U.S. Bailout of County Health System Stalled

Five months after President Clinton promised $364 million to save Los Angeles County’s troubled public health system from collapse, the county has not finished a long-range plan to restructure its health system and already is seeking more money from Washington.

Traveling with the president in Los Angeles, White House Press Secretary Mike McCurry said Friday that Clinton still stands behind his commitment made in September to help the nation’s second-largest public health system.

However, McCurry added, “the problem is the county is projecting much higher costs; $364 million is not sufficient. The county and state would like additional funding.”

Although it could not be determined how much more money the county wants, the latest projections show that the health system faces a potential deficit as high as $168 million next year.

After countless telephone conference calls and numerous meetings in the months since September, the county has yet to provide a detailed outline of exactly how it plans to move away from reliance on expensive inpatient treatment at hospitals to less costly outpatient treatment at health centers and community clinics.

Sources say the county, which lags far behind the national trend toward preventive health care, has had difficulty presenting more than a general vision of what its restructured health system might look like. Urged by federal officials, the county has offered to provide goals and timetables for restructuring the system without specifics.

Officials say the money must arrive within the next two months or the county will once again face the extreme financial problems that threatened to drive it to the brink of bankruptcy last fall.

County Chief Administrative Officer Sally Reed said that if the $364 million does not arrive soon, “the impact on our cash flow would be significant and it would be fast.”

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Federal officials blame the county and the state for not submitting their formal request for a waiver of federal Medicaid regulations to move the county’s health system from an emphasis on hospital treatment to a focus on outpatient care.

For years the $2.3-billion county public health system has been plagued by a lack of leadership and has remained wedded to its six hospitals rather than shifting to more health centers and community clinics. Such problems have contributed to the inability to fashion a blueprint for restructuring.

In the absence of a detailed document, there has been no final agreement on the waiver, which is the key to unlocking the $364 million.

McCurry said the Clinton administration cannot make some of the changes sought by the county because of concern that it would set an expensive precedent for other areas that the federal government could not live with.

It was the president’s promise of $364 million that averted the possible closure of the nation’s busiest public hospital, County-USC Medical Center, comprehensive health centers and community clinics.

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Even so, the county, faced with its worst fiscal crisis ever, laid off 2,525 health workers last fall, including doctors and nurses, and dramatically scaled back outpatient services particularly in specialty clinics at its hospitals.

As the behind-the-scenes debate continues, some county officials are growing more concerned because county supervisors counted on the $364 million in their precariously balanced budget for the fiscal year that ends June 30.

Mark Finucane, the county’s new health services director, told the supervisors recently that failure to receive the money would have catastrophic consequences for the health system that he likened to a meteor hitting the county.

Finucane said in an interview Thursday evening that he expects the county and state to submit their waiver application to Washington next week.

He also expressed confidence that the county will receive the promised money. “I don’t think the $364 million is an issue,” Finucane said. “I don’t want to say it’s a given. I don’t want to jinx anything.”

The county’s former health czar, Burt Margolin, said the county is working with Wilson administration officials in Sacramento and the federal Health Care Financing Administration to resolve the remaining issues.

“We don’t have a problem yet,” Margolin said. “We are trying to work through with HCFA serious policy issues involving the restructuring of our system.”

Officials of the federal agency declined repeated requests for comment.

John Monahan, a top aide to Health and Human Services Secretary Donna Shalala, said the Clinton administration is “absolutely committed to the process of working with the county on both the fiscal issues they are facing and the restructuring.”

A senior White House official, who asked not to be identified, said the county needs to close a deal for one year and stop pressing for a five-year arrangement that would involve more money.

“We’re trying to get the $364 million done before sitting down to talk about the five years. They’d like to get everything at once,” the official said.

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“Clearly, they want some help with their long-term problem and we are trying to separate the two. We’re not going to mix the two. You can’t. They are totally different things. This was a deal done for one specific year and all of a sudden, it’s ‘Let’s talk five years.’ ”

The official said the $364-million aid package by itself is tremendously complicated and has encountered bumps along the way in the past five months. Adding to the difficulty is the budget battle between the Democratic president and Republican Congress over the size and shape of federal Medicaid programs for the poor.

The difficulty completing the waiver and releasing the money stands in sharp contrast to the Santa Monica Airport news conference in September, when Clinton announced that the nation’s most populous county “will not have to suffer the impacts of a crisis shutdown of county hospitals and clinics.”

Instead, the president said the $364-million package would move the county away from “its current reliance on hospital care to a system that emphasizes preventive and primary care.”

As grateful county supervisors looked on, Clinton said the package was structured around a “federal waiver that will allow the county to restructure its health care system in a rational and planned way.”

And he suggested that if successful, the transition could become a model for the nation.

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At the time, Clinton praised the biggest union representing county employees for its role in encouraging an agreement to save the health care safety net in Los Angeles from unraveling.

A leader of the Service Employees International Union, Local 660, said Friday the county needs to accept the $364 million before proceeding with lengthy negotiations for more federal funds.

“We think that it is incumbent on the supervisors to reach a conclusion to these negotiations now,” said the union local’s general manager, Gilbert Cedillo.

“We all want long-term solutions,” he said. “But you can’t refuse immediate remedies in lieu of long-term solutions, because you need to be around for those long-term solutions.”

Staff writer James Gerstenzang contributed to this story.