When Dr. David S. Rosenthal '59 became director of the University Health Services in 1989, he was faced with a nearly impossible task.

After years of watching UHS run up budget deficits, University bean counters had decided enough was enough. UHS would have to live within its budget, the University said. Rosenthal would have to sort out the details.

"When I came here, which was shortly before Dr. Rosenthal, UHS was not paying much attention to cost containment because they had not been forced to," says Dr. Sidney Wanzer, the director of the UHS satellite clinic at Harvard Law School. "The University had picked up the slack and subsidized UHS for the deficit."

If runaway costs were the only problem facing the health services, Rosenthal's challenge might not have seemed so daunting. But for all the money being spent at 75 Mt. Auburn St., UHS had serious deficiencies that hurt both student access to the facility and the quality of care they received once they got there.

Technologically, Rosenthal and others realized, UHS was living in the 1970s. Little was computerized. The growing number of paper files had exacerbated space problems. The UHS floor plan had not changed since 1960. Medicine had been revolutionized. File cabinets were kept in elevator landings. Patients waited to see doctors in crowded, drafty hallways.

And the system for seeing patients was, by nearly all accounts, a mess. The first floor walk-in clinic was jammed and frequently chaotic, which left students, never very trusting of the health services, frustrated and angry. Some waited half a day to see doctors. Some yelled and screamed. Some left and found treatment elsewhere, or didn't find it at all.

With all these problems, UHS needed dramatic changes. But how much change could it afford? It couldn't hire more doctors and nurses to shorten the first-floor lines. It couldn't move into a bigger building to solve the space crunch. It couldn't computerize its record system without incurring the kind of huge costs that the University would no longer tolerate.

Rosenthal needed a plan.

After a first year spent learning more about UHS, doctors say, the new director hit on a theme: if UHS could be made more efficient, nearly all its problems could be addressed.

By limiting costly outside referrals, UHS could control the amount of money it spent. By incorporating computer technology slowly, administrators could spend less time shuffling papers from place to place and doctors could spend more time with patients--without putting too large a dent in the budget.

By renovating piecemeal with an eye toward efficiency, space could be conserved and UHS could be made more cost-effective. By changing its appointment system, UHS could serve most sick students faster and reduce waits.

Rosenthal says he, and his plan, are now in their "senior year." According to doctors and students, the director has done enough to graduate, with some honors. But everyone--especially Rosenthal--knows there's still more work to do.

Students know little about the costs of the health care they purchase at UHS. In a Crimson poll of 317 undergraduates last week, 45 percent answered "don't know" when asked what they thought about the cost of UHS care and health insurance.

If students aren't thinking about costs, UHS employees are certainly worrying enough to make up for undergraduates. The new emphasis on cost controls has left clinicians, nurses and administrators talking like financial analysts.

"You examine all those functions that are being done," Director of Nursing Bonita McCormack says of controlling costs. "You create efficiencies. You make sure no duplications are being done."

Deficits at UHS had been large during the 1980s, but in the final years of Wacker's tenure they seemed to be receding. UHS ran deficits of just $71,965 and $43,003 in Wacker's final two years. Since Rosenthal took over, the health service has run a balanced budget, although the total amount of the budget has increased more than 10 percent a year to keep up with rising costs.

Rising costs--particularly in the cost of outside labs and X-rays--has placed upward pressure on the health fee all students are required to pay UHS. Student fees rose 14.8 percent in 1988-89, 11.0 percent in 1989-90 and 8.0 percent in 1990-91.

For the 1992-93 academic year, students paid a $584 user fee and could opt for a $600 insurance plan offered through Blue Cross/Blue Shield. The user fee was up 6 percent from $550 in 1991-92. The cost of the insurance increased less--just eight dollars since 1992.

Janet L. Thompson, manager of insurance programs, says these increases have been less than the rise in the consumer price index and in annual medical costs nationwide. How does UHS do so well? "Management techniques," she says, refusing to specify further.

The new director's focus on money might once have bothered some at the health services. Before Rosenthal was hired in 1989, a group of staff physicians wrote a letter to the Harvard administration urging that the next director be a doctor and not a financial manager. The doctors worried that a new director might be too devoted to the bottom line.

"There certainly is more attention to budget. In the early days of my being here, these things didn't come up," says Dr. Irving Allen of the Mental Health Services. "But Rosenthal clearly lines up to what the group of doctors clearly had been looking for: a clinician."

Rosenthal and other doctors at UHS pitch primary care as a panacea for nearly all of UHS's problems. In a primary care system, patients are matched with physicians who see them as often as scheduling allows and can either treat patients themselves or send them to the appropriate specialist.

Rosenthal, like many health care professionals, believes that primary care makes for better care because physicians are encouraged to treat the same people over and over again, and thus gain familiarity with their patients. But some critics call this "gatekeeping" because student access to specialists is restricted.

Whatever the benefits and drawbacks of "gatekeeping," one major motivation for the policy is indisputable: controlling costs. Specialists are expensive, and while patients may get more direct, appropriate care, patients may go to the wrong specialist.

"I spoke the other day with a specialist--top-notch guy," says Wanzer. "I was talking about the long wait for an appointment with him. He's willing to provide more time to UHS, but the budget does not allow it."

For all the talk of cost containment, doctors and nurse practitioners insist that money does not affect how they treat patients. Care providers on the front lines say they don't know the costs of the different procedures and tests they can perform, and most say they don't want to know.

"In reality, as far as a patient goes, the providers don't know much about the cost of treatment," says nurse practitioner Donna Campbell.

"If a patient needs a CAT scan, I'm not going to not order one," says Dr. Kenneth Gold, an internist at UHS. "You do what's medically necessary...if for no other reason than 'Lawyer's going to sue me the next day.'"

The addition of a UHS referral committee has been one of the most important and effective cost-cutting measures, according to many doctors. Before its advent roughly three years ago, doctors say, the health service would lose track of people sent to specialists outside UHS. In many of these instances, specialists would refer people to other specialists, and UHS would be stuck with the bill for each additional visit.

"What used to happen was...we'd refer the patient outside and lose control," says Dr. Mary Wolfman, who sits on the referral committee. "It's a way of containing costs but it also benefits the care that people have gotten."

UHS also scrutinizes the hospital stays of people for whom it pays the bills. But administrators and doctors say the best way to control costs is to perform expensive procedures only when they're medically necessary and, in purchasing, to be market-wise.

"We automatically look to purchase drugs when drugs become multi-source," says William J. Madden, the director of the UHS pharmacy, referring to when more than one company sells a drug. "We can look to purchase drugs at a reduced rate."

Cutting costs, however, can be tricky. Telling doctors that their services will cost more is a delicate matter, and can be easily bungled.

Dr. Firmon E. Hardenbergh, chief of opthalmology, says that when he came to UHS in 1989, he successfully lobbied for the elimination of a $10 charge on all visits to the eye clinic. But this year, the UHS administration imposed a $20 fee for "routine eye examinations and contact lens evaluations/refittings," according to a memorandum written last fall by Thompson.

But before adding the new fee for the eye exams, administrators forgot to tell their chief opthalmologist, Hardenbergh.

Students will benefit from this focus on cutting outside costs if UHS responds by increasing the number of services it offers.

As it stands now, UHS doctors often accompany patients to nearby hospitals for any kind of surgery. Dr. David Brooks, UHS's acting chief of surgery, accompanies patients to Brigham and Women's Hospital.

Such involvement by salaried doctors helps control costs. "My predecessor did not operate," says Hardenbergh. "But I'm doing much of the major surgery. That's a savings because I'm on salary."

There may be more changes. The chief of surgery who will replace Brooks, a part-time employee, will work full-time at UHS. And Hardenbergh says UHS may develop an ambulatory surgery center inside the health service.

"The feeling is there may be sufficient interest to support that," says Hardenbergh. "The decision for that would be based on anticipated volume."

But improvements, everyone recognizes, require up-front expenditures of money. The trick is fitting them into the budget.

Rosenthal seems to be moving most quickly on technology. He's equipped UHS with an informational database that keeps doctors and administrators up to date on new developments in medicine.

"There's a payback, isn't there?" says Director of Nursing Bonita A. McCormack. "If you have better technology, you can operate more efficiently down the line."

And by the end of the year, doctors say the computer system, which already allows physicians to call up patient information in their offices, will allow them to access more outside databases and transmit prescriptions directly to the UHS pharmacy.

"Beginning later this year, all providers--doctors and nurse practitioners--will be equipped with stand-alone computers that will be linked with one another, patient records and outside databases," Wanzer says.

Dr. Mary Wolfman's office in the East wing of the third floor, she says, is a testament to the need for renovations. She sits at her desk. Her examining table, less than 10 feet away, is covered with files and papers.

The new renovations will change that Wolfman and the other 3 East doctors have been working on the plans for months Examination rooms and consulting rooms will be separate--no more files on exam tables.

"There's some benefit to having a room for conferences and consultations," says Dr. Karen E. Victor '80, who has an office in 3 East. "I think the whole health service is looking at it."

Under the plans, there will be a new, more private waiting room. A new group of nursing assistants will be brought in to prepare patients to be seen. They will undress elderly patients, prepare any necessary paperwork and do basic checks--all tasks currently performed by doctors.

The 3 East renovations will be accompanied by a change in the appointment system that may affect not just this wing but the whole health service. Under the new system, as much as 30 percent of appointments will be open for patients who call in for same day service and 20 percent for next-day service.

The renovations in 3 East, tentatively scheduled to begin this summer and cost more than $2 million, represent the biggest test of Rosenthal's vision for a more efficient UHS. This, doctors say, is a pilot project "Phase One," Rosenthal called it in an interview. If it doesn't work out, future plans for renovations could be altered.

Four years ago, Dr. David S. Rosenthal '59 inherited a University Health Services that was running deficits without improving quality of care. Confronted with Harvard's demands for a balanced budget, Rosenthal is now trying to do more with less because...

'I spoke the other day with a specialist--top-notch guy. He's willing to provide more time to UHS, but the budget does not allow it.' Dr. Sidney Wanzer, Director of the UHS satellite clinic at the Law SchoolPhotoDr. SIDNEY WANZER, director of the UHS satellite clinic at the Law School.