$800 Million in U.S. Funds OKd for Hospitals

The Bush Administration has released $800 million in additional aid for California hospitals that are confronted with an extraordinarily heavy burden of caring for the state’s poor, Gov. Pete Wilson announced Thursday.

The money, to be sent to hospitals around the state serving high numbers of Medi-Cal patients, was part of a simmering national controversy over the creative financing used by some states to squeeze added revenue from the federal government. Some federal officials privately described the machinations involved as “sleight of hand” or “highway robbery.”

In California, the state was able to qualify for added federal funds for the Medi-Cal program by transferring money from county governments back to the state. The state then used the cash to qualify for added federal matching funds for public and private hospitals that provide the largest share of care for low-income patients.

Wilson, along with his top state health and welfare officials, argued that--unlike some other states--California’s use of this financing technique was legitimate. In Pennsylvania for example, hospitals borrowed money from local banks and used that money to qualify for higher reimbursements, then paid back the bank loans and retained the difference.

State and county health officials have been counting on the money to make ends meet this year. The loss of the money would have been disastrous, especially for Los Angeles County, which expects to receive $300 million in added Medi-Cal revenue as a result of the federal action.

Private hospitals, too, will benefit from the additional funds if 25% or more of the patients they treat are low-income.

In Los Angeles County, 16 private hospitals treating heavy loads of Medi-Cal patients will receive an additional $95 million.

Childrens Hospital in Los Angeles, for example, will get about $21 million, representing almost a 20% increase in the hospital’s total Medi-Cal receipts. Ted Burnett, director of business development, said the extra funds will allow the hospital to devote more money to education and research as well as help open a new outpatient pediatric clinic across the street from the hospital.

White Memorial Medical Center in Los Angeles is scheduled to receive an additional $34 million in Medi-Cal funds and St. Francis Medical Center in Lynwood will get an additional $8 million, according to figures released by the Hospital Council of Southern California.

Hospital officials say the extra funds will help some hospitals offset huge losses they have incurred because of low reimbursement rates from the Medi-Cal program.