THE BUDGET CRISIS : State’s Fiscal Flu Spreads to Medi-Cal : Medicine: With no more IOUs being issued to pay for health care for the poor, people are being turned away in record numbers. Hospital layoffs and other cutbacks are being planned.

The salesman from the vaccine company came this week with a tempting deal for Dr. Nabil Koussa, administrator of a medical clinic for poor children and pregnant women in Los Angeles’ tattered Pico-Union neighborhood. Pay your bill now and get a discount, the salesman urged.

No question, Koussa could use the break. His fledging Olympic Family Clinic--started last year to relieve overcrowded public obstetric and pediatric facilities--lacks the amenities of many doctors’ offices. A computer printer is balanced on an old folding chair. The phone system needs upgrading; the scarred walls beg for spackle and paint.

But Koussa could not pay the vaccine bill because California has stopped paying its bills--one of the many ripple effects of the state’s seven-week budget impasse. Last week, state officials announced that they would no longer pay for medical services for the poor with IOUs, a form of currency California has been using to meet its obligations since the fiscal year began July 1.

The result, health officials report, is growing disarray in the state’s health care system. Poor people covered by the state’s Medi-Cal program are being turned away in record numbers. Hospital emergency rooms report a 25% increase in patient volume as clinics and doctors that have historically treated Medi-Cal patients close their doors to them.

“We had a 2-year-old come in who actually was undressed and on the examining table in her regular doctor’s office when somebody pointed out that she was a Medi-Cal patient,” said Dr. Nancy Schonfeld, director of emergency medicine at Childrens Hospital of Los Angeles. “They made the mother dress her and told her to bring the child to Childrens.”

Some hospitals, meanwhile, are grimly making plans to lay off staff and cut medical services in order to ride out the funding drought, according to David Langness of the Hospital Council of Southern California. The council and the state’s largest private health insurer, Blue Cross of California, are trying to stave off a systemwide lockout of the poor by lending hard-pressed hospitals money to keep emergency, obstetric and pediatric services open.

Tiny San Gorgonio Memorial Hospital in Banning, dependent upon Medi-Cal for one-third of its operating revenue, has applied for aid. Administrator Kay Lang said Wednesday that she cannot keep medical services open without another source of cash.

“The impact of the government not paying is huge; it’s unconscionable,” Lang said. “I can’t believe it is happening.”

Other health facilities are using spot layoffs and pay cuts to stay afloat. The AIDS Healthcare Foundation in Los Angeles, which operates two hospices largely funded by Medi-Cal, slashed staff salaries by 50% Wednesday.

“People are really nervous,” Langness said. “Some of the hospitals are telling us they may not be able to meet payroll, and a lot of doctors who treat Medi-Cal patients have just hung out signs saying “Sorry, Gone Fishing.’ ”

The doctors at the Olympic Family Clinic are not among them, but the effort to keep the clinic open has required some extraordinary financial juggling and personal sacrifice.

Koussa is trading away every ounce of goodwill in his business relationships, pleading with vendors to run a tab, and putting off loan payments in order to meet his payroll.

“Hopefully, I won’t need to last too long doing this,” he said, giving thanks for an understanding bank, First Interstate, which has accepted all of the Medi-Cal IOUs paid to the clinic and its doctors.

Dorothy Danielsen is juggling, too, but her bank, Union Bank in Riverside, has been less cooperative, refusing state IOUs for the last several weeks. As a result, the vendors who supply Danielson’s group homes for severely handicapped, Medi-Cal-insured children have gone longer without payment. Supplies are still being delivered, Danielsen said, but in smaller quantities and on a less reliable schedule, leading to spot shortages. Danielsen had to use her own money last Friday, for example, to buy diapers at the local discount market because the supplier skimped on the order.

To cut staffing expenses, Danielsen is requiring parents to take their children home on weekends. Two-thirds of the children, however, are wards of the state, without families to care for them.

“It’s not as if you can put them in the street and say, ‘Hey, no funds, no go,’ ” Danielsen said. “I’m not that kind of a person anyway.”

So she and her family are digging into their own cash reserves to meet the needs of the children, ranging from newborns to 12-year-olds. The latest payroll checks were backed by her husband’s retirement account, since local banks have lost faith in those backed by the state of California.

“No one will cash them. No one wants to mess with Medi-Cal,” Danielsen said. “I have $39,000 in IOUs that my bank won’t cash. I told them that it was causing a hardship on us, and they told me that they were trying to put pressure on the state to pass a budget. But the people in Sacramento don’t seem to see the urgency of this at all. They don’t know how the little people are being affected!”

Among them was Kelsey Rochette, 2. Born with a birth defect, microcephaly, that has left her with minimal mental capacity and numerous severe medical problems, Kelsey was one of the children Danielsen sent home last weekend.

Her mother, Elizabeth Rochette, said she spent the weekend terrified that Kelsey would die in her care.

“She has seizures. She has to be fed through a gastrointestinal tube and has six medications that have to be administered around the clock,” said Rochette, a single mother with two other children at home.

Publicly owned and operated health care facilities, such as county hospitals, appear to be weathering the budget crisis better than private facilities dependent upon contracts with Medi-Cal or other state-funded programs, according to the California Assn. of Public Hospitals.

Most counties have diverted cash to the hospitals to tide them over until Medi-Cal resumes payments. Los Angeles County, for example, has transferred about $82 million to the county’s six public hospitals and 47 health centers. This will carry them through the end of August, according to Irving Cohen, director of finance for the county Department of Health Services.

But Cohen said the problems of the private contractors could have a severe effect on public hospital operations if financially strapped nursing homes, hospices, and hospitals stop taking Medi-Cal patients entirely. The public hospitals simply could not handle the load.

“Under those circumstances, we might be forced to close our emergency rooms, too,” Cohen said.