A Bitter Competition for Medi-Cal Patients : Health: County says crisis is fueled by private hospitals that lure the people and the financial bonuses that now accompany them.


The billboard directly across from Women’s and Children’s Hospital urges pregnant patients receiving prenatal care at the county-run facility to deliver their babies at a private hospital less than a mile away.

The sign for White Memorial Medical Center shows a healthy, round-cheeked baby under a caption in Spanish: “With Medi-Cal, Mama and I have a private room.” Left unsaid is that at the aging county hospital across the street, most new mothers find themselves two or even four to a room.

A White Memorial spokeswoman says the billboard is part of a neighborhood-wide ad campaign to inform residents of the availability of services at her hospital.

But to county officials the in-your-face billboard is just one irritating sign of private hospitals’ attempts to lure relatively low-cost, high-revenue Medi-Cal patients away from public facilities.


This increasingly bitter competition for patients has contributed to the financial problems of the county’s health care system, which is being scaled back in response to a crushing budget deficit.

The county has lost out on more than $100 million a year in special bonus money to private hospitals who have increased their share of Medi-Cal patients.

“I think it is predatory,” said Don Petite, chief financial officer for the county’s Department of Health Services, referring to White Memorial’s billboards, which surround the county hospital complex. “It’s an attempt by White and other hospitals to bring in additional Medi-Cal revenue.”

That was cash, Petite says, that the county depended on to take care of uninsured patients--often the working poor--who do not qualify for government programs and have no medical coverage. Unlike the county, the private hospitals “aren’t using the money to take care of indigent patients,” he said.

The private hospitals offer free infant car seats, tote bags and special dinners in addition to private and semi-private rooms as inducements because pregnant women represent “guaranteed payment,” said Maria Elena Sanchez, administrator of women’s and children’s services at Los Angeles County-USC Medical Center.

Yet just a few years ago, these were the patients nobody wanted. Medi-Cal, the state and federal program for qualified low-income patients, did not pay enough and did not cover illegal immigrants.

As a result, in the late 1980s, county facilities such as Women’s Hospital, which are required to serve all residents regardless of ability to pay, were so swamped with pregnant patients that some women were giving birth in the corridors.

No more. After considerable publicity in the 1980s about the plight of overburdened public hospitals caring for Medi-Cal patients, state and federal agencies came to the rescue. Today, thanks to laws giving hospitals substantial financial bonuses for taking Medi-Cal patients and paying for prenatal care for undocumented immigrants, private facilities have started enticing pregnant women into their programs. And their success has gravely wounded the county’s public health delivery system.

For the private hospitals the new competition is part of a struggle for survival. There are too many empty hospital beds in Los Angeles County--most private hospitals hover around 50% occupancy. Those unable to compete are likely to shut down, said James T. Yoshioka, president and chief executive officer at California Hospital Medical Center in central Los Angeles.

The private hospitals such as Yoshioka’s, which generally offer more amenities to patients, are bound to win the competition, he said.

“Patients would rather come here,” he said. “We have semi-private rooms. We have a TV in the room. Maybe the food’s better. We’re getting down to choices, and when the Medi-Cal patient has a choice of going to the county or coming here, they come here.”

County officials contend that this movement of patients--and the loss of the substantial revenue that goes with them--has been a primary contributor to the financial squeeze that has threatened to destroy the Los Angeles County health care system.

One result is to give Medi-Cal patients--particularly pregnant women--many more choices than they had five years ago, county officials say. But the private hospitals do not share the county’s commitment to care for the uninsured poor. They “skim off” or “cherry-pick” those covered by Medi-Cal and other paying patients and leave it to the county to care for high-cost patients and those without any health coverage.

And the county’s money problems are expected to get worse as more private hospitals qualify for a state and federal program that gives bonuses to hospitals that serve a “disproportionate share” of Medi-Cal or other low-income patients.

To be eligible, at least 43% of a hospital’s patients must be enrolled in Medi-Cal. A hospital also qualifies if its Medi-Cal payments and charity costs add up to 25% or more of its total revenue.

Hospitals that meet one of the standards can expect a sizable windfall of state and federal cash--hundreds of dollars in additional pay for each day a Medi-Cal patient is hospitalized.

Share of Payments

Suburban Medical Center, a 184-bed, for-profit hospital in Paramount, first qualified for the “disproportionate share” payments in 1993. Over the last two years, that has meant an additional $14.5 million in Medi-Cal bonuses, according to state Department of Health Services figures.

Since 1991, the number of private facilities in the county that qualify for the bonus cash has increased from 14 to 37 hospitals. Together, these hospitals are taking a substantially larger piece of the available money.

But the private hospitals’ gain has come at the county hospitals’ expense. The amount of bonuses collected by the six county-run hospitals has plummeted from $387 million in 1991-92 to $253 million last year. This year the county is expecting less than $100 million.

Executives at private hospitals insist that they do their share for the poorest of the poor by treating them when they show up at their emergency rooms.

Indeed, federal law prohibits hospitals with emergency rooms--private or public--from turning away patients based on their inability to pay. As a result, private hospitals must provide emergency care for patients without government coverage or insurance.

However, county officials contend that virtually every private hospital emergency room in the area regularly transfers non-paying patients as quickly as the patient can be moved to a county hospital--leaving the taxpayers to pick up the high costs of continuing care.

Last year, the five county-run acute care hospitals received more than 16,000 transfer patients from private hospitals--more than 4,000 of them from hospitals that receive “disproportionate share” bonuses.

Because of that Medi-Cal bonus money, these hospitals should have an obligation to admit and care for patients without any ability to pay, said Dr. Sam Stratton, medical director for the county’s emergency medical service, which coordinates and monitors the transferring patients.

“Some of these hospitals get considerable amounts of money” from Medi-Cal, Stratton said, “and they should be able to care for a number of patients who are otherwise coming to the county.”

Stratton described one of those patients: a 62-year-old diabetic woman with a potentially life-threatening infection in her elbow.

The woman, an uninsured child-care worker and housekeeper, was initially seen by her private doctor, who sent her to the emergency room of a private hospital. Over the next several hours, the emergency room staff did the necessary tests and began treatment, an intravenous drip of the extraordinarily expensive antibiotic needed to fight her severe infection.

The hospital, which Stratton asked not to be identified, is one of the private facilities that receives a “disproportionate share” bonus of more than $400 per day for each Medi-Cal patient hospitalized in addition to its usual Medi-Cal payment.

But because the woman with the infected elbow did not qualify for Medi-Cal, the hospital would not admit her as a regular patient, Stratton said. Instead, the staff ordered her moved by private ambulance to the nearest county hospital.

The woman was treated for eight days in the county-run hospital, at a cost of $30,000, Stratton estimated. Under county policy, she will be billed according to her ability to pay--probably a few hundred dollars. The county treasury will pick up the rest.

Stratton said the patient is just one of thousands refused treatment by private hospitals and saved by the county’s medical safety net.

Private hospital officials counter that patients such as these have been a county obligation since 1982, when the state dropped Medi-Cal coverage for a large category of poor people--the medically indigent--shifting responsibility to the counties.

Because private hospitals receive no money for the indigent, there is “no incentive to take that patient,” said Sister Margaret Keavaney, president of St. Francis Medical Center in Lynwood. “We don’t think that’s justice, for the doctor who cares or for the hospitals.”

Keavaney, who chairs a group lobbying for private hospitals called Private Essential Access Community Hospitals, says the state should provide funding to cover the cost of indigent patients and that government money should follow the patients.

“The only true charity care is done in the private sector,” she said. “We don’t get reimbursed.”

Keavaney and other private hospital executives say that in the new, more competitive world of health care, private hospitals must run their operations like businesses. And that means transferring non-paying patients to the county when possible.

Changes in Medi-Cal

Private and public hospitals did not always battle for Medi-Cal patients as if they were disputed territory in a military campaign. The combat was the result of several changes in the Medi-Cal program. In 1986, Congress for the first time agreed to cover the cost of emergency care for undocumented immigrants including mothers showing up at emergency rooms for delivery. The state agreed to pick up the cost of their prenatal care as well.

In the early 1990s, many states began taking advantage of an obscure provision of federal law providing bonus money for hospitals that take more than their share of government-paid and other low-income patients--the “disproportionate share” hospitals.

Employing ingenious accounting devices and in some cases dubious gimmicks, many states, including California, were able to come up with the required state matching money without spending extra funds of their own.

Some enterprising states, such as Massachusetts, West Virginia, New Hampshire and Louisiana, pushed the program to its limits, drawing hundreds of millions of federal dollars and using the money to pay off sizable state budget deficits. Congress, worried about a growing federal budget deficit, cracked down and imposed limits on how much money each state could receive.

Now the public and private hospitals fight for their share of a fixed $2.2 billion pot--with Sacramento taking an increasing share to help close the state’s gaping budget deficit.

The competition for Medi-Cal patients and the bonus money they bring is only “the first battle in the war” for hospital survival, said California Hospital’s Yoshioka. “In the end I don’t think the private system and the county system can coexist.”


The Battle for Medi-Cal Money

When the government began providing extra money for hospitals with a disproportionate share of Medi-Cal patients, private hospitals began to woo them in order to qualify. As a result, private hospitals now take a larger share of these patients and a larger share of the bonus money. Although the program has given Medicaid patients more choices for hospital care, the county’s decreasing share of that bonus money is one reason for its health care crisis. Here is a comparison of how the money, which was essentially an equal amount, was divided before the change and then this year.


14 private hospitals ($98 million)

6 public hospitals ($387 million)



25 private hospitals ($230 million)

6 public hospitals ($253 million)

Source: State Department of Health Services