Crisis for Poor Patients

A crisis is brewing among San Diego area hospitals that participate in the state’s Medi-Cal health insurance program.

Just last week, Mercy Hospital, one of the county’s largest, notified the state that after Aug. 26 it will no longer accept Medi-Cal inpatients because it is losing too much money on them. Other local hospitals already have considered dropping out of the program, and medical officials would not be surprised to see others follow Mercy’s example.

The problem stems from the fact that San Diego hospitals across the board are believed to be receiving significantly lower rates of payment for Medi-Cal patients than are hospitals in other parts of the state. And while Medi-Cal, which insures indigents, was never intended to reimburse hospitals for 100% of patient care, several hospitals say the compensation is so low in comparison with today’s medical costs that the situation has become intolerable.

It is impossible to compare rates dollar-for-dollar, because the state negotiates individual contracts with each hospital and keeps the details secret. But state officials acknowledge that the rates paid to hospitals in the San Diego region are below the statewide average--and the level of reimbursement is too low everywhere.

The discrepancy developed in 1983 when the current system of hospital reimbursements began. San Diego County was the first area where Medi-Cal officials negotiated contracts, and--without having any idea what the traffic would bear and because this is an especially competitive region--the hospitals tended to accept less than their counterparts in other cities would later on. Mercy says it has not received any increase in its rate since it was originally negotiated four years ago. The hospital said it expects to lose $4.5 million this year on Medi-Cal patients, who account for about 20% of its inpatient days.

A few miles away at San Diego Physicians & Surgeons Hospital, the financial situation is even more stark. Serving a predominantly low-income clientele from Southeast San Diego and Barrio Logan, the 156-bed hospital says it has struggled with seven-figure operating losses for five years. Because of its low reimbursement rate, Physicians & Surgeons says it lost $840,000 last year on Medi-Cal inpatients. The hospital says its contract with the state today pays less than 28% of its costs for taking care of the average Medi-Cal patient.

Last Tuesday, at the same closed meeting of the California Medical Assistance Commission that was expected to discuss Mercy’s intention to leave the program, representatives of Physicians & Surgeons made a desperate effort to win a rate adjustment. Without a large increase, hospital officials said, they would have to consider closing the facility.

Should Mercy leave the program and Physicians & Surgeons go out of business, the impact on other San Diego hospitals--and on indigent patients--could be staggering. Physicians & Surgeons, with 32% of its beds going to Medi-Cal patients and with daily costs generally lower than those of larger hospitals, plays a vitally important role. If it closes, many of its poorest patients could be expected to go to UC San Diego Medical Center, which also would have to absorb most of nearby Mercy’s Medi-Cal patients.

Officials at UCSD say it is already running at capacity and cannot accommodate more patients. Additionally, UCSD has borne the brunt of dealing with the AIDS crisis, which has taken a financial toll and placed considerable strain on its staff.

Statewide, the Medi-Cal program has suffered from having too little money to pay its mounting obligations. Gov. George Deukmejian under-funded the program for the current fiscal year, then midway through the year proposed further cutbacks. That is the wrong way to go. The state should adequately fund Medi-Cal so health providers can continue to care for poor patients without going broke in the process.