Plan for New Wing Heightens Quarrel Between 2 Hospitals : Project: Backers say it’s needed to replace dilapidated structures. But chief opponent calls it part of a county scheme to vie for private patients.
A $30-million new wing for Ventura County’s public hospital has become the lightning rod in a heated quarrel between that hospital and nearby Community Memorial.
County officials argue that most of the 105,000-square-foot addition at the Ventura County Medical Center will replace a hodgepodge of aging, dilapidated, asbestos-ridden structures that leak in the rain and are an embarrassment to the public health system.
But Community Memorial officials oppose construction of the new wing and an $8-million parking garage, insisting that the project is not needed, is too costly and is part of an aggressive county plan to compete for private patients and not just treat the poor.
The Board of Supervisors approved the project in concept last year. But a final vote is not expected until 1995. And Community Memorial is building its case against the plan.
From the start, a chief attraction of the project has been the promise of a 70% state reimbursement for construction and borrowing costs initially estimated at $50 million. County health officials acknowledge that the project could die politically without the state funds.
“An opportunity exists for the county to save $35 million” by submitting project plans to the state Department of Health Services during a window of opportunity that will close in June, 1994, wrote county Health Care Agency Director Phillipp K. Wessels. His assertion was the first sentence of a project description to the supervisors last year.
But now, as engineers complete their plans for the new wing, administrators at Community Memorial have counterattacked.
They say state reimbursement, which must be appropriated in the budget each year, could vanish as a stubborn recession continues to force billions of dollars in state cuts each year.
“You simply can’t count on those funds,” said Los Angeles accountant Virginia McClain Rusk, a consultant to Community Memorial. “The issue is that there is a substantial risk, and an informed decision needs to weigh that risk.
“If Aunt Martha says she’s going to help you meet the mortgage and Aunt Martha goes bankrupt, the mortgage is still yours,” she said.
Rusk said some counties have held up their applications for similar funds in part because of nervousness about reliability.
But Ventura County health officials--buttressed by the opinions of several state officials--insist that they can count on state reimbursement. They cite new hospital projects under way in Riverside and San Bernardino counties that rely on the same 1988 state law--Senate Bill 1732--for reimbursement.
“It’s less than 100% certain, because it depends each year on the legislative process that generates the appropriation to support it,” Wessels said. “But the track record is that they have approved it.”
Even without the state money, the county could make its annual bond payments, county hospital Administrator Pierre Durand said. But it would have to borrow part of the money from the county general fund for 10 of the project’s first 12 years. And part of the borrowed money would not be repaid to the general fund--which supports basic services such as police protection--for 24 years, he said.
Such borrowing--beginning at $288,025 a year and escalating to $1.5 million in the sixth year--would be a “cash-flow strain for the general fund,” Durand said. And it could jeopardize the project when it goes before the Board of Supervisors for final approval, he acknowledged.
“Without 1732 (reimbursement) we need to probably come up with different options,” he said. “There’s no decision I know of that’s supporting the project without 1732.”
How strong is the Legislature’s financial commitment to rebuild the state’s safety-net hospitals for the poor?
Opinions vary among state and hospital industry officials who know the program. But most said in interviews that if Ventura County qualifies for the program, the state is legally obligated to make its annual reimbursements and can be counted on to make them.
To qualify, the county must submit engineering plans by June 30 and VCMC must have a patient load that is at least 50% indigent or Medi-Cal insured. The county hospital’s percentage of such patients is about 70%, thus its 70% rate of reimbursement, officials said.
“There’s a legal commitment to honor those projects that have made it through the window by June 30,” said Kirk Stewart, senior state Department of Finance analyst for Medi-Cal appropriations. “Essentially if they’re in for a 20-year commitment, we’re obligated for 20 years.”
William Wehrle, who analyzes the Medi-Cal budget for the legislative analyst’s office, said the state apparently has no legal way out of its commitment. “It’s a pretty clear-cut obligation. . . . It sounds about as ironclad as legislation could be.”
Ron Klusman, a state Medi-Cal supervisor, said the Legislature could, in desperation, withhold construction funding to county hospitals.
“They can decide not to fund something. It depends on how big the budget deficit is,” he said. “But I think they would be hard-pressed not to fund a program they set up in the first place.”
Others, however, said the state’s budget crisis could affect new spending programs.
“With the state in a fifth year of budget deficit, it doesn’t look good,” said Michael Dimmitt, lobbyist for the California Assn. of Hospitals and Health Care Systems. “They’re going to have to look pretty hard to find these additional funds.”
In a public statement last month, a spokesman for Community Memorial said lack of state support for the 1732 program is evident because the Legislature approved no money for it this fiscal year, and Gov. Pete Wilson has recommended none for next year.
But Community Memorial was wrong. State officials said Wilson’s budget recommends $59.3 million to cover obligations under the law and that an original $13.85-million appropriation this fiscal year has now reached $31.3 million because more counties have signed up.
Klusman said about 15 counties, including nearly all the large ones, have expressed interest in the funds and that the costs of probable projects could reach $2 billion. Half of the money comes from the federal Medicaid funds, with a 50% match from the state, he said.
Only $2 million has been paid out so far, he said, because state reimbursement is not triggered until the new buildings can be occupied.
Beyond the reimbursement issue, Community Memorial has argued that the county’s new wing is too costly and that VCMC officials should have considered cheaper alternatives in tight budget times--such as leasing space from Community Memorial and other nearby facilities.
The $38-million cost of the new wing and parking garage is far higher per square foot than the $16.5 million Community recently spent on a similar structure three-fourths as large, said Michael D. Bakst, Community Memorial’s executive director.
Bakst also maintains that it is unwise to build a new hospital wing when existing hospitals are only half-full and the universal health-care program proposed by President Clinton could make the current public system obsolete.
Community Memorial officials also maintain that the county’s estimate for construction and financing of the new wing and garage, now revised to $57 million, is perhaps $20 million too low.
“I think those costs are understated, and that is a disservice to the supervisors, who are not being told the entire story,” Bakst said.
Wessels said Bakst is just wrong about county cost estimates.
And the Clinton package, even if approved, would have almost no effect on the Medi-Cal system, because the President’s reforms focus on providing health care to the working poor, not those already covered by Medi-Cal, Wessels said.
County Hospital Administrator Durand said putting county clinics at a variety of locations--instead of in the new outpatient wing--would create hardship for patients and costly inefficiency for the hospital.
He also argued that long-term leases are foolish, because the new wing would pay for itself in 24 years and create savings of $19 million after 40 years--even if the county gets no reimbursement from the state.