Breakthrough Seen on $364-Million Deal to Rescue County Health System : Finances: Package is pieced together just hours before President arrived in Los Angeles. The tentative agreement would allow hospitals, most clinics to remain open.

A tentative $364-million rescue package that would save Los Angeles County’s crippled health system from imminent collapse was hammered together Thursday in Washington only hours before President Clinton arrived in Los Angeles, according to sources familiar with the bailout plan.

The President this morning is expected to formally announce the complex deal that would save the nation’s second-largest public health system from unraveling and keep open the county’s hospitals, health centers and most of its community clinics.

“We’ve turned a corner,” said a Clinton Administration source familiar with the intensive negotiations in the nation’s capital that produced the tentative agreement. “We think we’ve achieved a tentative framework that would provide an infusion of funds that will allow the county to keep the hospital open, and to save the county health care system without it collapsing or being destroyed.”

Word of the deal came as Clinton arrived in the city on a campaign swing through Southern California--just 10 days before the nation’s biggest county government would have been forced to slash the health care safety net for millions of county residents who are poor or lack health insurance.

The package also may prevent the layoff of some but not all 5,200 county health workers whose jobs were threatened by the county’s worst fiscal crisis.

“It appears there has been a major breakthrough,” said Supervisor Zev Yaroslavsky. “This tentative agreement would allow us to stabilize and restructure our health system without destroying it. Our health system will never be the same. This package could help us improve the way we deliver health care and it could be a model for the nation.”

In a major philosophical shift, the federal plan would allow the county to use federal funds now only available for hospital treatment and apply them to the care of patients in clinics and health centers.

Yaroslavsky said the county’s vast health system, which has failed to follow the dramatic changes taking place in health care nationally, will shift its emphasis from expensive treatment at hospitals to less costly care at clinics and health centers.

“It is understood and it will be a condition of this agreement . . . that there is reform and restructuring,” he said. “We would be remiss if we accepted a waiver [of federal regulations] and not deliver reform. The federal government will insist on it and rightly so.”

Yaroslavsky and other members of the Board of Supervisors have been invited to join the President for a formal announcement of the deal this morning at the Santa Monica Airport before Clinton leaves for stops in Orange County and San Diego.

Clinton’s message will be delivered in territory that is essential to his hopes of winning reelection; he must win California if he is to return to the White House in 1996. Los Angeles County--whose population is greater than that of 42 states--was crucial to his victory in California three years ago. Clinton captured 53% of the county’s vote in 1992, enough to carry him to victory over President George Bush in the state with the most electoral votes.

Tempered Relief

After weeks of gloom and doom at the county Hall of Administration, there was a palpable sense of relief, tempered by caution about what may lurk in the details.

County health czar Burt Margolin, who led the county’s efforts to win a federal bailout, is expected to brief the supervisors at an afternoon meeting today.

“It’s very encouraging. Let’s hope everything holds together,” said Supervisor Yvonne Brathwaite Burke. “I won’t be totally relieved until the money is here in our hands.”

Burke said it is clear that the county will have to downsize its vast health system. “I think they have just given us the money so we can start our restructuring in a way that is not so Draconian.

“We’re going to have to face reality,” Burke added. “There is no way for us to carry on this system with the tremendous number of indigents. There is just not enough money.”

There also was concern about the details of the pact. “Anything you do, you have to go to the Legislature and the governor. It can’t just come from Washington,” Supervisor Deane Dana said. “I’d given up a few hours ago . . . the governor wasn’t going to call a special session and the Legislature wasn’t going to help. But now I see a glimmer of hope.”

But in Sacramento, Kim Belshe, the state Health Services Department director who took part in the Washington meeting, said the Wilson Administration is supporting the county in its request for the federal funds.

“The short-term goal is to try to stabilize a clearly struggling health care system,” Belshe said. “That stability does require the short-term infusion of dollars. It’s pretty hard to restructure a health care system when it’s collapsing.”

Shortly after returning from the marathon talks in Washington, Belshe explained that the plan is intended to force the county to move away from hospital treatment to preventive and community-based care.

“It is not a one-year quick fix,” she said. “It is a five-year plan for transition.”

A top federal official, speaking on condition of anonymity, stressed that the $364 million is “not just [for] one year. We’re trying to deal with a long-term restructuring.”

The goal is to force the county to reduce its health care costs over time.

In order to accomplish this, the county will receive a waiver of federal rules on how it can spend federal Medicaid money. Although most federal aid now is earmarked for hospitals, the waiver will permit the county to spend it on more cost-effective outpatient care--a key element in Margolin’s program to reform the vast county Health Services Department.

The waiver would allow the county to tap into a new source of federal money to match local dollars that now provide outpatient care for the working poor who lack health insurance but earn enough so they are not eligible for Medi-Cal.

Critics have long complained that Medicaid rules have hindered health care reform efforts by rewarding local governments for putting as many people as possible into hospital beds, where federal reimbursements are richest. The switch to outpatient care, they say, will allow the county to extend care to more people for the same amount of money.

However, the package is not expected to reverse efforts by the supervisors to establish partnerships with private hospitals and medical groups who want to take over the county’s health centers and clinics.

State, county and federal negotiators were pressed to resolve the issue by the nature and scope of the fiscal crisis faced by the county and the possibility that the county would have to close the nation’s largest public hospital, County-USC Medical Center.

Clinton arrived in Los Angeles on Air Force One at midafternoon, participated in a radio “town hall” with talk show host Larry King, and headed to a star-studded fund-raising gala at the Century Plaza Hotel. There, the President, surrounded by such Hollywood notables as Tom Hanks, Steven Spielberg, Kirk Douglas, Edgar M. Bronfman, Lew Wasserman, Rob Reiner, Jack Valenti and Christian Slater, raised $1.6 million for his reelection campaign.

Also present were politicians, including state Sen. Tom Hayden (D-Santa Monica), who said the plan would be good for public health care--and a sound move against the glitzy backdrop of the lucrative campaign swing.

“If it’s true, and I know the President is trying to make it come true, it’s a great thing for public health care in Los Angeles,” Hayden said. “To come here to collect money from the affluent, while leaving no money for the poor, isn’t the message the President wants to send. He wants to do both.”

In his remarks to contributors, Clinton made no direct reference to the county aid package.

Late Thursday, the First Saxophonist arrived at the House of Blues on the Sunset Strip to attend a fund-raiser for a group of young Democrats called the Saxophone Club.

Nurses Stage Sickout

On the day the deal was done, county nurses who had expected to be laid off staged another sickout at the outpatient clinics of County-USC, whose facade has long been known to soap opera fans as General Hospital.

The clinics were crowded with long lines of patients Thursday morning as 85% of the registered nurses scheduled for duty called in sick. But by afternoon, fill-in supervisory personnel, administrators and a handful of regular nurses and clerks were able to handle most of the patients.

Hospital officials said 38 of 44 registered nurses, four licensed vocational nurses and 60% or so of clerical and support staff participated in the sickout.

The clinic normally treats 1,500 to 2,000 patients a day. It was not clear how many were seen Thursday, but Harvey Kern, a hospital spokesman, said some were turned away and rescheduled for appointments while others waited longer than usual.

“They are taking care of the patients as best they can,” Kern said.

Harold Tucker, 59, of Azusa said he waited five hours for a 9:30 a.m. appointment for treatment of a back problem at the orthopedic outpatient clinic.

“These people are just so shorthanded today,” he said. “There seem to be people from every department helping out.”

Althea Penner of Alhambra, a registered nurse who works in the oncology clinic, explained why she called in sick:

“I don’t always agree with calling in sick, but in light of what’s going on, we just felt that we need to make a statement. We are just really concerned. We are just barely making it as it is.”

The sickout came in protest of massive layoffs and transfers announced Sept. 15. The nurses said that the planned cutbacks would have put patients at great risk.

Jean Jarosz, a nursing supervisor who has been notified that she will be laid off, said she was not bitter about her colleagues walking off and leaving an undersized crew.

“The nurses that didn’t come to work today are trying to make a statement to let President Clinton and Gov. Wilson know what will happen if they don’t do anything,” she said. “The nurses tried to make a statement of what it will be like every day. This was another way of saying, ‘Please listen.’ ”

In a related protest, nurses, doctors and other health professionals set up a tent city in front of the medical center to demonstrate what they warned could be the medical care of the future.

More than a dozen colorful small nylon tents bore red crosses and were labeled “Pediatrics,” “TB Control” and “Pharmacy.”

Nurses set up tables in front of the tents and distributed food and drinks. Eventually, the protesters said, if something is not done to stop the cutbacks, patients will be treated in tents instead of clinics.

“Things will only get worse,” said Tammy Kramer, a nurse manager who faces a demotion and a $13-an-hour pay cut. “They couldn’t do it with limited staff today; how will they do it with the cutbacks they are contemplating?”

Some of the protesters vowed to sleep overnight in the tents.

In Washington, as many as 25 health officials from the county, state and federal governments huddled for a second long day on Capitol Hill in search of the solution Clinton is expected to announce today.

“I am very optimistic that we are going to be able to get substantial federal assistance to the county of Los Angeles, but they still have to conclude these negotiations and they are still putting all the pieces in place to guarantee it can be done,” said Rep. Henry A. Waxman (D-Los Angeles), an architect of major health care legislation who has been advising the negotiators.

“Everybody was working very cooperatively to try to deal constructively. These are county, state and federal representatives and I think everyone is anxious to reach a conclusion because it is important to reach one for L.A. County,” Waxman said.

The congressman, who was in touch with negotiators throughout Thursday, said the participants were praising Margolin, a former assemblyman and the county’s chief strategist, for keeping alive what many said was an impossible mission.

Also contributing to this story were Times staff writers Faye Fiore in Washington, Max Vanzi in Sacramento, and Jack Cheevers, Douglas P. Shuit and Timothy Williams in Los Angeles.