High-Level Care, Uninsured Patients Make a Costly Mix : Medicine: Defenders say county offers services at a competitive expense. But critics see many inefficiencies.


For more than a month, the 11-year-old boy sat within easy reach of his respirator in the pediatric intensive care unit at Los Angeles County-USC Medical Center--the nation’s largest hospital complex.

He is no stranger here. Rafael Guerrero was born prematurely in the same building and was rushed immediately to intensive care. He has “prune belly syndrome"--a lack of abdominal muscles that has left him with a host of serious medical problems involving his lungs, intestines and bladder.

Before his current stay he had rung up 540 days in intensive care in his young life--and medical bills that hospital officials say easily exceed $1 million. Back for corrective surgery in mid-September, he suffered kidney failure and has required around-the-clock nursing and monitoring. At $4,869 a day, that is more than $180,153 in additional charges.

This bright but sickly little boy--who speaks only in sign language--unwillingly represents American medicine at its most costly. He also represents one of the county’s most nettlesome problems in controlling costs.


Officials say there is an abundance of such patients at the six county-run hospitals, facilities that offer a variety of high-level care available at only a few private hospitals.

In addition, few patients in the county system have private insurance--the kind that would cover most of the bills for a complicated delivery, emergency surgery or intensive care. And the fees paid by government programs--Medi-Cal and California Children’s Services in Rafael’s case--do not necessarily cover the costs.

Even more telling, fully a third of the 126,000 patients discharged from county hospitals last year had no health coverage at all. This is the heart of the problem facing the beleaguered government system: how to pick up the costs of the 42,000 indigents who were hospitalized last year and who cannot be expected to pay a dime.

The uninsured are “at the core of the Los Angeles County health crisis,” said the county’s “health czar,” former Assemblyman Burt Margolin. “We would not face the meltdown of the system if we as a society had developed a solution to the larger problem of having a significant population without access to health insurance.”

On top of a multitude of largely hidden costs, critics complain of inefficiencies in the county’s health care delivery system. They say:

* The bureaucracy is top-heavy.

* Overly generous salary increases have been given.

* There are unexplained differences in costs among county-run clinics and hospitals.

* Record-keeping problems too often require repetition of expensive medical tests.

* The antiquated billing system cannot track the costs for an individual patient.

But it is the county’s burden to provide care, whatever the cost, to whoever needs it. And patients such as Rafael Guerrero, with high-cost, life-threatening disorders, are expensive to care for.

County officials assert that the system provides medical care at a competitive cost. Executive and physician pay is generally lower than in the world of private health care. The hospitals rely heavily on residents--physicians in their final years of training who are paid a fraction of a full physician’s salary. Buildings are older and in some cases in dire need of replacement. The problem is a lack of dollars coming in, not a sudden hemorrhaging of dollars spilling out, the officials say.

“The public needs to understand . . . that this department is not a bureaucratic bunch of buffoons,” said Don Petite, chief financial officer for the county’s Department of Health Services. “We are competitive and we have kept costs down over the years, but the revenues are not there. . . . And any time we try to curtail services we’re prevented from reducing services by the courts.”

Petite and other county health care executives point to statistics showing that the average cost per hospital day for a county patient is well below that of comparable hospitals in the state. Yet several of the hospitals used in the comparison listed, such as White Memorial and Brotman medical centers, had significantly lower costs than the county.

Still, the county hospitals’ average cost for the 1994 fiscal year was $1,259 a day compared to $1,224 for all hospitals in the state.

However, analysts--inside and outside the county health bureaucracy--warn that those numbers may be misleading. Computing the cost of care--and the efficiency or wastefulness of a hospital or clinic--is a complicated business. Comparing hospitals of different size and specializing in different sorts of care is even trickier.

“Average cost per day doesn’t take into account the mix of patients,” said Gerald Kominski, associate director of the UCLA Center for Health Policy Research.

David Langness, vice president for communications of the Healthcare Assn. of Southern California, calls it “one of the worst measures of hospital costs.”

Hospitals that provide a lot of relatively low-cost services, such as normal deliveries, will have lower average costs than hospitals that specialize in high-price procedures, such as heart surgeries and hip replacements. And what counts is the total cost for a hospital stay, not the daily rate, because some hospitals keep their patients longer than others for the same illness.

A more sophisticated study of hospital performance, by the accounting firm KPMG Peat Marwick, found that hospital costs for Medicare patients in Southern California were generally below the national average, after taking into account the mix of patients.

And costs at County-USC--the county facility with the largest number of Medicare patients--"are below the average costs of the Los Angeles marketplace,” said Michael Hamilton, the firm’s national director for health care practice.

The firm’s 1995 Guide to Hospital Performance shows costs for treatment billed to Medicare at the three largest county hospitals to be well below those at a sampling of privately run hospitals in the area.

Still, health czar Margolin believes that the county’s massive system of public hospitals and clinics is not doing all it can “to bring down costs and operate in the most efficient manner possible to deliver the most care for each dollar.”

He is carrying out a plan to contract out the operation of the county’s clinics to private medical groups to bring down costs and raise revenues. “You provide incentives in a small organization that the county has a hard time doing with this massive system that isn’t structured to do that,” Margolin said.

When the nonpartisan state legislative analyst’s office looked at the county’s financial problems, it complained that in many county departments, “employee salaries have increased faster than inflation since 1988-89.” In many cases, employees got pay increases above the 20% rise in the consumer price index for Los Angeles in that period--some as high as 34%.

In July, shortly after the report appeared, Sally R. Reed, the county’s chief administrative officer, shot off a rebuttal, pointing out that the average increase for county employees was 19.5% and that 90% of county workers had received no increase for the past two years. Some of the biggest pay increases went to firefighters and law enforcement officers.

But many health professionals enjoyed substantial increases--nurses were at the top of the chart with 34% pay raises. Physician salaries rose a little more than 20%. By comparison, most state government employees received 25% pay increases over the same period.

Various county salary surveys show that the pay for a county nurse is higher than pay in the private market; physician pay is below. Doctors’ salaries “appear to be consistent with those paid by other public agencies,” Reed concluded last year. But county doctors are generally better paid than their counterparts in state service.

The report did not take into account that the top physicians at the county’s six hospitals are faculty members at medical schools--receiving added pay for their teaching services. These doctors may also be earning additional pay from private practices they are allowed to maintain on the side.

Faced with a growing health care crisis, the county auditor-controller conducted a critical review of the Department of Health Services this spring. The study found that the county’s hospital costs per patient admission were generally less than at comparable hospitals.

But one unexplained finding was a wide range in costs from one county-run hospital to another.

For example, the cost of surgical intensive care averaged $126,000 per patient at County-USC but only $25,000 at Martin Luther King Jr./Drew Medical Center.

There were also vast and unexplained differences in costs among the county’s outpatient clinics. The Long Beach comprehensive health clinic reported average costs per patient visit of $163--66% higher than the lowest-cost clinic.

Change is difficult in a system so large--and complicated by relationships with three separate medical schools that provide teaching faculty and residents at the county hospitals.

One internal critic of the system, Dr. Sidney Wechsler, charged that there is “a whole thick wad of administrative overhead that has grown more than necessary over the last 10 or 15 years.”

Wechsler, a USC professor, is chief of ambulatory services for women at Women’s and Children’s Hospital, part of the County-USC complex. He complains of costly inefficiencies in a system that he described as “not physician-driven. It is bureaucratically driven.”

He complained that as patients move from county-run clinics into the hospital, their records do not always follow them--requiring a duplication of costly tests and delays in treatment. Nor do the doctors in the clinics follow their patients when they are hospitalized, as they would in private practice.

But changing the system is difficult. “People are almost getting in the way of decision-making,” he said.

Others see the problem as primarily economic: The county is locked in a constant struggle for revenue and lacks the money needed to make the system run more efficiently. For example, the county spends $2 million a year for “fire watchers,” who walk the corridors of County-USC night and day because the aging hospital has no sprinkler system. That is cheaper than installing a new system in a building that is scheduled for replacement. But whether the county can afford the $1 billion-plus needed for a hospital less than half its present size is uncertain.

Dr. Stanley Klein, who started the trauma center at Harbor-UCLA Medical Center in Torrance, says the county provides vital but expensive services that an increasingly cost-conscious private sector will not be able to replace.

“Yes, it is true that large bills are run up [to care for trauma patients],” Klein said. “It is the safety net for the entire community. Trauma knows no anatomical boundaries and it knows no geographic boundaries.”

Seventeen-year-old Nicole Terrones learned that lesson on a bright morning in mid-July when she and two friends were driving down a hill in San Pedro on their way to an iced cappuccino and slammed head-on into another car.

Within minutes, the paramedics were rushing her to the trauma center at Harbor-UCLA. Although she was wearing a seat belt and complained only of a backache, the trauma team immediately knew something was terribly wrong--her skin was far paler than it should have been. At Harbor, doctors quickly realized that Nicole was rapidly bleeding to death from internal injuries.

After hours of surgery and 100 units of blood products--the equivalent of five complete blood transfusions--surgeon Klein and his team had removed her spleen and a third of her liver and had stopped the bleeding.

The bill for surgery: $21,839. The first day in intensive care cost an additional $5,833.

Unlike other hospitals, the county facilities do not itemize their bills. That is because of an antiquated computerized billing system that county officials say is too costly to replace when government agencies that provide most of the payments the county receives do not require it. Nicole’s charges were based on average costs of patient care.

But enough detail is available to show a multitude of X-rays of chest and spine and numerous blood tests the first day.

That was only the beginning. Two days later, Nicole would undergo a second round of surgery to remove the packing around her internal organs. The bill for the second operation: $8,739.

Before she was released to another hospital 12 days later, her bills would total more than $90,000.

Her family was well insured, which is not uncommon for accident victims who turn up at Harbor--the top-level trauma center for the southwest corner of the county.

Back on her feet in time to begin her senior year in high school, Nicole doesn’t hesitate when asked the value of the county hospital’s trauma unit: “If it wasn’t there, I wouldn’t be here.”

But the financial crisis has raised questions about the future of all county facilities. It would be difficult for all but a few private hospitals to duplicate the range of specialties available at Harbor-UCLA 24 hours a day, said Dr. Fred Bongard, chief of the hospital’s trauma service.

“There is virtually nothing we can’t take care of at this hospital,” he said. “It’s folly to dismantle an institution like this and re-establish it somewhere else. It’s inane.”

Rosalva Guerrero, mother of Rafael, who commutes every day from the San Fernando Valley to be with her son, worries about the future of County-USC, which for her and her son has become a second home.

“I hear they want to close this hospital,” she said. “Where are we supposed to take the child? I’m really afraid to go to some other hospital. We’ve had some of these doctors since he was a baby. The doctors and the support staff are like my family.”


About This Series

In this series, 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.

* Sunday: 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.

* Today: 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.


Critical Source of Payments

Payments from Medi-Cal, the state and federally funded health coverage for low-income patients, are the life’s blood of the county’s health system. All six county-run hospitals rely heavily on Medi-Cal patients to help cover their costs. Increasingly, many private hospitals depend on Medi-Cal as well. A sampling:



High Desert: 69%

Rancho Los Amigos: 61%

Olive View-UCLA: 58%

King/Drew: 55%

County-USC: 54%

Harbor-UCLA: 49%


Queen of Angels/Hollywood Presbyterian: 54%

St. Francis: 49%

White Memorial: 46%

Huntington Memorial: 17%

Santa Monica: 8%

Cedars-Sinai: 7%


Insured and Not

The county-run hospitals must take every patient who needs care, regardless of ability to pay. Here’s how public hospitals differ in terms of the patients they serve.

For the six county-run hospitals:

Medicare: 5.1%

Medi-Cal: 55.3%

Insurance and self-pay: 9.4%

Indigent: 30.2%


For all hospitals in L.A.County

Medicare: 34.0%

Medi-Cal: 28.5%

Insurance and self-pay: 31.8%

Indigent: 5.7%

Source: Office of Statewide Health Planning and Development (figures for the full year ending March 31, 1995)


County-Run Hospitals

Los Angeles County runs six public hospitals as part of the nation’s second largest health delivery system. They are:


Patient dis- Hospital Location Licensed beds charges per year* Los Angeles County-USC Los Angeles 2,045 59,079 Rancho Los Amigos Downey 727 4,606** Harbor-UCLA Torrance 553 24,194 Martin Luther King Jr. Los Angeles 513 20,044 Olive View-UCLA Sylmar 377 16,161 High Desert Hospital Lancaster 170 1,718


* Patients discharged in the year ending March 31, 1995

** Hospital has long-term stays

Source: Office of Statewide Health Planning and Development, 1992 Profile of Hospital Patients


Seriously Ill

Because county-run hospitals admit a greater proportion of emergency room patients than do private hospitals, analysts say, patients in county-run hospitals are sicker.

PUBLIC HOSPITALS: % of admissions from emergency room

County--USC: 67%

Harbor-UCLA: 63%

King/Drew: 40%

Olive View-UCLA: 38%

PRIVATE HOSPITALS: % of admissions from emergency room

St. Francis: 32%

Long Beach Memorial: 27%

Cedars-Sinai: 24%

Huntington Memorial: 23%


Comparing Medical Costs

A 1992 comparison of some common medical procedures shows a wide disparity in charges per stay at hospitals in Los Angeles County.


Childbirth (uncom- Hip plicated Hospital Appendectomy Replacement delivery) County Hospitals County-USC $5,325 $26,331 $2,747 Harbor-UCLA $4,681 $14,998 $2,006 King/Drew $6,440 $20,287 $2,583 Private Hospitals California Hospital $8,473 $26,282 $3,848 Cedars-Sinai $9,781 $34,654 $4,587 Long Beach Memorial $5,913 $19,849 $3,077 Queen of Angels/ Hollywood Presbyterian $8,593 $32,845 $2,589 UCLA Med. Center $7,157 $37,313 $5,053 Countywide Average $6,640 $27,199 $3,013

Heart Attack (without compli- Hospital cations) County Hospitals County-USC $18,202 Harbor-UCLA $13,941 King/Drew $18,607 Private Hospitals California Hospital $9,197 Cedars-Sinai $19,309 Long Beach Memorial $15,907 Queen of Angels/ Hollywood Presbyterian $16,238 UCLA Med. Center $15,204 Countywide Average $13,702



Highest Cost per Procedure


Childbirth Heart Attack (uncom- (without Hip plicated compli- Hospital Appendectomy Replacement delivery) cations) Private Hospitals Cedars-Sinai $9,781 $19,309 UCLA Med. Center $37,313 $5,053



Lowest Cost per Procedure


Childbirth Heart Attack (uncom- (without Hip plicated compli- Hospital Appendectomy Replacement delivery) cations) County Hospitals Harbor-UCLA $4,681 $14,998 $2,006 Private Hospitals California Hospital $9,197


Source: California Hospital Discharge Data, Office of Statewide Health Planning and Development, 1992