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Proposal to Bail Out UC Hospitals Faces an Uncertain Future

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Legislators at an Assembly hearing Wednesday cast doubt on the passage of Gov. George Deukmejian’s plan to give a $25-million bail-out to three University of California hospitals, including UCI Medical Center.

Despite testimony that UCI Medical Center “is technically bankrupt” and will be $12.5 million in debt by June 30, some legislators maintained the bail-out would be unfair because many other public hospitals throughout the state are equally deserving.

No vote was taken, because the joint hearing by education and health and welfare subcommittees was intended only for testimony on the governor’s bail-out proposal.

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A parade of health care officials testified that the UC hospitals’ plight is no worse than theirs.

‘Reflective of All Hospitals’

“Their situation is reflective of all hospitals serving high numbers of indigent persons,” testified Robert C. Gates, director of health services for Los Angeles County. “Any solution (to the UC hospitals’) problem should consider the needs of all hospitals similarly situated.”

Assemblyman Burt Margolin (D-Los Angeles), chairman of a health subcommittee considering the governor’s proposal, said he agrees. Margolin pledged to push legislation that he said would match the amount the governor has proposed with federal funds and give it to the most hard-pressed of all public hospitals in California that serve large numbers of poor people.

But UC officials urged that the governor’s original bail-out plan be left intact. Teaching hospitals have urgent special needs, “and this would provide a lifeline,” argued Dr. Cornelius Hopper, vice president of UC health affairs.

“We want to make sure that in trying to take care of the big problem, we don’t lose the money and can’t take care of the immediate problem” at the UC hospitals, UC Irvine Chancellor Jack Peltason said. “I agree that the other hospitals have needs, but we should take care of one thing at a time.”

Worries About Blue-Penciling

Assemblyman Robert Campbell (D-Richmond), an education subcommittee member and co-chairman of the hearing, agreed that money for the UC hospitals should be kept separate. “I worry that the governor might blue-pencil the money if we try to put it in an appropriation for all the hospitals,” Campbell said.

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But other legislators questioned the governor’s singling out the UC hospitals in his budget proposal. Assemblyman Phillip Isenberg (D-Sacramento) asked a state official at the hearing to “find a way” to increase the money the governor has proposed in order to help other hospitals.

And one legislator questioned whether UC needs to own its hospitals. “I’m not convinced the University of California has to own any hospitals,” said Assemblyman Bill Leonard (R-Redlands). “They have to use them, not own them.”

At issue was a budget proposal that would provide a total of $15 million for operations and $10 million for capital improvements to the medical centers operated by the UC at the Irvine, San Diego and Davis campuses. Those hospitals could lose as much as $26.2 million next year, according to state officials.

This would be the first of seven annual bail-outs under the plan, although the Legislature would have to approve the money each year. Although bail-out funds would be shared among the three, it is expected that UC Irvine Medical Center, which is in the worst financial shape, would receive the bulk of the first-year funds.

According to the governor’s budget proposal, the three medical centers are in financial straits because all are former county hospitals that continue to treat a disproportionate number of poor patients. They do not receive adequate reimbursement from state Medi-Cal and county health programs for those patients, the proposal says.

The state legislative analyst originally opposed the bail-out proposal, saying it offered no short-term or long-term solutions to the financial problems.

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But Wednesday, Tom Dooley, representing the analyst’s office, said the opposition has been dropped. In fact, Dooley disclosed that the legislative analyst now is urging an additional $1.6 million for the hospitals, but that additional money would be provided only for one year.

Hospitals Share Problems

The reason for the UC medical centers’ red ink--inadequate reimbursement for treating the poor --explains why county hospitals throughout the state are facing a crisis, witnesses argued during the three-hour hearing.

“Why should only these three hospitals be helped when the problem is so much bigger than that?” Margolin asked.

Margolin has introduced a bill that would put $25 million in state money into a special fund, where it would be matched by federal dollars and grow to $50 million (Medi-Cal funds are matched by federal money). The combined fund would be used to supplement Medi-Cal payments to hospitals that have disproportionate numbers of poor patients.

He has suggested using $15 million of the money the governor would have set aside to start that fund. If successful, that bill would deal a severe blow to the medical schools at the three campuses, which use the hospitals to train doctors. They would receive augmented Medi-Cal payments under Margolin’s plan, but the total would be substantially less than the $15 million proposed subsidy.

What’s more, Peltason said, UCI Medical Center’s worst financial problems are not created by Medi-Cal reimbursements but by inadequate county funding, which would not be affected by Margolin’s bill.

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Reduction in Funds Feared

The financial crisis would continue if Margolin’s bill eats up the subsidy that UC hospitals would otherwise get, according to officials.

“I don’t want to talk closing hospitals,” UC’s Hopper said, “but our options would be severe and stringent.” Hopper said the three hospitals have already reduced their staffs.

Peggy Skotnes, a ward clerk at UCI Medical Center and a representative of the American Federation of State, County and Municipal Employees, charged that employee layoffs at the hospital are endangering patients.

“The bottom line is the situation is getting worse . . . it’s becoming dangerous not only for the staff, but it’s becoming increasingly dangerous for the patient.”

County hospitals have been suffering for the past two years, since Medi-Cal reforms cut reimbursement rates, said Carole Emmott, executive director of the California Assn. of Public Hospitals.

“UC has somehow managed to bring that message to the governor where we had been unsuccessful,” Emmott said. But although her association supports Margolin’s bill, she would not say whether the UC bail-out proposal should be scrapped.

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“It’s not our desire to pit ourselves against the University of California,” she said.

The legislation will formally come before the two Assembly subcommittees within the next two months as part of the Deukmejian budget. The budget must be passed by the Legislature by July 1.

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