Clinton Offers L.A. Aid Plan Based on Community Care : Finances: In announcing $364-million health package, President praises proposal to move away from hospitals. Supervisor Molina says action saves lives, jobs.

As grateful Los Angeles County supervisors watched, President Clinton on Friday announced a $364-million bailout package designed to rescue the county’s teetering health care system from collapse while forcing the vast network of hospitals and clinics to fundamentally change.

On the Tarmac at Santa Monica Airport with a presidential helicopter as a backdrop, Clinton hailed the plan to move the county’s massive public health system from expensive hospital treatment to less costly preventive care at health centers and community clinics.

“It would have been criminal to permit these clinics to close and all of this crisis to develop not just because of the very poorest people in the county, but because of the working families on very limited incomes who don’t have insurance,” Clinton said.

“And that is a national issue. It’s not a Los Angeles County issue. If it can be solved here with the restructuring, a lot of people all over America will be learning a lot from what you are doing. And the working families of America will be better served by it.”

On behalf of the jubilant supervisors, board Chairwoman Gloria Molina thanked Clinton for his assistance in the county’s worst hour of financial distress. “Over 9 million residents of Los Angeles County owe you our deepest gratitude,” Molina said. “Your announcement today has literally saved countless lives and certainly many jobs.”

Yet the President’s midmorning announcement, broadcast live on local television in a region crucial to his reelection hopes, only served to underscore the amount of work still facing the supervisors. The county’s elected leaders must make tough decisions in the coming weeks to solve the fiscal crisis that drove the county to the brink of bankruptcy and the health system to the edge of collapse.

While the rescue package, with its one-time shot of federal funds, will avert the threatened shutdown Oct. 1 of the county’s six comprehensive health centers, most of the 28 community clinics and many outpatient services at county hospitals, it is not a cure-all for the ills that face the nation’s second-largest public health system. Officials could not specify Friday how many of the 5,200 layoffs and demotions that had been expected Oct. 1 now can be avoided.

“There are a significant number of jobs that cannot be restored,” said Burt Margolin, the county’s health czar. “There clearly will be significant services that cannot be funded under any scenario.”

After basking in the presidential limelight in the morning, all five supervisors returned to their chambers at the Hall of Administration Downtown and decided they did not have enough information on the details of the deal to take any action Friday.

By postponing any decisions until they meet again Tuesday, the supervisors rejected the demand of the biggest union of county workers that they halt the layoff and demotion of thousands of health workers scheduled to take effect at the end of next week.

Gilbert Cedillo, general manager of the Service Employees International Union, Local 660, urged the board to rehire county employees who have received pink slips. “I call upon you to rescind the layoff notices immediately,” he said. “Let’s bring some stability. . . . We have been given a golden opportunity by the President to do this with sobriety, in a thoughtful way.”

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While the board decided to wait to make a decision, Supervisor Zev Yaroslavsky thanked Cedillo for the union’s lobbying of Clinton. “It’s clear you’ve had an impact on this decision, and this spirit of cooperation works much better than the alternative,” he said.

With the aid package less than a day old and county health officials planning to work through the weekend to analyze its effects, there was no indication of how many of the pink slips will be withdrawn.

And the county, pressured by the federal and state government, was put on notice that it must dramatically change the way it delivers health services to millions of county residents who are poor or lack health insurance.

“In order to remold steel, you have to turn the heat up on that steel,” Yaroslavsky said to Clinton at the airport. “Hot enough so that it is pliable. The heat has been turned up on the Los Angeles County health care system, now to the point where it can be remolded, remolded in a more effective, more efficient, cost-effective way that better serves our public.”

It will not be easy.

David Langness, spokesman for the Healthcare Assn. of Southern California, which represents private hospitals, said the aid package is not salvation.

“I just hope that nobody thinks that the crisis is over. It’s not,” Langness said. “We’ve got a major crisis in health care in Los Angeles County and it’s not going away.”

The aid package merely buys time, he said.

“It’s not a bailout. It’s just a finger in the dike. It gives us a little bit of breathing room to reconfigure, redesign and retool Los Angeles County’s health care system, which is a huge, huge task.”

The county health system, he said, is “so complex and such a culture of dependency on in-patient care. It’ll take a big change in the power structure of county government and the Department of Health Services to move away from a hospital-centered [system] and toward an outpatient one.”

With Congress on the verge of slashing Medicaid and Medicare funds, the county could face an additional $600-million shortfall in next year’s budget. “No short-term bailout can fix them,” he said.

Dr. Brian Johnston, an emergency-room specialist and president-elect of the Los Angeles County Medical Assn., said the federal aid was “wonderful news” and that county supervisors should now move to drastically reform the much-criticized Health Services Department.

He said the supervisors should set up a county Health Authority, as recommended by Margolin. Separate from the massive health department, the authority would be composed of medical experts who would carry out broad health care policies approved by the supervisors.

The $364-million federal bailout provides an upfront infusion of money to stabilize the county’s health system and prevent the closure of the nation’s biggest public hospital, County-USC Medical Center.

The money would reach the county through a Byzantine system where federal health dollars flow from Washington to Sacramento and on to Los Angeles.

At the heart of the bailout is a waiver of federal Medicaid rules that have provided the greatest incentives to hospitalize patients rather than treating them at outpatient clinics.

However, over five years, the county must reduce its health care costs substantially by moving firmly toward less costly preventive care at community health centers and clinics and away from expensive treatment at hospitals. If it fails to do so quickly, the nation’s biggest county government will find itself locked in a perpetual fiscal crisis.

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To provide care to the needy and the working poor, Supervisor Mike Antonovich said the county must still privatize some of its clinics and health centers “in innovative and cost effective partnerships” with private hospitals and medical groups.

The board is expected to consider contracts with private providers next week before the Oct. 1 deadline.

Margolin, a former state assemblyman with a long record on health care reform, joined in thanking Clinton for his leadership in moving two days of intense talks in Washington toward an agreement.

“There is absolutely no way in the world that we would have been able to develop this package if the President of the United States hadn’t taken some of the most creative thinkers in the area of health service delivery, ordered us essentially to go into a room in Washington, D.C., and literally lock that door until we came out with a solution.”

Health care workers were cautious in the wake of Clinton’s announcement.

Nurses and union leaders demonstrated at County-USC, saying they would continue their demonstrations and sickouts until they were sure that the jobs of all county health workers were being protected.

The sickouts continued Friday, with all 16 of the registered nurses assigned to the operating room taking the day off. As a result, hospital officials suspended all non-emergency and elective surgeries, and reserved the operating rooms only for trauma and other emergency cases, according to hospital spokesman Harvey Kern.

Nurses and other workers in the medical center’s family planning clinic also stayed off the job, causing a shutdown of the clinic.

Kern said half the nurses in the medical center’s pediatrics clinic stayed off the job Friday as well, forcing managers and other replacement health workers to fill in. He said the pediatrics clinic was continuing to see patients.

“We have to figure out how we are going to go about reversing this,” Kern said. “Emotions are heavy. It is going to take a while to get over all this, even if we are over the crisis.”

One of the operating room nurses who didn’t show, Pattie Sugerman, turned up at the hospital nonetheless to participate in the daylong series of demonstrations and news conferences outside the landmark Eastside hospital.

“I feel some hope,” Sugerman said after Clinton’s announcement.

Beth Osthimer, a senior attorney for a San Fernando Valley legal aid group that sued the county in an attempt to block clinic closures and other cuts, said her group would withdraw its suit if the county uses the federal money to avert the cuts and maintain existing medical services for the poor.

At the airport, the county’s five supervisors were thrilled about the federal bailout, shaking hands and smiling in front of Marine One, the helicopter that was to take Clinton to campaign-style events in Orange County and San Diego.

There was even time for joking. As Clinton laughed, Antonovich compared the county’s situation in recent months to that of a song by Tom Lehrer, with the line, “Sliding Slowly Down the Razor Blade of Life.”

Contributing to this story were Times staff writers Douglas P. Shuit and Timothy Williams in Los Angeles and Robert A. Rosenblatt and Faye Fiore in Washington.