COLUMN ONE : How Public Health Care Got So Sick : From computer snafus to political infighting, a long string of mistakes and mismanagement has worsened L.A. County’s crisis.

Los Angeles County’s vast public health system--which came within a heartbeat of collapse this fall--is an entrenched and inefficient bureaucracy whose hopes for survival are tangled in its troubled past.

As economic and political forces have slashed its funding and increased its burdens, the county’s massive Department of Health Services has stumbled in response. And even though a $364-million federal bailout has temporarily saved its far-flung network of hospitals, health centers and community clinics, the department is left to struggle with an array of problems, many of its own making.

They include:

* An institutional culture that resists change and punishes innovation, while virtually ignoring the national trends that are dramatically reshaping health care.

* The failure to install sophisticated computers that actually work together, even as the department maintains inadequate billing and patient record systems that have cost millions of dollars in duplicated services and lost federal reimbursements.

* Embarrassing--and at times tragic--disclosures in areas ranging from costly malpractice cases to investigations of county doctors suspected of improper moonlighting and skimming patients to their private practices.

* A leadership vacuum created by a fractured and ineffective decision-making process among health officials, complicated by county supervisors fighting to protect health facilities in their districts.

This week, the nation’s second-largest public health care system reaches a turning point with the retirement of Robert C. Gates, its longtime director, as well as the last of more than 3,000 layoffs and demotions and the privatization of six clinics.

As it moves toward an uncertain future, the county draws high marks for its performance in some areas, notably its delivery of top-quality trauma care. Four of the county’s six hospitals are teaching institutions that have trained legions of doctors, nurses and other health professionals.

But the challenge these workers face is immense. More than 2.5 million county residents lack health insurance--the biggest share of uninsured of any metropolitan area in the nation. Another 1.6 million rely on Medi-Cal, the joint state and federal program for the poor.

All told, more than one out of four residents in the nation’s most populous county are poor or lack medical insurance. More than anywhere else, they turn to the county for help in time of need.

“The depth of the problem in this county in terms of lack of insurance can’t be underestimated,” said Burt Margolin, the outsider who was appointed “health czar” this summer to help guide the county out of its latest and worst financial crisis, which threatened to force the closure of one or more hospitals.

Since its creation in 1972, the department has lurched from crisis to crisis with little vision for the future and few incentives to become more efficient. When the money was flowing, the pressure for change was nonexistent.

But when funding started to dry up in the 1990s due to the deep recession and ensuing loss of local, state and federal dollars, the supervisors and county officials papered over severe financial problems with stopgap measures, phantom budget entries and borrowing. This year, the long era of neglect came to an abrupt end.

“We’ve never had a very well-run department,” said Board of Supervisors Chairwoman Gloria Molina, an outspoken critic who led a behind-the-scenes effort to oust Gates this year.

“I noticed an absence of leadership, of accountability,” Molina said. “It wasn’t very assertive and very aggressive or passionate about what needed to be done. Planning was nonexistent.”

As the county flirted with insolvency and toyed with the idea of closing one or more of its major hospitals, it was targeted with unprecedented scrutiny by Wall Street, Sacramento and Washington.

And they didn’t like what they saw.

The Roots of Trouble

The county has been in the health care business since 1879. But it entered the modern era when it merged with the city of Los Angeles’ Health Department in 1964, and with the rest of the area’s municipal health systems eight years later.

That last consolidation came after a county-appointed blue ribbon panel of experts criticized health care efforts as fragmented, uncoordinated, wasteful, impersonal and overspecialized.

More than 25 years later, the system still is all of those things.

It relies more on hospitals and acute, specialized care than on preventive and comprehensive care, and has downplayed the concept of the versatile primary care doctor who watches over patients.

Instead of complementing private health care systems, the county built its own system, replicating many of the services already provided.

And despite the blue ribbon committee’s warning in 1970 that “incompatible data systems are a major obstacle to coordinated planning,” the department has been plagued for years by a hodgepodge of often unworkable information systems that cannot communicate with each other or exchange the most basic information--costing the county huge sums of money and massive delays in patient care.

The problems began almost immediately after the department’s creation.

Employees of four county departments were thrown together with those from city health departments, and a rift between hospitals and public health programs solidified.

“It was like two icebergs that they hoped would come together,” one senior Health Department administrator recalled. “Instead of melding, they kept clashing with each other and that’s the way it stayed.”

At first, the department was split into five districts, each with a deputy director. Over the years it has seen changes including centralization and decentralization and, most recent, clusterization--with each hospital forming a nucleus for a group of comprehensive health centers and clinics.

In the beginning, the county’s economic growth also fueled a tremendous expansion in the department.

By the late 1970s, however, the same public anger over government size and inefficiencies that spawned property tax-slashing Proposition 13 grew into demands to shrink county government.

But that downsizing never happened. Instead, the Health Department and the county kept growing.

A s it grew, critics inside and outside the Health Department say, it became wasteful and inefficient--a $2.3-billion bureaucracy in desperate need of reform.

“There’s so much waste it’s like, where do you point your finger?” said Dr. David Goldstein, chief of general internal medicine at County-USC Medical Center.

Robert Issai, senior vice president and chief financial officer for St. Francis Medical Center in Lynwood, said the county should get out of the health care business altogether.

“They are not efficient,” Issai said. “If our financial position was even close to that of L.A. County, if we had one-tenth of the financial difficulties the county is in, my boss and I--the St. Francis leadership--we would probably be working in a gas station in Alaska right now.”

L.A. County Labyrinth

In the labyrinthine world of Los Angeles County health care, computers do not communicate with each other, appointments are often scheduled haphazardly and no one is able to track patients as they move from one facility to another.

There is no single identification number for patients and medical records are not computerized. Instead, the system relies heavily on handwritten reports that do not necessarily follow the patient, potentially jeopardizing medical care.

Often, tests and X-rays have to be repeated, doctors say. As patients move between clinics and hospitals, doctors and nurses must create medical records and render diagnoses on the same person over and over, driving costs higher.

“When they get to the hospital, we don’t know what’s been done,” said Dr. Sidney Wechsler, chief of women’s outpatient services at the county Women’s and Children’s Hospital.

Because medical records are kept the old-fashioned way--on paper--the county employs an army of workers (400 at County-USC alone) who must haul them out of storage, creating delays and rescheduled appointments. One county document put the cost of running the paper-based system at about $45 million a year.

“You end up writing a lot of paper and carrying it around,” said Dr. Thomas V. Berne, associate director of surgery at County-USC. “It just slows everything down.”

Patients suffer at the hands of a chaotic appointment-referral system.

Clerks sometimes sign up many patients for the same time slot and leave other slots blank, said Dr. Paul Wallace, executive director of the Joint Council of Interns and Residents, which represents physicians-in-training at county hospitals.

Patients with 9 a.m. appointments, Wallace said, often wind up waiting until 2 or 3 p.m., leading to frustration and anger. By the time they are seen, other departments, such as the pharmacy, have closed, which means they must return a second day.

But because many county patients work at low-wage jobs, and cannot afford to take even one day off, they often stay away from county facilities until treatable ailments flare into critical illnesses.

“They go through excruciating pain because they can’t take time off to go to the hospital when they’re not going to be seen in a reasonable amount of time,” Wallace said. “People who are not in the lower economic segments of society would never, ever, accept the time it takes.”

County-USC spokesman Harvey Kern said the hospital did have serious problems with appointments in the past. But he said the Eastside complex and two others--Olive View and Harbor-UCLA medical centers--have received new computers within the last year that have vastly improved the appointment system.

County taxpayers, meanwhile, lose out when faulty computers and inept employees fail to recapture maximum Medi-Cal reimbursements from the state and federal governments.

For example, a March, 1994, audit found that County-USC--the nation’s largest public hospital--was missing out on millions of dollars by not doing enough to determine if patients were eligible for Medi-Cal or other insurance coverage.

Health officials acknowledge the problem and say they are taking steps to correct it.

Martin Luther King Jr./Drew Medical Center, another audit shows, has missed out on potential millions by allowing patients to stay too long in emergency room beds instead of moving them to inpatient areas where Medi-Cal reimbursement rates are nearly five times higher.

Last year, outside auditors KPMG Peat Marwick and Gilbert Vasquez & Co. found Health Department computer problems partly to blame for a “significant” amount of unexplained Medi-Cal billing losses, which the county had never investigated.

The county’s computer problems hit a low point when a system called IBAX came on the scene in 1990, touted as a panacea that would modernize the vast and troubled network’s accounting and operations programs.

Instead, the system created by IBM and Baxter Healthcare Corp. has turned into a nightmare that cost the county untold millions of dollars even though it was only installed in the two smallest hospitals before it began crashing and spitting out gibberish.

By the time county supervisors pulled the plug on IBAX in 1994 its costs had soared past $74 million, by some estimates. Supervisor Molina called the system “a disaster.”

The county continues to pay outside contractors $300,000 a month just to keep IBAX stabilized while in-house computer experts try to keep systems running.

In the wake of IBAX, officials say they have taken steps to better coordinate systems countywide, and are even considering creating a special department to oversee reforms in the county’s information management.

Malpractice Factor

Failures in the county’s record-keeping system contributed to $60 million in malpractice case awards between 1988 and 1992, according to county documents.

Flawed records were an issue when supervisors recently approved paying up to $802,000 to settle a negligence lawsuit brought by a man who was improperly treated for a stab wound at two county hospitals in 1992.

According to county attorneys, medical workers failed to give William Marroquin, then 28, antibiotics and repeatedly ignored signs that he was developing an infection around his spinal cord. The infection left him a paraplegic.

In a memo urging supervisors to settle the case out of court or face damages of up to $1.3 million if the case went before a jury, county lawyers wrote: “There was neither communication nor documentation between hospital or medical personnel at [County-USC] and Rancho Los Amigos Hospital regarding his high fever or wound care prior to or after his transfer.”

County officials also recently agreed to pay up to $427,000 to a newborn who was treated at County-USC in November, 1981, for fever and respiratory problems. Bruce Rodriguez was readmitted a few days later and went into a coma. He emerged retarded and unable to control his muscles from the neck down.

His medical records were lost, although medical experts believe he was suffering from viral encephalitis that went undiagnosed and untreated at County-USC. But with his records missing, the county could not prove it was not at fault, and its attorneys urged an out-of-court settlement.

Because county hospitals also are used to teach budding physicians, nurses and other health professionals, they are partly staffed by inexperienced residents. That, too, can lead to problems when they are not properly supervised, investigators have found.

A negligence suit recently settled out of court for up to $190,000 illustrates their point.

The action was brought by a 33-year-old woman admitted to County-USC last year for removal of her tonsils. But during surgery a resident accidentally cut one of her carotid arteries, which supply blood to the brain, according to a county summary of the incident.

Rather than call in an experienced surgeon, the resident tried to fix the problem but damaged a second artery. While still trying to repair the damage the next day, the resident finally got a vascular surgeon to help him.

The surgeon decided the only way to stop the woman’s bleeding was to tie off the carotid artery, which led to a stroke. She continues to suffer memory problems, loss of taste, headaches and throat and neck pain, the summary says.

Such incidents prompted Molina to castigate county health officials.

“I’m tired about haranguing the department about this,” she said recently.

In the last five fiscal years, taxpayers have shelled out $134.4 million to settle malpractice claims--an amount that Health Services Director Gates and others say is not excessive, given the number of patients the county handles. (Between July, 1990, and last March, the county was hit by 851 malpractice lawsuits, according to the county’s risk management experts, with the annual number of suits dropping from 282 in 1991-92 to 145 in 1994-95. The Health Department served 763,000 people in 1993-94.)

Gates said the department is making progress in addressing weaknesses that lead to mistakes and malpractice cases. “I think it’s on the way to correction,” said Gates, noting that cases currently being settled were filed years ago, before corrective measures were instituted.

As for the doctors-in-training, Fred Leaf, head of the Health Department’s Inspections and Audit Division, said supervisors at all hospitals have been told to crack down on “attending” senior physicians to make sure they are properly monitoring the inexperienced medical residents.

The department also is trying to weed out doctors who do not work their 40-hour weeks because they moonlight at other jobs and doctors who deprive the county of needed revenues by illegally skimming insured patients into their private practices.

Those allegations are under investigation at all six county hospitals. But the probes have been hampered because auditors and investigators have been among the first to go during budget crunches.

Sometimes management oversight is lacking too. One audit in 1992 determined that although the department spent $320 million one year on more than 1,200 contracts for outside medical, dental, nursing, security, billing and other services, it had no system of monitoring contractors’ performance.

The department also has overlooked cost-saving measures in its own operations.

When the county recently asked outside auditors to look for potential savings, they found an estimated $1 million right away at two emergency rooms.

In a draft of their report, scheduled for release in November, the auditors said one reason that county emergency rooms are so crowded is that the department has no centralized hot line that could tell callers what they need or whether alternative care might be available at a clinic.

Health officials counter that they do have a toll-free line that tells people of available services but provides no diagnoses. A call to the hot line went unanswered for more than 40 minutes last week, then an operator said she could only give out addresses and phone numbers of health facilities.

Other cost savings may lurk in the arcane world of the county’s formularies, manuals compiled by hospital committees that determine what drugs a hospital stocks.

Although private hospital systems such as Kaiser have centralized formularies, partly to give them more buying power with drug companies, the county has a separate one for each hospital. County officials estimate they could save $3.5 million annually if they consolidated the formularies and took advantage of discounts offered by drug firms.

Concerns also have been raised about a $1.2-billion project to rebuild County-USC. Already, houses have been leveled and chain-link fences erected for a replacement hospital whose funding and future remain in doubt.

Political interference also has stymied reform.

Hospitals--like parks and libraries--are powerful symbols of political clout, fiercely protected by the supervisors.

Over the years, supervisors’ health deputies--liaisons between their elected bosses and the health services in their areas--have grown increasingly powerful and, critics say, meddlesome.

To better serve the county as a whole, the newest supervisor, Zev Yaroslavsky, has called for creation of an independent health authority to oversee the department and get the supervisors out of the business of running the Health Department.

“We should not be making these kinds of micro-management decisions,” Yaroslavsky said recently, “especially when it’s viewed in terms of my district, your district, somebody else’s district.”

As the county’s fiscal problems worsened in recent years the supervisors began to lose confidence in Gates. Ultimately, he agreed last May to resign, effective Wednesday, after supervisors agreed to rewrite recent unfavorable evaluations and to sweeten his pay and pension package.

With a lame-duck director and a deficit that soared to an unprecedented $655 million last spring, the department became paralyzed by indecision.

Unable to choose between two alternatives to close the gap--shutting down County-USC Medical Center or four of its five other hospitals--the department’s top executives deadlocked.

“We didn’t like either one of them,” Gates said.

So, he made no formal recommendation to county Chief Administrative Officer Sally Reed on how to erase the deficit that threatened to sink his department and take the county with it.

By mid-June, Reed came to a difficult decision. Without help from Sacramento and Washington, she felt the county had no choice but to close the oldest and biggest hospital, County-USC, to save the rest.

Unwilling to take such a drastic step, the supervisors, at the suggestion of Yaroslavsky, created a Health Crisis Task Force to find another way out.

Margolin, a former state legislator and expert in health care issues, took charge.

“When I came on the scene this summer I found a department that was facing collapse,” Margolin said. “A department that was angry and frustrated. . . . There was a sense of impotence . . . a sense that we’re drowning, our system is drowning, and we have no allies. And we have little credibility.”

In state and federal circles it all sounded so familiar: Los Angeles County was in a budget crisis and was demanding financial help.

“That argument,” Margolin said, “was increasingly and angrily rejected by Sacramento and Washington decision-makers who said, ‘We understand you have a serious problem in L.A. County. But if you keep asking us to pour money into the same structure, into the same system, we don’t see your problem getting any better.’ ”

Lagging Behind

As the move to managed care has transformed the private health care landscape, Los Angeles County has been slow to embrace reforms aimed at reining in skyrocketing medical costs.

County officials say part of the reason is that the federal Medicaid program provides its richest reimbursements when local governments put patients in hospital beds, rather than treating them in less-expensive outpatient clinics.

“We get killed when we lose inpatient days,” Gates said.

Almost three years ago, the department’s top physician, medical Director Jonathan B. Weisbuch, warned Gates that no one was looking at the entire county system to see what was working and what wasn’t and where dwindling resources most needed to be applied.

He said in a memo that the county’s hospitals were seeing increased competition from their private counterparts for Medi-Cal patients--the financial backbone of the county system. To survive, Weisbuch told Gates, the department needed to provide better coordinated primary care.

Because of changes taking place at the state and national levels, Weisbuch said, the department would increasingly be forced to compete or cooperate with private providers.

“To compete in an environment driven by patient choices, [the Department of Health Services] must improve,” he wrote. “If DHS does not provide the quality patients demand, it will be history.”

When Weisbuch told Gates that he intended to address the supervisors about these issues, he was removed as medical director and sidelined to a new office with few responsibilities. Ironically, he is the lone candidate from within the department on a short list of finalists to succeed Gates.

At the time, Gates said, Weisbuch’s ideas were not financially feasible. In hindsight, Gates acknowledged in a recent interview: “Maybe we weren’t being creative enough. I will allow that possibility.”

With more than 25,000 employees, Gates said the department is “tough to transform. You can’t turn this organization on a dime.”

After a summer in turmoil, some supervisors say the crisis that drove the county to the brink may in the long run break down barriers to change.

“As long as they could keep the money funneling in, it was very difficult to make changes in the department,” Supervisor Deane Dana said. “Finally, it all fell apart and now we are back to doing what we should have done several years ago, downsizing the department.”

‘A Supreme Being’

The 1990s have not been kind to Los Angeles. The boom years of the late 1980s gave way to a deep and persistent recession, a series of natural disasters and civil unrest.

As the economy declined and jobs disappeared, the number of people with health insurance dropped sharply and the ranks of the poor on Medi-Cal soared.

A financially troubled state government began to take a larger share of property taxes from the counties and, naturally, the biggest was the hardest hit.

Hoping for better times and unwilling to adjust to austerity, the supervisors held together the health system and the rest of county government through a series of one-time financial moves, mortgaging assets and borrowing.

Then came the biggest financial gamble of all. In the spring of 1994, supervisors plugged the budget gap by penciling in more than $600 million from a federal program--money that never came through.

By January, the county budget was in shambles.

But out of the chaos that has engulfed the system came an idea that may hold the key to ending the county’s over-reliance on inpatient hospital treatment.

The $364-million U.S. rescue package negotiated by state, county and federal officials last month not only kept hospital and clinic doors open but contains the seeds of reform. In announcing the bailout, President Clinton declared that the county has the chance to become a model for the nation by spending federal health dollars on more cost-effective preventive care.

Margolin, who spearheaded the effort on the county’s behalf, said the money will provide an opportunity to stabilize the county system and move to reform and restructure it. One of those steps takes place this week when community clinics in Santa Monica, Venice, Canoga Park, Valencia, East Los Angeles and Bell Gardens are turned over to private hands.

Margolin believes that such privatization offers the county an opportunity to have smaller community-based health organizations provide care.

But many obstacles lie ahead.

The county has a large, powerful and diverse unionized work force determined to protect jobs.

Despite the union’s best efforts, including lobbying Clinton to help Los Angeles, more than 3,200 health workers will lose their jobs or be demoted by Halloween.

“They just want to cut, forget the human aspect of people going out the door,” said Alejandro Stephens, president of the county’s largest union, Service Employees International Union Local 660, which continues to press for voluntary buyouts and other alternatives to layoffs.

Margolin said the county faces a stark choice: “This is not a jobs program. It is a health care delivery system.”

On the eve of Gates’ departure after 11 years as health chief, supervisors are still haggling over who will replace him.

“We need a Supreme Being,” Molina said last week.

Said Gates: “I don’t envy my successor.”

Times staff writer Timothy Williams contributed to this report.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

About This Series

Beginning today, The Times goes behind the scenes of Los Angeles County’s massive public health system as it tries to resuscitate itself after a near-fatal collapse brought on by too many patients, too little money and too many questionable decisions.

* Today: How the nation’s second-largest public health system ended up at the brink of disaster.

* Monday: Who really uses the system, and why many working people must depend on the taxpaying public--not their employers--to bankroll medical care.

* Tuesday: Behind the Thin White Line: the view from inside the operating room.

* Wednesday: The hidden costs of public health care--and how private hospitals are trying to lure Medi-Cal patients away.

* Thursday: From New York to San Diego, a look at how other large metropolitan health systems are coping with the present--and thinking creatively about the future.