Can Private Foundations Help Rescue Clinics? : Health care: Hospitals discuss tapping nonprofit arms of health insurers to keep seven facilities open.

Fearing an onslaught of sick people with no medical insurance, a group of private San Fernando Valley hospitals is trying to prevent a threatened shutdown of county-owned health clinics in the region by tapping nonprofit health care foundations for millions of dollars.

Private hospital executives gathered Tuesday at Holy Cross Medical Center in Mission Hills to discuss plans under which foundations associated with two giant health insurers, Blue Cross and Health Net, would take over the financing of seven Valley clinics slated for closure because of the budget crisis.

But the plan faces serious uncertainty on several fronts: Two of the foundations do not exist yet, and a third says it is too early to decide if it will make grants to ease the county health crisis. Moreover, hospital officials are racing a Thursday deadline to submit their proposal to county officials, with many details still unresolved.

The proposal marks the emergence of charitable foundations as possible players in the county’s budget crisis, which prompted the County Board of Supervisors to vote to close 34 regional and neighborhood public health clinics Oct. 1.

The facilities provide tens of thousands of low-income residents with prenatal care, AIDS testing, vaccinations and treatment for tuberculosis and sexually transmitted diseases. Experts say many county patients will go without care and communicable diseases will resurge if the clinics are shuttered.

Private hospital officials worry that a deluge of county patients--two-thirds of them uninsured--could overwhelm emergency rooms and push some fiscally shaky hospitals into bankruptcy, badly damaging the area’s private health network.

“This hospital does well financially, but most hospitals in the San Fernando Valley don’t do that well financially,” said Dan J. Brothman, president and chief executive officer of West Hills Regional Medical Center. “They could be put out of business real easily.”

At least nine Valley hospitals are involved in the foundation effort, which envisions creation of a private corporation to take over and manage Valley clinics, whose operating costs are about $15 million annually.

County health czar Burt Margolin has encouraged private care givers to bid on taking over part or all of the county’s large clinic network, which records more than 2 million visits annually, in an effort to keep the system running. But no county money is available to private contractors.

Dr. Keith Richman, who chairs the Valley hospital group, said its members are eager to prop up the Valley’s clinics, which he said are visited 229,000 times a year by poor and uninsured people.

Richman said the group plans to seek funding from the California Wellness Foundation, a nonprofit charity associated with Health Net, and two similar foundations that Blue Cross hopes to set up. Both insurers are based in Woodland Hills.

But whether the Blue Cross foundations come into existence depends on whether the firm can win state approval to merge its for-profit subsidiary, WellPoint Health Networks, with Health Net’s owner, Health Systems International.

Under such conversions, firms are required by law to turn their

assets--in this case, Blue Cross’ 80% stake in WellPoint--to a public or charitable benefit. Blue Cross wants to transfer stock and cash totaling $3 billion to the foundations, creating one of the nation’s largest philanthropic organizations.

So far, the deal has not been approved by the state Department of Corporations, which has the authority to ensure that California would be adequately compensated for the decades of benefits that Blue Cross enjoyed as a tax-exempt nonprofit. Blue Cross had asked the state to rule by Tuesday, but a spokesman for state corporations Commissioner Gary S. Mendoza said no decision has been made.

Blue Cross spokesman Mike Powers said his firm is “very concerned” about the county’s deteriorating health network and would be interested in trying to help keep the clinics open, if its foundations are set up.

“But we’re kind of talking about many ifs here,” he said. “There’s really nothing Blue Cross can do right now.”

Gary Yates, president and chief executive officer of the California Wellness Foundation, which spends $40 million to $45 million annually on health improvement projects, also expressed concern about the county crisis but declined to commit foundation capital.