Ailing Atlanta hospital struggling to heal itself

For more than a century, Grady Memorial Hospital’s mission has been to care for Atlanta’s poor. But now the hospital -- by far the state’s largest healthcare provider for the poor -- is struggling to avoid bankruptcy. It expects its deficit for the year to hit $50 million.

Republican legislators and business leaders with the Metro Atlanta Chamber of Commerce have urged Grady to transfer day-to-day management to a private, nonprofit corporation. Today, the hospital board will vote on whether to cede operational control.

But many at the hospital and in the community fear that such a transfer of power will compromise Grady’s historic commitment to the poor -- and shift control from a predominantly African American board to one that would probably be predominantly white.

Like other large urban public hospitals across the country, Grady is reeling from rising healthcare costs, more uninsured patients and shortfalls in federal and state funding. One example: Under a new formula for distributing federal funds, Georgia’s Department of Community Health awarded Grady $67 million this year -- nearly $25 million less than in 2006.

In addition to the problem of its yearly operating losses, the hospital needs about $250 million to modernize equipment, laboratories and operating rooms.

Though it would be for different reasons, many here worry that Grady could follow the fate of Los Angeles’ Martin Luther King Jr.-Harbor Hospital, which was closed in August after failing a federal inspection.

Grady’s closure would mean metropolitan Atlanta, a region of 5 million, would lose its only Level 1 trauma unit. The city’s Chamber of Commerce has warned of a “patient tsunami” through the region’s hospitals. Some fear the burden would eventually fall on the justice system as untreated mentally ill patients inundated the region’s jails.

Yet despite all the concern, many black elected officials remain wary of handing control of the hospital to a private corporation.

As a historically black institution, Grady has symbolic power: Opened in downtown Atlanta in 1892, it was for many years referred to in the plural -- The Gradys -- because it had separate white and black sections. Now it is one of the largest public-health systems in the country, an institution that provides 5,000 jobs and treats 900,000 patients a year.

For some, the battle over Grady represents a broader negotiation for political control of Atlanta. Georgia state Sen. Vincent D. Fort, who is black, says Grady represents “the most consequential struggle in race relations in this city” since the 1973 election of Maynard Jackson as Atlanta’s first black mayor.

“This is a hospital takeover by a Chamber of Commerce, by the city’s white power structure,” Fort said. “Frankly, I don’t trust the people who are pushing for Grady to privatize to do the right things for poor folk.”

Grady officials have long complained about insufficient county, state and federal funding. While the hospital serves all metro Atlanta counties, it is almost entirely funded by two counties, Fulton and Dekalb. In 2004, Grady filed suit against the state after it revised Medicaid funding to channel money to rural and suburban hospitals.

For A.D. “Pete” Correll, co-chairman of the Metro Atlanta Chamber of Commerce’s Greater Grady Task Force, converting the hospital’s governing structure from a politically appointed public model to a nonprofit 501(c)3 model would give potential investors greater confidence. Already, he said, philanthropic groups had promised $200 million in aid for Grady -- if the hospital transferred control to a nonprofit governing board.

“The issue is money,” he said. “We have a major indigent-healthcare hospital that is going to fail if someone doesn’t do something quick. . . . People are saying they would like to help, but they would like a say in the hospital’s governance. That’s not unreasonable.”

Still, some question the need for a change in Grady management. Unlike hospitals such as Los Angeles’ King-Harbor, they say, Grady has long been considered one of the nation’s leading public hospitals, with an acclaimed trauma center, AIDS clinic and regional burn unit.

“No one is saying this change is necessary because of mismanagement, corruption, or malfeasance,” Fort said. “And no one is really explaining why a change in leadership will lead to more money.”

Correll said he had no specific complaints about the existing board. Changing the hospital’s governing structure, however, would allow it to appoint members with greater financial expertise and give them more flexibility in creating profit-making enterprises, he said. A private board, he added, would focus on increasing the number of insured patients. At present, more than 90% of the hospital’s patients are uninsured.

While any board “would be very hesitant to cut services in order to survive,” Correll said, it also had to confront the question: “How do we decide what is a reasonable level of health?”

With nearly 1.7 million uninsured Georgians -- about 1 in 5 -- many seem to believe that Grady’s leaders are refusing to accept the realities of the cost of healthcare.

“Grady must make cuts that hurt,” said the headline of a recent editorial by the Journal-Constitution. Grady’s financial crisis, the newspaper argued, stemmed in part from the “unwillingness of the board to consider curtailing some very expensive services to the poor when they have no plan for how to pay for them.”

Grady’s outpatient kidney dialysis unit, which averages 80 to 100 patients a day and costs about $4 million a year, has been the subject of particularly fierce debate. Earlier this year, as physicians started to phase out the clinic as part of a plan to cut the hospital’s deficit, the hospital board ordered Grady Chief Executive Otis Story to keep the center open.

With Grady’s debt rising, those who work at the hospital say it is not easy to work out how much free care they can offer.

“There’s a whole chunk of people who desperately need this care,” said Dr. Neil Shulman, an associate professor at Emory University School of Medicine and co-producer of a documentary titled “Save Grady.”

“They could die if we don’t give it to them,” Shulman said.

“Any time you have such massive [budget] cuts you have to reevaluate your services -- no question,” said Dr. William R. Sexson, an Emory neonatologist and associate dean of clinical services at Grady. “But it’s tough: What is it that you cut?”

Already, Sexson said, Grady had reduced the hours of its outpatient pharmacy and had cut pediatric surgery and its sleep laboratory.

“You could have absolutely the best money managers in America running this hospital, but if that group is underfunded, they would not be able to make it work,” he said. “It’s not enough -- unless the people of Georgia want to help with funding.”

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jenny.jarvie@latimes.com