Court, both of which are still pending. Along with the fundamental question of whether or not the regents have the authority to transfer the medical center to a private entity, issues at hand include the public board's decidedly nonpublic handling of the matter and alleged unfair business practices stemming from shutting labor out of the deal. The merger essentially will result in medical center employees no longer being in the public employee system, and they may very well lose access to some or all of the Public Employee Retirement System; UC refused to disclose such details.
Labor took an initial blow in December when Superior Court Judge William Cahill ruled that, under the public records law, UCSF did not have to disclose anything that might also contain proprietary information from Stanford, because the latter is a private entity. That has meant that everything anyone really wanted to see, such as the business plan for the new entity and its employees, has remained a public mystery.
University officials initially said they were figuring on employee cuts of only 5 percent, but they're not the ones making the call anymore. That decision ultimately will be made by the new board of directors of the new private entity.
It may have been inevitable, though the clandestine manner in which the board handled its business raised doubts. But in any event, it means a number of health care workers are going to join the ranks of S.F.'s unemployed.
"These places are not going to be bigger and employing more people on the service side in the future," says Michael Holt, who follows health care issues for the Institute for the Future in Menlo Park. "It's very much like the steelworkers. This is the kind of stuff that plays out in the end. In the end, workers go find something else to do. In the meantime, you've got months and years of people losing jobs and being kicked back into the community."
Proponents of the merger, including UCSF Chancellor Martin, Medical Center Administrator Kerr, and most of the regents, argue that the deal will cut the loss of jobs in the long run. But that's akin to saying, "Trust me," because they also won't reveal the numbers that support their plan. Needless to say, labor stopped trusting them some time ago.
In many ways, the UCSF Medical Centers began acting like a private entity long before they officially became one. A selected group of leaders huddled behind closed doors in weekly planning sessions. They shared not just financial statements, but their intimate business dealings -- their successes, their failings, and their fears -- with private consultants who were bound to guard them. And in the midst of all of this, one financial wizard in particular quietly became a guiding force in closing the deal.
F. Warren Hellman is a multimillionaire partner in the San Francisco investment firm of Hellman & Friedman. He sits on the boards of a handful of businesses, not the least of which is Levi Strauss (being as he is also a member of the Haas family). Hellman's name is on the short-list of longtime movers, shakers, and philanthropists in the high-society and business crowds. He directed the UCSF Foundation and sat on the UCSF Campaign Cabinet from 1991 to 1996.
When Warren Hellman talks, people listen.
Before the Board of Regents Health Committee even took the merger to a vote at that November meeting, they issued a formal apology to Hellman for Regent Frank Clark's earlier criticism of a report Hellman had done on the pending business deal. "We apologize for the unforgivable treatment you received on Friday," John Davies, chairman of the committee, told the guru. Hellman had been invited by the regents into their inner circle to perform a "third-party review" of the proposed merger deal. He was hardly the first outsider to enter the game. The Lewyn Group, a health care consulting firm based in Washington state, had recommended that the medical centers merge in the first place. The accounting firm of Ernst & Young had crunched the numbers and acted as financial analyst for the actual deal. UCSF refused to disclose either the Lewyn Group or the Ernst & Young reports, and significant parts of Hellman's report.
Hellman put together a team, issued a report, and gave the Board of Regents the celebrity imprimatur it craved.
"My thinking on the whole issue was greatly influenced by Warren Hellman's report," says Lt. Gov. Davis. "His report persuaded me that many more people would have a job two years from now than are currently working at UCSF."
It was no surprise, then, that on Jan. 7 Hellman was named to the new board of the new entity known as UCSF Stanford Health Services. That's business. And, now, academic medicine is business, too, something that troubles a lot of people.
"Fundamentally, health care doesn't belong in the marketplace," argues Vishwanath Lingappa, a UCSF professor of physiology and medicine, and a vocal opponent of the merger. "When you go buy orange juice, you can taste it and make a decision. Unless you are a physician, you are dependent upon someone who has looked at the X-rays and tests and makes a decision that you are not allowed to evaluate. Medicine is judgment. Now you superimpose either financial incentives to do things, or the new managed care incentives not to do things. Neither of those is right. You, my patient, want my judgment to be free of financial incentive either way."
The whole point in merging Stanford and UCSF medical centers and turning them over to a private board to run was to create a better, more competitive business. After all, this deal started because of the bottom line, which is likely to become much more of a driving factor.
