State, U.S. Politics May Impede Hospital Building Plan

As a bitter campaign between two rival Ventura hospitals enters its final weeks, political moves in Sacramento and Washington have raised new questions about who will pay for a proposed $56-million wing at Ventura County’s public hospital.

The reliability of state and federal money pledged to the project has emerged as a central issue in the fight between private Community Memorial Hospital and public Ventura County Medical Center.

In the latest development, the chairman of the Assembly Health Committee said in an interview last week that he will push to kill funding that would provide at least $27 million to the Ventura project.

“If the voters of Ventura County want to take on that obligation 100%, go ahead. But if they’re counting on the state to come in and pick up half the tab, just plain don’t,” said Assemblyman Brett Granlund (R-Yucaipa), a leader in the Republican majority of the state’s lower house.

Ventura County supervisors approved the new five-story hospital wing last year as a onetime opportunity to replace a hodgepodge of dilapidated, abandoned clinics without draining local coffers. But Community Memorial, claiming unfair competition for patients, has blocked construction by qualifying a referendum for the March 26 ballot.

Under Measure X, voters will decide whether the county can sell $51 million in bond-like certificates to cover much of the cost to replace the clinics and the kitchen, laboratory and other facilities at the county medical center. The rest of the money would come from county hospital reserve funds.

Granlund’s Health Committee will begin hearings Friday on how the state can shed some of at least $2.1 billion in construction obligations to 30 hospitals in the program that Ventura County is relying on as reimbursement for at least half the costs of its new wing.

These projects will contribute to the existing oversupply of hospitals and medical facilities statewide, Granlund said. And in some cases, they apparently would help public hospitals go beyond their statutory roll as providers of last resort and to compete with private hospitals for insured patients such as county employees, he said. The Ventura County facility treats 2,700 county employees.

“The key question is, are they competing?” Granlund said. “In principal, that is wrong.”

Ventura County officials say they have no intention of competing with private hospitals, and insure their own employees because it saves money for both. Frank Schillo, chairman of the Board of Supervisors, has even offered to sign a noncompetition agreement with Community Memorial.

Yet, Democratic Assemblyman Martin Gallegos (El Monte), vice chairman of the Health Committee and supporter of the hospital projects, said conservative political trends away from government-provided health care suggest that Granlund could be successful.

By a change of law, the Legislature could block promised hospital reimbursements, which are appropriated in the budget each year as debt payments require.

“I would say the [hospital construction funding] is clearly in peril, and any of these projects are on very thin ice at this point,” Gallegos said.

An Assembly bill limiting hospital construction also would have to pass the state Senate, where Democrats still hold a slight majority. But Sen. Diane E. Watson (D-Los Angeles), veteran chairwoman of the Health and Human Services Committee, said the Senate is also rethinking health care obligations because of proposed federal cuts.

“Everything is on the table,” Watson said. “It’s not a given that we’re going to accept everything that’s in the [hospital construction] pipeline. We’re going to look at it.”

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Sen. Cathie Wright (R-Simi Valley), whose district includes most of Ventura County, said she supports the new hospital wing. And she said she would probably fight efforts to exclude Ventura County from the construction program.

“I will fight for these dollars if everything is in line,” she said. “Everything you do in this day and age really is a gamble, but sometimes you have to take it.”

State Sen. Jack O’Connell (D-San Luis Obispo) in whose district the Ventura County hospital is located, has not taken a position on the issue.

The positions of legislative leaders are important because in the months ahead, state lawmakers may end up with more say in how to spend money from Medicaid, the nation’s health care program for the poor. Such federal money makes up about two-thirds of the state’s $16-billion Medi-Cal budget.

The Medicaid budget passed by Congress last fall, but vetoed by President Clinton, would have provided grants to the states with no strings attached, unlike the current system where states follow federal spending mandates.

Analysts say a final federal budget--not expected for months--could give states more freedom, a proposition endorsed recently by the nation’s governors. That would allow the Legislature to divert federal hospital construction money to other uses.

Under Clinton’s proposed budget, money would still be designated for hospital construction, but at significantly reduced levels.

Over the next seven years, the congressional plan would cut $133 billion from increases previously anticipated in Medicaid, the Clinton plan, $59 billion.

“If the Republicans and the governors have their way, all bets are off as far as getting funds earmarked for these institutions,” said Rep. Henry A. Waxman (D-Los Angeles), who was chairman of the House health subcommittee for 15 years. “Even if President Clinton prevails, there will be less money.”

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Despite such uncertainty, California would probably have to honor its pledges to 24 of the 30 hospitals that have already sold bonds or built facilities based on state promises of reimbursement, said Jack Toney, chief of the Medi-Cal Operations Division in the state Department of Health Services.

“We can’t guarantee anything. But if we’ve already accepted the project and they’ve begun, I don’t know how we could change that,” he said.

Other officials also said they do not think big changes are in store for the construction program.

“As long as Medicaid or something similar to it stays in existence, I can’t imagine this program not being funded,” said Bruce Beland, staff counsel in the state Department of Health Services for Medi-Cal. “I think you have a very good expectation that the money will come.”

But according to Toney and Beland, Ventura County’s project is one of six that may be considered in a different legal light.

They are in a second tier of qualified hospitals because they have not yet made a long-term financial commitment through bond sales or construction. Ventura County has spent just $2.5 million, mostly on plans.

“Is there a difference in status? Yes. Is there risk there? Maybe,” Toney said. And Medi-Cal lawyer Beland said: “The Legislature made this offer, and theoretically the Legislature can make this offer go away.”

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Pierre Durand, director of the Ventura County Health Care Agency, acknowledged the county’s precarious position. But he blamed the delays on a Community Memorial lawsuit in 1994 and the ballot referendum primarily sponsored by the rival hospital.

“The other counties are ahead of us,” Durand said. “We suddenly have fallen behind due to all the roadblocks we have.

“That is a concern,” he said. “If a decision is made to cut the funds, and we have not gone out with the issuance of the [bonds], there is a possibility of losing funding. Sooner or later, this program will be closed even for those who have approval.”

Durand argued, however, that Ventura County’s second-tier status is only a temporary disadvantage that voters can fix by approving Measure X.

“We’re ready to go if we get approval from the voters,” he said.

The certificates could be sold within two months, long before the Legislature could change the law to exclude hospitals from the program, he said.

There may be problems with such a strategy. Granlund said he would try to block any hospital’s attempt to sneak through that window of opportunity.

But other legislators said that Ventura County’s position would be solid if it gets voter approval and quickly moves forward.

“It’s a legitimate argument,” said Assemblyman Phillip Isenberg (D-Sacramento), an expert on health care issues. “It’s not as if they haven’t been trying. They’re not sitting on their rights, dawdling. If you try, but your competitors file a lawsuit and screw you up, you’re in a different category.”

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Even if state and federal money were to vanish, Ventura County officials argue that the hospital project makes sense and voters should approve it, although the county’s net costs would increase from about $14 million to $45 million.

“With or without this funding, this is a viable financial commitment for this county,” Durand said. “It can still work.”

How the county hospital would make its annual payments on the $51 million (of the project’s $56 million cost) that is covered by bonds is another campaign issue.

Project supporters have insisted in ballot statements that the costs of the new wing are “completely covered” by state and federal funding and the hospital’s operating revenues.

But project opponents say local taxpayers will end up carrying the burden as state pledges evaporate. “Who will be left to finance this expensive project?” asks a flier mailed to registered voters recently. “The answer is simple--the Ventura County taxpayer.”

County officials say the flier is wrong. Even if promised government reimbursements were to disappear, no new taxes could be levied to pay off the debt without a two-thirds vote of the people.

But by the county’s own estimates, about $15 million would have to be siphoned over 10 years from its general fund--the budget that provides basic services such as police protection--to make up the funding shortfall.

“What we’d have to do is cut back in other areas in order to cover it,” said county Auditor-Controller Thomas O. Mahon, who wrote the ballot financial analysis of the project.

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Durand insists these extra costs should be compared to the price tag of the county’s only alternative: to continue to rent space for five clinics displaced from unsafe structures at the county medical center and other aging hospital facilities to be closed soon.

Rental costs and related expenses would total $132 million over 40 years, the life of the proposed new wing, county analysts project. That is about $87 million more than the county would pay for the new wing even without state money, once operational savings and hospital revenues are considered, they said.

Durand also argued that keeping county clinics scattered at a variety of locations--instead of in the new 105,000-square-foot wing--creates a hardship for patients.

“This decision is a no brainer,” Durand insisted.

But a Community Memorial consultant, lawyer John McDermott, said Durand hasn’t seriously considered the alternative his client recommends.

“Their analysis doesn’t make sense,” he said. “The system we think ought to be in place is contracting services out with physicians and hospitals throughout the county. There’s underutilized space throughout the county.”