Streamlined Approach Key to San Diego Health System : Medicine: Some see its decentralized, limited-care strategy as wave of future. Other areas use different tactics.

As Los Angeles County officials struggle to rescue their bloated, bureaucratic and financially desperate public health system, they might want to look southward.

For a generation, San Diego County has made the sorts of cost-conscious moves that Los Angeles County is only now reluctantly considering in response to a crisis brought on by deep cuts in public funding.

Unlike their counterparts in Los Angeles, San Diego County officials have opted for a health care system that keeps the number of public employees to a minimum and instead stresses reliance on private sector and nonprofit groups. San Diego also insists on strict eligibility criteria for medical care and has curtailed services to illegal immigrants.

The San Diego County Department of Health Services does not operate a single hospital. Since 1966 it has had a contract with UC San Diego Medical Center to provide indigent care and emergency services. The backbone of the San Diego system is not a huge public hospital but a network of community clinics. The clinics are run not by the county government, but by nonprofit organizations that are seen as more efficient and economical.

Under the San Diego system, not all medical services are offered and not everyone is covered.

On the other hand, the San Diego system is not teetering on the edge of bankruptcy nor locked in political uproar and labor-management strife.

Joel Kotkin, public policy fellow with Pepperdine University and a senior fellow with the Pacific Research Institute, cites San Diego as the polar opposite of the big government, big bureaucracy approach to public health care used in Los Angeles and New York.

“As Los Angeles and New York begin to look at ways to fix their gaping budget shortfalls, the San Diego model possesses enormous appeal,” Kotkin wrote recently.

“We are the future,” said Roberta Feinberg, executive director of community clinics in the racially diverse Linda Vista section of San Diego.

Doing more with less. Working cooperatively rather than competitively. It is a mantra heard in health departments nationwide, particularly when discussion turns to public hospitals.

Once, public hospitals were the crown in the nation’s public health system. Now, they are often seen as millstones.

In New York, the city’s municipal hospital system--the largest in the nation and for decades the model for the rest of the country--is beset by a flood of uninsured patients, suffering from competition with private institutions and lacking strong leadership.

An advisory panel backed by Mayor Rudolph W. Giuliani has recommended that the city stop owning and operating its 16 hospitals and long-term health care facilities.

“New York City, which has borne a disproportionate share of the health care burden for the uninsured, can no longer bear the burden,” the panel said. As a first step, New York has put three public hospitals up for sale and bids are expected later this year.

“Municipal hospitals are under tremendous pressure and there is a new competitive environment out there,” said Christine Burch, executive director of the National Assn. of Public Hospitals.

Joshua M. Wiener, health policy analyst at the Brookings Institution in Washington, said, “Municipal hospitals are being squeezed in several directions and they will be squeezed even more.”

Out of this tumult, a wide variety of strategies for coping are emerging:

* Alliances are being forged with private health care facilities and medical schools to share costs and broaden the patient base.

* Some counties are opening additional clinics to draw new patients and modernizing existing buildings in an effort to attract a lucrative middle-class clientele.

* Giant, aging central city hospitals are being abandoned in favor of smaller, newer and more efficient medical centers supported by networks of community clinics.

* Some communities have formed independent authorities to oversee public health systems in an attempt to take politics out of decision-making and hasten efforts to cut red tape and labor costs.

* Tax dollars, such as sales tax revenues, have been set aside to keep hospitals operating in some counties--which use the funds to build a more businesslike management system.

* Still other counties, such as San Diego, have decided that there are limits to what their communities can afford and have chosen to offer a narrow menu of services--but in that way ensuring that they will have a financially viable health system and, hopefully, a fiscally sound local government.

Despite these efforts, authorities say no single model has emerged that promises to solve the public health crisis for all communities. And, hospital administrators warn, these innovative efforts are taking place in an uncertain environment.

Under legislation now being considered by the House of Representatives, hospitals could lose $8.6 billion in medical education subsidies and $7.1 billion for treating the poor--severely wounding virtually all public hospital systems as they search for a sound financial footing.

The struggle to provide public health care in such a risk-filled climate is intense, hospital administrators say, with only the fittest and most innovative in a position to survive.

James R. Knickman, vice president of the Robert Wood Johnson Foundation, specializing in health care philanthropy, said: “Perhaps 40% of the public hospitals will close in the next decade.”

In an effort to remain in the 60% that will stay open, public hospitals in a variety of large metropolitan areas--Seattle, Atlanta, Dallas, Miami, Chicago, San Diego and New York--are mapping their own unique routes to the future.

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Even before the Los Angeles budget calamity, the San Diego approach was being studied nationwide.

One reason the San Diego public health system evolved differently than that in Los Angeles is that San Diego has long believed that it is shortchanged by the state Legislature in health care funding, compared to Los Angeles and San Francisco--counties with more political muscle in Sacramento.

The San Diego County Board of Supervisors, armed with statistics showing a disparity in per capita funding, has even gone to court to seek more money from the state, to no avail.

But the meagerness of state support for San Diego is now seen as a blessing.

“Compared to Los Angeles, we have a lot to be thankful for,” said Dr. James Kyle, an administrator with the private Sharp HealthCare system and a medical correspondent for a San Diego television station. “We’ve never had the luxury of building a large county bureaucracy. We’ve been forced to work collaboratively with the private sector and do more with less,” he said.

“We realized a long time ago that government works best as the broker of services, not the provider,” said Supervisor Dianne Jacob. “In terms of health care, L.A. has been living fat and happy for a number of years while San Diego has been staying as lean as possible.”

The privatization of care extends to a network of outpatient clinics dotting the county. Instead of health clinics staffed with county employees, San Diego County has contracts with 21 nonprofit, community-based groups to run primary care clinics such as those managed by Roberta Feinberg.

The clinics are largely free of governmental red tape and administrative overhead. They can raise funds from a myriad of private and public sources. And they can utilize the services of volunteers, including doctors, without provoking protests from labor unions.

“The clinics hustle [for funding], no doubt about it,” said Tracy Ream, executive director of the Escondido Community Clinic, which has 55,000 patient visits annually. “We have our problems, but it is not the same as having an entire health infrastructure going down the drain like you have in Los Angeles.”

Clinics are run by staffs that are smaller and often paid less than would be expected at a clinic run by public employees.

“We have a lot of Peace Corps mentality here,” said Ben Wiggins, executive director of clinics in La Mesa, El Cajon and Lakeside. “That wouldn’t be available if we were part of a large structure.”

The county demands that the clinics rigidly screen patients to make sure they fit into the reimbursement categories--aged, blind, mothers with children, etc.--devised by the state and federal governments. Patients must meet a “medical severity” test to prove they are sick enough to need care and must pay at least a portion of their bills.

The county will not pay for aid to illegal immigrants under its contracts with the 21 community clinics. Illegal immigrants are still eligible for tuberculosis screening, immunizations and sexually transmitted disease testing at public health centers staffed by county employees.

And the community clinics are free to provide care for illegal immigrants as long as it is paid for by non-county funding. “We’ve never turned anyone away,” said Feinberg.

Two years ago, the Board of Supervisors also voted to stop paying UC San Diego Medical Center to provide emergency care for people who are in this country illegally. The supervisors said they could not abide spending money on illegal immigrants if it meant cutting services to legal residents.

The move, applauded by Gov. Pete Wilson, shifted the cost of emergency care for illegal immigrants from the county to the medical center. As a result, the medical center ran in the red for the first time in its history.

Now, House Speaker Newt Gingrich (R-Ga.) has proposed a bailout plan for hospitals such as the UCSD Medical Center that provide emergency care for illegal immigrants.

While other health departments concentrate time and energy on public hospitals, the community clinics are given priority by the San Diego supervisors. Faced with a funding cut from Sacramento, the county this year opted to reduce payments to private hospitals and leave the clinics untouched.

Fran Butler-Cohen, executive director of the Logan Heights Family Health Center, often regarded as a model clinic, said the San Diego County system has enormous pluses in terms of controlling costs and bringing health care to the neighborhood level.

But it also has drawbacks, she said, including difficulty in providing some expensive medical specialties such as orthopedics and neurology and also the specter of people being forced to get sicker before they can pass the medical severity test for care.

“Our system is not optimum,” she said, “but it’s pragmatic.”

Other attempts at public health care pragmatism are being tried across the country:

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In Seattle the affiliation between Harborview Hospital and the University of Washington is cited as a model of a successful partnership between a public institution and an academic medical community.

“Visitors who come here don’t recognize this as a typical county hospital,” said hospital spokeswoman Tina Mankowski. “You think of people waiting in corridors for days to get care. It’s just not like that here.”

More than a decade ago when the liaison took place, the university agreed to place a variety of services at Harborview including trauma care, a burn unit, an epilepsy center and the school’s neurosurgery department. The move was designed to bolster the public hospital by offering a broad appeal to the entire community.

“It sends a hell of a message,” said Dr. Gilbert Omenn, dean of the School of Public Health and Community Medicine at the University of Washington, who notes that Harborview is designed to serve a far broader patient population than just the poor.

Although King County owns Harborview and names a board of trustees, it gives it no financial support. The 330-bed institution is managed by the university and funded by a combination of state, federal and private sources.

“We are probably unique in the country,” said Dr. Jim LoGerfo, Harborview’s medical director. “Effectively, we’ve had to make it on our own the past 20 years or so.”

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In Atlanta, Grady Memorial Hospital has worked aggressively to expand its patient base beyond a core of the poor, drawing cases from the more affluent suburbs and the rest of the state.

Grady operates the Hughes Spalding Children’s Hospital, seven primary care walk-in clinics in the city, the Georgia Poison Control Center, the Georgia Comprehensive Sickle Cell Center, the regional burn center, regional neonatal care unit for high-risk infants and a level one trauma center--one of only two in the state. It also runs Georgia’s largest nursing home. The broad mix has strengthened the public’s identification with Grady.

“It is true that we are here to provide services to the indigent,” said Edward J. Renford, president and chief executive officer of the Grady Health System, which operates the complex, “but the indigent are not the majority of our patients. The majority of our patients are those individuals covered by Medicaid and Medicare.”

Now the hospital is preparing to go toe to toe with its private sector rivals as it plans to reconfigure itself as a health maintenance organization.

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In Dallas, Parkland Memorial Hospital has been preparing for tough times for more than a decade by building itself into the kind of institution that the paying middle class and even well-heeled patients may want to enter.

The hospital created a network of community clinics stressing preventive care and, beginning in 1982, it refurbished facilities and strengthened medical specialties while money was still available.

“People see that the product we provide is a quality product not just for indigents but for the entire community,” said Ron Anderson, administrator of the Dallas County Hospital District.

“Public hospitals that work have to have a governing structure like a not-for-profit hospital,” Anderson said. “They have to be accountable to the community but not be whipsawed back and forth by political intrusion.”

A seven-member Board of Managers, appointed by Dallas County commissioners, oversees the Parkland system. The Board of Managers is composed of appointees from various areas of the county and includes a high school principal, a lawyer, a construction company chairman, a homemaker and a financial analyst. Their approach is to allow hospital administrators to do their jobs with minimal interference or involvement in any political agenda.

“We were able to put into place some things that worked at a time before things were desperate,” said Anderson. “We saw some of this coming and did strong strategic planning and community work. . . . I would hate now to have to start over. No one can survive in this climate without change and good strategic planning.”

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In Miami, it took a half-cent sales tax approved by voters to put the 1,500-bed Jackson Memorial Hospital on a sound financial footing. The tax generates $90 million a year.

“The half-cent tax has enabled us to operate more like a well-run business,” said hospital spokesman Mark Cohen.

The revenue allows the hospital to “take advantage of cash discounts offered by many of our vendors,” said Cohen. “Before the sales tax, poor cash flow meant that we were running six months late on accounts payable. Many vendors were demanding premium prices and/or cash in advance to provide necessary supplies and services.”

In keeping with its private sector approach, the hospital has aggressively cut costs and keeps a rigid policy of seeking reimbursement from patients for services.

“We have put the focus on controlling expenses,” said Cohen. “We have a private sector mentality. On Oct. 1, 1994, management asked to further cut the budget. The typical reaction in the public sector would be, ‘Let’s wait six months, cross our fingers and see what happens.’ We cut the budget by 3% across the board.”

Since October, 1993, Jackson Memorial’s staff has been reduced from 10,100 to 8,900 through attrition, early retirement and layoffs, resulting in a savings of $50 million a year. Overtime has been cut in half.

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In Chicago, venerable Cook County Hospital is being rebuilt, but on a smaller scale. The 80-year-old, 918-bed hospital complex of 13 buildings with a neoclassical facade will be replaced by a much smaller 464-bed acute care hospital that, as in San Diego, will be supported by a network of community clinics.

“The focus will be to do things in the community . . . pushing education and primary care into the community,” said Ruth Rothstein, director of Cook County Hospital.

Officials say the rebuilding, while expensive, will save money in the long run and provide a higher standard of care.

In 1990, Cook County Hospital lost its accreditation after serious code violations were discovered. The cost of clearing the violations and keeping the hospital free from further disciplinary action runs more than $20 million a year, Rothstein said. A study by Coopers & Lybrand forecast that replacing the hospital with the new health care network would save $440 million in the first five years of operation.

Also contributing to this story were Times researchers Edith Stanley, Doug Conner, Lianne Hart, Anna M. Virtue and John Beckham.

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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.

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

* Today: 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.

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Seeking Solutions

Here is a look at how other large cities are coping with their health care problems.

NEW YORK: Sell the public hospitals

New York City is considering dismantling its 11 hospitals and five long-term health facilities after years of mismanagement by the Health and Hospitals Corp. Three of its public hospitals are up for sale. Bids are expected later this year.

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SAN DIEGO: Private, nonprofit style

San Diego has no county hospital but instead contracts with UC San Diego Medical Center to provide indigent care and emergency services. The county’s network of clinics is run by 21 nonprofit, community-based groups that raise funds from private and public sources. Patients must meet a strict medical severity test for reimbursement and are required to pay at least part of their medical bills. For the last two years, the county has not paid UCSD to provide emergency care for illegal immigrants and the hospital is now running a deficit for the first time in its history.

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CHICAGO: Rebuild, refurbish, downsize

Chicago’s county hospital plans to replace itself with a smaller acute care facility and emphasize preventive care using a network of 20 community-based primary care clinics. A study has shown that the combination of a new, smaller hospital augmented by neighborhood clinics will save money.

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SEATTLE: Partnerships

Seattle’s county hospital formed a partnership with the University of Washington and its medical school, giving the hospital a high profile with the public and enabling it to get state, federal and private funding, including funds from the passage of bond issues. By positioning itself as a multi-state facility with a major regional trauma center, it draws patients from as far away as Alaska.

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ATLANTA: Broad, diversified services

Atlanta’s public hospital offers a broad mix of special services and walk-in clinics in the city that are of high enough quality to draw in not only Medicaid patients but also Medicare patients from the suburbs and all around Georgia. The hospital is now repositioning itself as a health maintenance organization.

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DALLAS: Independent leadership

Dallas’ public hospital was prescient enough to see that the nation might be headed toward universal health care and thus refurbished old facilities and built a network of community clinics stressing preventive care. Its strategic planning was made possible by its unique governing board-an appointed board of directors accountable to the community yet not part of the local political machinery.

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MIAMI: Raise taxes, cut costs

Miami’s county hospital receives the bounty of a half-cent sales tax. Along with the added tax revenue, the hospital has focused on controlling or cutting costs by bolstering its collection area, cutting the budget 3% and reducing staff through attrition, early retirement and layoffs.