Long-Term Facilities Planning	Print Format

Mark Laret, chief executive officer of UCSF Medical Center, presented to the Committee on Health Services of the UC Board of Regents an update on the medical center's long-term facilities plan. His presentation addressed plans for the Parnassus and Mount Zion campuses and the new Mission Bay campus.

Here is his full speech.

Committee on Health Services
UC Board of Regents

Jan. 18, 2006

My objective today is to update you on the complicated facilities challenges at UCSF Medical Center, and to share with you our thinking about how to address these challenges in a manner that meets state and university seismic requirements, supports our academic programs in the near term and long term, and does this in the most financially responsible manner.

UCSF Medical Center is in the enviable position of having strong financial performance, a steady growth in demand for our services and an ability to recruit truly exceptional faculty, housestaff and students. In our case, it is our facilities that present the greatest challenges. We need more space to develop academic and clinical programs, much of our space is functionally obsolescent and many of our facilities fail to meet state and university seismic requirements. Because we are a self-supporting enterprise, every solution to these problems must be funded by the medical center itself, through retained earnings, debt and philanthropy.

A quick review. UCSF Medical Center operates hospitals on two sites — first is Parnassus Heights, where we have the interconnected Moffitt and Long hospitals (currently 494 beds of adult and pediatric services, including the Emergency Department). We are making seismic adjustments to these hospitals now, and under current state seismic law will be able to operate the Moffitt hospital until 2030 and the Long hospital permanently thereafter.

The Mount Zion medical center — where we are currently operating 72 beds, most of which are used for cancer surgery — has a state seismic requirement that it either be retrofitted or shut down as an inpatient facility by 2013. Further, under current university policy whether or not we continue to use Mount Zion as an inpatient hospital, some buildings must either be torn down or retrofitted by 2013 if university employees are to occupy them.

Academic and Clinical Vision

Last year, we laid out in detail our academic and clinical vision for UCSF Parnassus, Mount Zion and the new Mission Bay campuses. In short, that plan was to acquire 14 acres of land adjacent to the research campus at Mission Bay in order to build a women's, children's and cancer hospital there by 2013, enabling us to move all inpatient services from the Mount Zion campus by the 2013 seismic deadline. Our long term vision was, and remains, to have two major inpatient campuses at Parnassus and Mission Bay, with Mount Zion ultimately serving mostly as an outpatient center.

Three years ago, the cost estimates for the Mission Bay project were about $700 million, to be funded from medical center debt (our capacity is about $400 million) and philanthropy (about $300 million). The philanthropic goal was aggressive but, we believed, achievable. After detailed program planning, this past summer two independent cost estimates put the price tag of the project at well over $1 billion. While $700 million was a stretch, $1 billion was not realistic and certainly not by 2013.

Over the past several months, Medical School Dean David Kessler and I have discussed the financial reality of this situation with the UCSF campus leadership, with committees of the Academic Senate and with our community-based UCSF Medical Center Executive Council.

The consensus is that the plan should proceed simultaneously on two tracks. Building a major clinical campus at Mission Bay is the right thing academically and clinically, but we should plan to build that clinical campus in phases, as we can afford it. There is agreement that the first phase should be a home for the UCSF Children’s Hospital. On the second track, to address the 2013 seismic deadline at Mount Zion, even though we ultimately envision this campus as an outpatient facility, the consensus is that we should proceed now to make the necessary seismic improvements there to allow its use as an inpatient hospital, as needed, until 2030. By making these seismic improvements, we would eliminate the business risk — and the risk to our very strong academic cancer program — of no longer being able to care for cancer patients at Mount Zion after 2013 should the state seismic laws remain in place.

At Mission Bay, land acquisition continues as you have authorized. We are in the process of executing the ground lease for the Catellus property in excess of 9 acres and the WYL property has been acquired. Negotiations are underway for an option on the X3 parcel.

New Children's Hospital

The UCSF Children’s Hospital, currently on three floors in the Moffitt and Long hospitals, is one of the highest ranked children's hospitals in the country. It is where the neonatal intensive care concept was first implemented and pioneering treatments were developed like surfactant that in the past 40 years has halved infant mortality internationally and fetal surgery that corrects birth defects, which were previously fatal, before babies are born. This children's hospital needs its own facility and visibility. Once it leaves Parnassus, it will open considerable additional space for other adult programs there.

We have begun the detailed planning for a 180-bed children’s hospital as a first phase project at Mission Bay and we are ready to begin fundraising for it. Current estimates are that this project could be built for approximately $600 million, if midpoint of construction is 2012. We will obviously bring this project to the Regents regularly for updates and approvals, but we will only ask for your permission to proceed with this project when we have secured the financing, including the philanthropic support. I can tell you that the prospect of beginning the fundraising in earnest has electrified our faculty and staff as well as many in our donor community who are motivated to bring this project to fruition as soon as possible.

Mission Bay, Mount Zion

Consistent with the original plan we discussed with you, subsequent phases of development at Mission Bay would include the inpatient and outpatient cancer programs, and inpatient and outpatient women's programs.

The second track is to address the Mount Zion campus. We have completed a detailed review of all of the elements necessary to bring facilities into compliance with university and state seismic requirements. In addition, we have evaluated the costs of adding beds and operating rooms at Mount Zion to meet the growing demand for our services.

The plan has the following major elements:

• Relocate tenants occupying approximately 60,000 square feet in the Hellman building, and tear this 1916 building down. This step needs to occur to meet university seismic guidelines since this building is rated "very poor."
• Strengthen the A, B and D buildings. Some of this strengthening is required to meet university requirements and some is required to meet state inpatient hospital requirements.
• Add two additional operating rooms and between 28 and 56 additional beds to accommodate expected growth.

The total cost of this project is between $250 and $300 million, of which approximately $100 million has to be expended simply to meet university seismic and triggered infrastructure upgrades. These are costs we have to incur regardless of how we use Mount Zion — as a hospital, outpatient facilities or faculty offices. The incremental costs beyond this base include the cost of relocations of programs, faculty and staff; the costs of upgrading facilities to meet state seismic requirements; and the costs of the additional operating rooms and beds. A more detailed project plan will of course be coming to the Regents for review and approval.

The costs of this project, while significant, are within the debt capacity of UCSF Medical Center. We also believe we can complete this project well before the 2013 deadlines.

Advantages, Disadvantages

This revised plan has the advantage that, by 2013, we will have addressed the seismic requirements for Mount Zion, enabling us to use the hospital (under state law) as needed until 2030; and for education, research and outpatient services (under university policy) for as long as needed. Further, this plan allows UCSF to proceed with our long-term academic vision of a major clinical campus at Mission Bay to be built in phases, as resources allow. The first phase of the children's hospital planning and fundraising can begin now.

The disadvantages of this plan are that the required investment at Mount Zion is significant, and making this investment will inevitably will delay the medical center’s ability to finance the first phase Mission Bay project. Another consideration is that when the Children’s hospital is completed at Mission Bay, UCSF will be operating hospitals on three sites, which is not ideal.

But barring a major revision of state seismic law, immediate unprecedented philanthropic support or financial support from the state — none of which we want to rule out but none of which we can count on — we believe that we have no other choice but to pursue this revised plan.

Two-Track Approach

We cannot afford the original Mission Bay plan within the 2013 seismic timetable. The two-track approach — continue acquiring land for a clinical campus at Mission Bay and build it in phases as resources allow, and make the seismic improvements to the Mount Zion campus that will enable us to remain in business there until 2030 — is consistent with our academic goals, our clinical goals and is financially responsible.

In subsequent meetings, we will be seeking your approval on many specific issues, including specific elements of the children’s hospital planning and the Mount Zion seismic improvements. All of those actions will fit within the context of what I have presented today. I look forward to your questions and comments.