Hospital Feud May Go On and On

Whatever voters decide in the battle over the proposed $56-million outpatient wing at the Ventura County Medical Center, the bitter feud between the public hospital and rival Community Memorial Hospital will very likely continue after the March 26 election.

Community Memorial has spent more than $864,000 in its sponsorship of Measure X, a countywide referendum that would kill the financing plan for the new, five-story ambulatory care center. The nonprofit hospital fears that the new building would be used to lure away its privately insured patients.

But with both facilities being squeezed by an ever-changing health-care economy--driven by low-cost managed care--there is every indication that the fight between the two hospitals for dwindling patient dollars will go on.

Some Community Memorial representatives said the county should stop its pursuit of private pay patients, shut down its public hospital and contract out for health-care services.

“Tomorrow they could contract with not only Community Memorial but with all private hospitals and physicians,” said John McDermott, an attorney for Community Memorial. “They don’t need to be in the business. They should get out of the business.”

Community Memorial trustee Donald Benton said that the two hospitals could coexist but only if they stick to their separate missions.

“There is room for a county hospital that takes care of the indigent,” Benton said. “But a community of 100,000 cannot support two full-service hospitals that get all the HMO and private pay patients.”

County officials say they are not trying to compete for private pay patients, noting that more than 80% of the public hospital’s patient population is either covered by Medi-Cal or is without insurance of any kind.

They argue that the county would lose control of health-care costs by contracting with other hospitals. Besides, officials say, the county already runs an efficient health-care system that includes seven satellite clinics. That reduces costs by emphasizing preventive care, they say.

“People criticize government for being inefficient and negligent,” said Pierre Durand, the county’s health-care director who is credited with rescuing the public hospital from bankruptcy eight years ago. “Now here’s a case where government is efficient, where it is run like a business so that it is cheaper for taxpayers, and they don’t like it.”

The next major source of contention is the county’s pursuit of a state license to set up its own managed health-care program, which could potentially be open to the public.

Community Memorial has sought to block the county’s Knox-Keene license application because it believes the taxpayer-supported program, functioning much like an HMO, would be used to compete with private hospitals for insured patients such as county employees.

“We will fight them wherever possible to prevent them from expanding,” McDermott said. “We will do whatever it takes.”

County officials said they are pursuing the managed care license not to attract private patients but to further reduce costs and to prepare for Medi-Cal managed care, a fast-growing state and national trend.

They contend that Community Memorial is simply looking for ways to shut down the county hospital system.

“Anything that allows the county system to run efficiently they’re going to challenge,” County Counsel James McBride said. “They’re going to fight us on everything we’re doing until our system’s back is broken.”

Durand, whose agency includes the public hospital, said a managed care license would allow the county to keep a lid on costs for the 2,700 county employees now enrolled in its health plan.

With the license, the county hospital could put a cap on the money paid to contract physicians by establishing a reimbursement plan based on the number of patients seen, Durand said. Under the current system, the county’s insurance program pays doctors a fee for every service provided.

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“It would reduce our level of expenses,” Durand said. “That to me is critical. It saves taxpayer money.”

A majority of county supervisors said they support pursuing the state license for exactly this reason. To ease Community Memorial’s fears, Supervisor Frank Schillo has even offered to sign a non-competition agreement with the hospital.

“Somewhere along the line we have to rectify the misunderstanding that Community Memorial has,” Schillo said. “They’re convinced that we’re trying to compete for private patients, and we’re not.”

Community Memorial officials said Schillo’s proposal would not be binding under a future board. They also point out that the county, under its managed care license application, is seeking to offer health coverage to contract employees who work in its satellite clinics.

County officials say providing health insurance for the contract clinic workers only makes sense.

“It’s kind of funny that somebody who works in a clinic cannot go there for care,” Supervisor Maggie Kildee said.

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But McDermott, Community Memorial’s attorney, said with Congress proposing to cutback Medicare and Medi-Cal funding, the county will be forced to seek more private patients to offset its losses for treating the poor and uninsured.

“They face an increasingly bleak picture,” he said. “There is no way financially they can stay in the health-care business without treating private pay patients. They can’t do it.”

This is why the new outpatient wing is so critical to the county’s long-term plans, McDermott asserted.

“Without a brand spanking new building, nobody wants to go to VCMC,” he said. “They need the new building to have any prospect to compete effectively to treat private pay patients.”

County officials deny the new building is meant to draw new patients. Instead, they say, the ambulatory care center is needed to replace several dilapidated, abandoned clinics. The new wing would save the county hundreds of thousands of dollars spent every year for rented clinic space and related overhead costs.

But Community Memorial has questioned the reliability of the state and federal money that the county is counting on to help pay for the project.

The Board of Supervisors last year approved the selling of $51 million in bond-like certificates to cover most of the costs for the new wing, which would replace several clinics and the kitchen, laboratory and other facilities at the medical center.

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At least $27 million of that would be repaid with state and federal grant money, with the rest coming from the county hospital’s revenues.

Community Memorial’s officials argue that the county can no longer depend on the construction money pledged to the project because of conservative trends in Sacramento and Washington.

In fact, Assemblyman Brett Granlund (R-Yucaipa) said recently that he will push to kill the money for the county project.

Granlund, who chairs the Assembly Health Committee, said the state cannot afford the $2.1 billion in construction obligations it has to 30 hospital projects.

“We can’t bankrupt the state,” he said. “We can’t leave the counties with a blank check to build hospitals that are not needed.”

Granlund recently held a special hearing in San Bernardino to gather information on how the state could get out from under some of its hospital debt.

“Now we need to take the information and determine if legislative or administrative action needs to be taken to correct this,” he said.

Durand, of the county’s Health Care Agency, acknowledged that the county is in a difficult position because of construction delays brought on by Community Memorial’s 1994 lawsuit against the county and its sponsorship of Measure X.

“Is there a possibility that the money will be cut?” Durand said. “Of course there is, the longer we take. There’s a limit to how long the state will wait.”

Yet Durand said he believes the county would still receive its grant money if voters approve Measure X. He said the county would be able to sell its certificates of participation within two months, before the Legislature could take action.

“No one has informed me that the state program has been canceled yet,” he said.

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But Granlund said he would try to block any hospital’s attempt to push its project through without further evaluation.

Meanwhile, Community Memorial officials said the county should not be allowed to sell the certificates of participation without a guarantee of reimbursement.

If state and federal construction money vanishes, they warn, county taxpayers would end up paying all of the debt service on the bond-like certificates.

Under the law, the county cannot not raise taxes to pay off such debt. But it could take money from its general fund to do so, which would mean cutting back on other basic government services, officials said.

The county estimates that about $15 million would have to siphoned off over 10 years from the general fund to make up for the shortfall.

Sen. Cathie Wright (R-Simi Valley), whose district includes most of Ventura County, said she strongly supports the county project and will fight for the county to get its share of construction money if Measure X passes. She said Granlund did not fully understand the county’s project and how it has been held up for two years by Community Memorial.

“I have to educate poor Brett,” she said. “This is what happens when you have a freshman in charge of the Health Care Committee. He doesn’t know all of the issues.”

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Wright said county hospital is not expanding as Community Memorial alleges in its campaign, but is consolidating clinics to save money on rent. She said the county project adds no new hospital beds.

The assemblywoman said if the county hospital were to close, Community Memorial is not going to step forward and take care of all of its indigent patients.

“If they want a contract with the county, why don’t they offer one?” she said. “They didn’t pour all of this money into the campaign to take care of poor patients with no insurance.”

Another legislator, Assemblyman Phillip Isenberg (D-Sacramento), an expert on health-care issues, said he is also confident that the county would receive state money for its project if it wins voter support.

Isenberg also questioned the appropriateness of a nonprofit hospital such as Community Memorial--which provides charity care and other community work in return for its tax-exempt status--to be waging such an expensive campaign against the county.

The hospital, which reported gross revenues of $127 million in 1994, spent $209,000 on charity care in fiscal 1994-95, according to reports filed with the Office of Statewide Planning and Development. And only about half of that actually went to direct patient care and educational health programs.

“For Community Memorial not to provide medical support of any substance to continue their tax exempt status is outrageous,” Isenberg said. “They ought to fill their empty beds with Medi-Cal patients, then they would be in the morally superior position.”

* PROS AND CONS

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