UC-DAVIS HEALTH SYSTEM: Increasing Costs Force ‘Unpopular’ Budget Cuts

      The UC-Davis Health System will trim $10 million from its operating budget for the coming fiscal year, following a $15 million cut that was instituted last year. The Sacramento Business Journal reports that "[b]udget cuts for the fiscal year that began last week are the last phase in a three-year program to slash spending by roughly $50 million." While "the cuts are stirring controversy," UC-Davis officials say they are necessary because the health system expects to make "only $28 million" in the coming fiscal year -- 22% less than last year. The health system expects revenue "to increase by just 1% while expenses will go up by 4%."

Unpopular Cuts
      The Sacramento Business Journal reports that the primary targets of the "controversial" budget cuts are the geriatric home-care program and the UC-Davis physician network. The home care program "is being reorganized" and will put a greater emphasis on telemedicine "to link doctors and patients." In cutting down its provider network, UC-Davis terminated 10 doctors "from the Primary Care Network over the past eight weeks," leaving thousands of patients to find new doctors. The remaining 130 physicians "have been asked to see more patients." Other departments, such as the pharmacy division, are seeing cost-cutting changes. The health system is now "emphasizing the use of less expensive drugs." Dr. Phil Raimondi, medical director of the Primary Care Network, said, "We were given only so much money to run the network -- and the restraints put on us necessitated some cutbacks. We tried to do this in a way that caused harm to the least amount of people."

Managed Culpa
      The Sacramento Business Journal reports that UC-Davis' financial struggles partially arise from the impact of managed care on its hospital, the UC-Davis Medical Center. In addition to the "increased cost of doing business," the hospital is also taking a hit from contracts with managed care companies that only pay "a low, set fee per patient per month no matter how much care is provided." Bob Chason, COO for the health system, said HMO members account for "slightly less than one-third of the patients being treated" at the hospital, but "bring in only 12% of the hospital's gross patient revenues" (Robertson, 7/13 issue).