County Studies Health Care Overhaul

Los Angeles County health officials, hoping to avoid catastrophic cuts in county services, are contemplating a major overhaul that would, in effect, create an entirely new system of health care delivery based on a partnership with private hospitals, medical schools and managed-care plans.

Such a plan might not only help solve the massive problems plaguing the local health care system, but could also qualify the county as a federal “demonstration project” eligible for an infusion of federal funds. This might, proponents say, stave off the closure of major hospitals and many of the free-standing comprehensive health centers and public clinics operated by the county.

Members of a local blue-ribbon task force and other county officials are leading a major lobbying effort to achieve federal demonstration status for the county.

Two members of the Board of Supervisors, Chairwoman Gloria Molina and Zev Yaroslavsky, spent 45 minutes at the White House on Wednesday pleading the county’s case to presidential aides and the state’s Democratic Congressional delegation.

“The presentation they are making is very much going to be rooted in the notion that L.A. County is available as a national laboratory for how to spend federal dollars in a much more creative way than rules presently allow,” said Burt Margolin, chairman of the task force.

Rough outlines of what the new system might look like have emerged over the last two weeks during hearings conducted by the five-member county Health Crisis Task Force.

One system envisions a cluster of health services centered on the county’s three major medical schools: USC, UCLA, and Drew University of Medicine and Science.

The most detailed plan is one drafted by Drew administrators that would incorporate the county’s Martin Luther King Jr./Drew Medical Center, county clinics and health centers, and a network of local physicians in South-Central Los Angeles that would essentially act as an integrated network outside the traditional county system.

Another system would move large numbers of patients out of county hospitals and into private hospitals.

Still another would involve a partnership of the county with private managed-care plans in which the county essentially contracts with the private providers for services delivered in county hospitals and health centers.

Just how far the plans get depends on how receptive federal officials are.

The various proposals spring from a problem faced by large urban health systems everywhere: How to maintain costly and, in many cases, outdated urban hospitals in the face of declining government revenues and intense competition from private hospitals and managed-care systems that say they can provide the same service better and cheaper.

Each member of the task force agrees that there appears to be no way to meet the goal of cutting the county Department of Health Services budget by as much as $745 million without catastrophic results.

The task force expects to wrap up its work and come up with recommendations for handling the immediate budget problem by the end of the week.

No matter how county health officials configure which hospitals and clinics to close, they say that only a small fraction of patients can be absorbed by other county facilities or private hospitals. They estimate that 1 million patient visits will be unaccounted for, meaning many county patients may go without care.

At the top of the agenda is a recommendation by Chief Administrative Officer Sally Reed to make up for roughly half the budget deficit by shutting down County-USC Medical Center, one of the nation’s largest hospitals. It serves an estimated 800,000 people each year in outpatient clinics and emergency rooms on its Eastside campus.

Given estimates that it could take several years to put any long-term money-saving reforms into place, new money appears to be the only way to avoid catastrophic cuts, the task force members say.

“We’re doing everything we can to find a revenue solution,” Margolin said.

He added that the only condition under which federal officials might allocate more money is if the county enacts some essential reforms and restructures its health care system.

“There has to be some fundamental restructuring,” said another task force member, J. Duffy Watson, chief administrative officer of Henry Mayo Newhall Memorial Hospital in Valencia. Watson has also been in contact with federal decision-makers.

“The question at this point,” Watson said, “is whether the federal government is willing to work with Los Angeles County as a demonstration site to see how urban areas may solve their [health care delivery] problems. I hope so, because if they won’t, I don’t think there is a solution.”

The basic conundrum in creating the new system, said task force member Dr. Raymond G. Schultze, the former director of the UCLA Medical Center, is how to hold together the vital hospital services like trauma care while making “a huge leapfrog” into a much more cost-effective modern health care delivery system based on preventive care and community clinics.

The current state and federal payment system that provides most of the financing for the $2.5-billion county Department of Health Services is based on a system that pays on the order of $1,300 a day for hospital stays but reimburses providers only a fraction of that for outpatient visits.

The plan presented by the medical schools would create separate clusters, each centered on a medical school and major county hospital. The hospitals would be the County-USC Medical Center, Harbor-UCLA and King/Drew.

Each would be an integrated system capable of generating its own revenue and would include the hospitals, clinics and independent physician groups.

The King/Drew plan is the most advanced of the three, with a basic structure already set up that would include the county hospital, the Hubert Humphrey Comprehensive Care Center, 10 community health centers, the medical school and a 100-member physician provider network.

The short-term problem with the medical school plan is that it calls for two hospitals now on closure lists--County-USC and Harbor-UCLA--to stay open.

Nonprofit hospitals that care for low-income patients have put together a plan that foresees a greatly diminished role for the county. Reasoning that since the county receives $1,300 a day from various funding sources, they could provide in-patient care for $850 a day and the county could even make money on the deal.

However, the flaw in that plan is that the hospitals so far have been unwilling to commit to receiving large numbers of indigent patients.