Wednesday, September 17, 2014

UCLA vs. Kaiser

According to the LA Times, UCLA is part of a consortium of health providers seeking to take on Kaiser.  It apparently shifts risk to UCLA from Anthem Blue Cross.

Taking aim at HMO giant Kaiser Permanente, insurer Anthem Blue Cross is joining forces with several big-name hospitals and their doctors to create an unusual health plan option for employers in Southern California.
The joint venture being announced Wednesday brings together seven rival hospital groups in Los Angeles and Orange counties, including well-known institutions Cedars-Sinai Medical Center and the UCLA Health System. The deal reflects the pressure insurers and hospitals alike are facing to hold down healthcare costs for employers and their workers.  The California Public Employees' Retirement System, the giant pension fund and the nation's second-largest healthcare buyer, has already signed on as the first major customer in the Southland starting Jan. 1. The new Vivity health plan also includes MemorialCare Health System, Good Samaritan Hospital, Huntington Memorial Hospital, Torrance Memorial Medical Center and PIH Health. In addition to their hospitals, this Anthem HMO includes all of their affiliated physicians offices, surgery centers, clinics and other outpatient facilities...

The agreement marks a major departure from industry practice, in which insurers [rather than providers] usually bear the financial risk and try to squeeze hospitals for lower prices — or exclude them altogether — from their insurance networks over cost...

This new arrangement will look very much like a regular HMO, in which patients are responsible for one simple co-pay at the doctor's office, for a medical procedure or a prescription...

"Under the current model, hospitals want to keep occupancy rates up," said Pam Kehaly, Anthem's west region president and a key architect of this deal. "This is in complete opposition to that. For this joint venture to succeed, we have to keep occupancy rates down." Susan Ridgely, a senior policy analyst at the Santa Monica think tank Rand Corp., said these hospitals are probably betting that they can attract enough new patients and referrals through (the new) Vivity (plan) to offset the gradual decline in inpatient admissions...

The deal represents an about-face for Anthem, which in recent years has singled out Cedars and UCLA, in particular, for high costs that were burdensome to employers...

Full story at

And there's a song to go with it (which would need a few words to be changed):

Tuesday, September 16, 2014

What could possibly go wrong?

One of yesterday's postings dealt with the Regents' agenda and noted that there was an unclear reference to some kind of investment fund.  It was unclear whether that item referred to the $1 billion green investment fund or something else.  Turns out, it was something else:  [From UCOP]

University of California proposes creation of new venture fund to invest in UC innovation

The University of California today (Sept. 15) announced the creation of UC Ventures, an independent fund to pursue investments in UC research-fueled enterprises, subject to the approval of the UC Regents. The Office of the Chief Investment Officer would make an initial commitment of up to $250 million to the fund. UC Ventures will seek to generate attractive, risk-adjusted returns by investing in commercial opportunities arising from the University of California. No tuition or state funding will be used. With its 10 campuses, five medical centers and three affiliated national laboratories, as well as more than 20 incubators and accelerators, 233,000 students, 190,000 faculty and staff, and 1.7 million living alumni, the University of California is a rich environment for innovation that is already the target of venture capitalists from around the world.

The UC Board of Regents will vote on this proposal Sept. 18 during the board’s regular bi-monthly meeting at UC San Francisco’s Mission Bay campus.

“UC Ventures is the result of careful evaluation of best practices to develop the most effective investment vehicle to capture the economic value the University of California is creating through its pioneering research,” said UC Chief Investment Officer Jagdeep Singh Bachher. “Our goal is to build upon the technology commercialization efforts at UC while carefully managing potential risk exposures. We are confident an independent UC Ventures will achieve this.”

“In addition to any financial benefits, we see this fund as a potential vehicle for providing resources to support the basic research and talent — among both faculty and students — required to develop innovations that can benefit California and the world,” said UC President Janet Napolitano.

Recent examples of successful UC startups include Aragon (acquired by Johnson & Johnson in August 2013); Kite Pharma (IPO in June 2014); and Seragon (acquired by Genentech in July 2014).

UC Ventures will be a stand-alone, independent investment vehicle structured to operate with a long-term, investment horizon. UC’s Office of the Chief Investment Officer will hold certain key governance rights and help UC Ventures develop its own resident expertise to mitigate risks. The UC Ventures team will have day-to-day investment management responsibilities.

In collaboration with its 10 campuses, UC also intends to create an independent advisory board of leading figures in Silicon Valley and California to provide advice and industry insight to UC Ventures. These advisory board members will be announced in the coming months.

Subject to approval by the UC Board of Regents, the University of California plans to launch UC Ventures in 2015.


The actual proposal to the Regents is at

The problem here is that what is presented is all upside.  We will encourage innovation.  We will make money.  Future donors will be created.   Are there no downside risks?  Surely it is possible to lose money investing in start-ups.  When UC has invested in similar outside funds, it has had problems because of public documents requests.  Outside financial media want to know what is going on in the start-ups and insist that UC provide the (confidential commercial) info.  No problem on that score from this fund?  There have been concerns over whether faculty will be "encouraged" to be involved in this venture.  Unless individual regents raise such issues, it is unclear that they will be raised.

Oh! That! Yeah, there’s that.

From a news media interview with UC president Janet Napolitano:

MarketWatch: What are you reading?
Napolitano: What am I reading right now?
MarketWatch: Yes.
Napolitano: I’m reading Scott Berg’s biography of Woodrow Wilson. It’s a great book.
MarketWatch: Are you?
Napolitano: Yes I am.
MarketWatch: Why?
Napolitano: Well, I read lots of biography and history.
MarketWatch: But why Woodrow Wilson?
Napolitano: You know. Why not? And I don’t know much about Woodrow Wilson. It seems to me reasonable that I should.
MarketWatch: All I know is he was a university president who went on to run for president.
Napolitano: Oh! That! Yeah, there’s that. No. Actually what happened is, I was being interviewed by a reporter from L.A. And we got to talking about books. And I loaned him a biography, and he asked me if I’d read this biography about Woodrow Wilson, and I said no. So he sent me a copy, so that’s what I’m reading...

Full story at

Note: We'll check back to see if she later reads a biography of Dwight Eisenhower who was president of Columbia University on his way to the White House.

Monday, September 15, 2014

UC Goings on This Week

Goings on back in the day:
President Saxon and the chancellors, 1982. Left to right: Daniel Aldrich, Robert
Huttenback, Julius Krevans, Robert Sinsheimer, James Meyer,
David Saxon, Tomas Rivera, Richard Atkinson, Charles Young, Ira
Michael Heyman.

Goings on this week - Wednesday, anyway - at the UC Regents:

Regents Wednesday Agenda (Sept. 17, 2014)

8:30 am                Committee of the Whole
Public Comment Period  (Likely comments on fossil fuel divestment)
Remarks of the Chairman of the Board
Remarks of the President of the University
Remarks of the Chair of the Academic Senate

9:30 am                Committee on Educational Policy
Includes discussion of sexual assault politices

10:45 am              Committee on Finance
Capital budget approval including some seismic upgrades at UCLA.  The item, if you read it carefully, notes that the sharp dichotomy between the general fund budget and the capital budget no longer exists.  UC can use general funds for capital purposes.  On the one hand, this change gives UC some flexibility.  On the other, it is a symptom of the state’s backing away from support to UC.

12:00 pm              Lunch

1:00 pm                Committee on Investments 
Basically, the agenda is a repeat of what went on in last week’s meeting of the committee, i.e., investment in green stuff/not divestment in fossil fuels, and earnings on the pension and other elements of the UC portfolio.

concurrent with    Special Meeting:  Committee on Investments
The Regents are to approve an investment vehicle for “innovations.”  It is unclear whether this item refers to the $1 billion for green investment or something else.

2:15 pm                Committee on Compliance and Audit
Included is a presentation by the Berkeley and UCLA chancellors on NCAA rules.  It is likely that this item has some connection to the various lawsuits on behalf of college athletes.

3:00 pm                Committee on Compensation (closed session)
Big buck salaries plus collective bargaining. 

3:30 pm                Committee on Compensation (Regents only session)
Yet more big buck salaries.

4:00 pm                Committee on Educational Policy (Regents only session)
Confidential personnel matter involving a UC-San Diego faculty member.

4:15 pm                Committee on Finance (Regents only session)
Lawsuits: There is a hint of some kind of settlement talks on the UCLA Japanese Garden affair.  There is an update on the O’Bannon college athlete case against the NCAA.  A case yours truly would guess involves the attempt by a UCLA faculty member to obtain admissions records related to Prop 209 and affirmative action seems to be on the agenda. There is also reference to a lawsuit in which San Francisco wants to collect parking taxes.  (City collecting taxes on a UC enterprise? Think UCLA Grand Hotel!)

4:45 pm                Committee on Compliance and Audit (Regents only session)
Vague reference to personnel matters.

4:55 pm                Board (Regents only session)

Sunday, September 14, 2014

The President Goeth to Gwyneth: Oct. 9

Looking to get to or from campus on Thursday, October 9?  Read on!

President Barack Obama will return to Los Angeles in October to attend a fundraiser at the Brentwood home of actress and longtime supporter Gwyneth Paltrow.  Tickets for the Oct. 9 event will cost up to $32,400, and the evening will include an intimate dinner with Obama fielding questions from supporters, according to an invitation sent by the Democratic National Committee...

Full story at

Just a Reminder that We're in a Budget Lull

Where we're not
Sacramento Bee columnist Dan Walters provides a reminder that we have not solved the state's (and therefore UC's) budget crisis.  Rather we are in a lull created in part by Prop 30 temporary revenue and general economic recovery.  It wouldn't take much of a perturbation in the economy to cause a renewed crisis.  As we have noted in past posts, if you look at the reserve in the state's general fund (including the "rainy day" fund the governor has put on the ballot), it is slated to decline in the current fiscal year - something that in normal English parlance might be called a "deficit."  Whether that turns out to be the case will depend on actual revenue flows and spending.  But there won't be much in the rainy day fund for years, whatever happens.  It would disappear very fast in a downturn.

From Walters:
...(T)he (Prop 30) tax increase accounts for perhaps a third of the revenue gain.  The rest stems from the improving economy and particularly the substantial increases in incomes of the state’s highest-income taxpayers – the chief targets of the 2012 tax increase.  While criticizing the widening gap between “one-percenters” and the rest of us is popular, the fiscal reality is that California’s budget probably would still be drowning in red ink were it not for taxes on income gains by those atop the economic food chain.  State income tax data for 2012, the latest available and the first year of the temporary income tax increase, illustrate that fact. The state received 15.2 million personal income tax returns for 2012, of which 161,744 – 1.06 percent – came from those with adjusted gross incomes of $500,000 or more. Those one-percenters accounted for $275.3 billion or 28.5 percent of all taxable income, but paid $30.8 billion or 51.4 percent of all income taxes that year. It’s now at least $36 billion, more than twice the $17.3 billion they paid in 2010.  With income taxes now two-thirds of general state revenue, it means one-percenters are financing over a third of the budget’s spending on schools, colleges, prisons and health and welfare programs for the other 99 percent. Brown understands that and worries aloud about “volatility” in revenue due to ever-higher reliance on taxing incomes of the affluent – although, it should be noted, his tax hike increased that reliance...

Full story at

Read more here:

Saturday, September 13, 2014

Listen to the Regents' Committee on Investments, Sept. 12, 2014

As is our standard practice, we provide an audio archive of each Regents meeting since the Regents have a policy of deleting their recordings after one year (for no good reason).  You will find a link at the bottom of this posting to the audio.

Yesterday, the Committee on Investments met in preparation to the full Regents meeting next week.  As blog readers will know, a main event of the meeting was the presentation of the report on green investing, the product of a task force that was formed after pressure from student groups favoring fossil fuel divestment.  As blog readers will also know from an earlier post, the report produced by the task force does not explicitly favor divestment (but doesn't quite rule it out in some form at some future date).  The report is much more focused on INvestment in green stuff and announces a $1 billion plan to do just that.

During the public comment period, there were statements, mainly by students, favoring divestment.  However, the student regent did not push that view and instead primarily supported more student involvement going forward.  It wasn't clear what the students would be involved in, since the report presumably will be approved by the Regents and will become official policy.

It appears that out of the $90+ billion UC manages for its pension, endowment, and "working capital" (day-to-day "checking account"), about $10 billion is in fossil fuels.  But much of that is not directly held by UC but is "co-mingled" with other funds that are given to various outside investment managers who try to beat the market through stock selection.  About $3 billion of the $10 billion is in companies targeted by the pro-divestment group. 

The report on green investing was presented by Jagdeep Singh Bachher, the new chief investment officer.  His predecessor, Peter Taylor, was present at the session and presented an anti-divestment view.  An earlier blog post covered his position as expressed at a lecture at UCLA:
Concerns about a change in investment policy toward "picking winners" were expressed by Regent Hadi Makarechian.  However, most of the comments by committee members were positive about the report.  

It might be noted that no one asked whether the university, by some definition, already had investments in green stuff, possibly to the tune of $1 billion or more.  In that case, the report would not be an addition to current policy.  

It is likely that at next week's Regents meeting, the public comments on this issue will be repeats of what was said at the Committee.  And it is likely, to the extent there is Regental discussion, that the comments will support the report but with some cautions such as those by Makarechian.  Indeed, an unkind reading of the report might be that UC will invest in green stuff if it seems like a good idea in an amount of $1 billion more or less and we might or might not consider divesting in the future if oil-coal-gas seem like bad investments.  Given the fuzziness, the Regents should have no trouble endorsing the report.

Two other items were considered by the Committee.  There was a review of university investment performance for the last fiscal year.  Chief investment officer Bachher cautioned that the stock market cannot be expected in the future to continue gains such as occurred in the period after the 2008-09 financial crisis.

The Committee also looked at the returns of the various campus foundations.  There was a question raised about whether the independent foundations would comply with the green report and whether it would look bad for UC if they didn't.  But it was not clear what complying might entail, given the fuzziness of the report.  It was also noted that the foundations have the option of not managing their funds and instead turning them over to the central administration to manage.  They would have done better in recent years by doing so.  It was said that the foundations that insist on managing their own funds are doing it because donors want them to.  That sounds really, really fishy.  High-end job creation by the foundations might be an alternative rationale, but that's just another unkind thought by yours truly.  However, some campuses apparently do outsource their fund management to the central administration.  Presumably, their donors want their funds to be centrally managed.  Funny, isn't it, how donors can differ from campus to campus?

You can find the audio at the link below: