County Health System Bailout Gets Final OK

The Clinton administration granted final approval Monday of a $364-million bailout for Los Angeles County as part of a five-year effort to transform the nation’s second-largest public health care system from heavy reliance on hospital treatment to an emphasis on community-based preventive care.

U.S. Health and Human Services Secretary Donna Shalala delivered the long-awaited word that the county’s request to become a national demonstration project for health care reform had been approved.

That was welcome news to county supervisors who gambled last summer that a last-minute infusion of federal aid could avoid hospital closures and even deeper cuts in the health care safety net.

“We are very grateful to the president,” said Supervisor Yvonne Brathwaite Burke. “We’re going to do what is expected of us. We definitely intend to keep our commitments.”

Those commitments, embodied in the county’s request for a waiver of federal Medicaid rules, involve significantly downsizing the county hospital system by eliminating at least one-third of its beds and privatizing two of its smaller hospitals.

At the same time, the county promised to expand by 50% the amount of outpatient primary care services that are provided to poor people and those lacking health insurance.

With the waiver approved, county officials now face the challenge of actually remaking the county’s $2.3-billion-a-year health system.

Jim Lott of the Healthcare Assn. of Southern California, which represents mostly private hospitals, said county supervisors made “a lot of promises” in the waiver. But it remains to be seen, he said, whether they have the political will to downsize the system.

“The supervisors will have to allow that to happen, even if it means taking services and jobs out of their districts,” he said.

Final approval of the waiver came almost seven months after President Clinton announced in Santa Monica that the federal bailout would prevent the closure of County-USC Medical Center and the shutdown of clinics amid the county’s worst-ever fiscal crisis.

County Health Services Director Mark Finucane readily acknowledged that “along with the $364 million come very, very high expectations” that the county will “aggressively move into the outpatient world.”

The 300-page waiver document submitted last month to federal officials by the county and state offers a broad vision of how the county’s hospital-heavy system might be restructured.

The plan calls for reducing the number of hospital beds from 2,595 to 1,719 by eliminating some beds at the county’s four major hospitals and privatizing High Desert Hospital in the Antelope Valley and Rancho Los Amigos Medical Center in Downey.

At the same time, the county would expand its primary care services in outpatient community clinics. But precisely how and where this will be accomplished still is being studied.

E. Richard Brown, director of UCLA’s Center for Health Policy Research, sounded a note of caution, saying the restructuring might be derailed by bureaucratic resistance.

“The main obstacle is the county’s lack of experience in running a system focused on primary care and prevention, rather than emergency rooms and [hospital] inpatient services,” Brown said.

The waiver approach was conceived last summer when the health system had an enormous $655-million budget deficit, and the supervisors were faced with harsh choices about closing hospitals and cutting services.

After agreement was reached in September on the outlines of the waiver, the supervisors were able to avoid the most severe cuts.

Nonetheless, the budget cuts resulted in the biggest layoff in the county’s history, costing the jobs of more than 2,500 health workers, including doctors, nurses and lab technicians.

It took multiple lobbying trips to Washington by some supervisors and former county health czar Burt Margolin, plus the direct intervention of the White House to finalize the agreement.

Clinton administration officials insisted that the waiver will be “budget neutral”--that it will not cost the federal government any more than the county’s health program would have cost without the exemption over the next five years.

But a recent report by the U.S. General Accounting Office, the watchdog arm of Congress, warned that the cost of such waivers “could grow significantly.”