Health System Gets an Extra $100 Million

Los Angeles County got a welcome $100-million surprise Friday when Gov. Gray Davis tacked that amount onto a new federal aid package for the county’s ailing network of public hospitals, bringing the recovery package to $250 million over two years.

The unexpected development unfolded after U.S. Health and Human Services Secretary Tommy G. Thompson formally announced an agreement between federal and state officials that will bring as much as $10 billion over the next two years to 250 hospitals throughout California.

As a condition of that deal, Thompson required that at least $150 million be directed to Los Angeles County, on top of the $2 billion it would normally receive in the two years.

Davis then pledged to divert an additional $100 million from the federal aid package to the county over the same period, prompting cheers from an assemblage of local, state and federal officials at Childrens Hospital in Los Angeles.

The money, which can be spent as the health department sees fit, buys more time for the county to escape from what Thompson referred to as a “death spiral.”

Thompson praised state officials and the county’s congressional delegation and Board of Supervisors for “their energy and tireless effort” in negotiating the agreement.

“They’ve worked extremely hard and they’ve come to a very equitable deal,” he told The Times.

Given the dire state of California’s economy, Davis took visible pleasure in bestowing rather than slashing funds -- even if they were federal, rather than state, dollars. “Rarely in public service do you get an absolutely unadulterated positive result, particularly given the times we live in,” he said.

The dual announcements brought an end to more than a year of negotiations involving the county, state and federal governments. Federal money for care for the indigent is disbursed directly to the states, and Los Angeles County -- home to nearly 30% of the state’s residents -- has a particular stake in how California’s share is spent.

“We appreciate it so much,” county Supervisor Yvonne Brathwaite Burke said at the Childrens Hospital gathering. “We had a crisis, and you stepped in to alleviate that crisis.”

To bridge the health department deficit that had been projected to reach $709 million in two years, the Board of Supervisors last year voted to close 16 health centers and slated two hospitals for closing as well.

High Desert Hospital in Lancaster and Rancho Los Amigos National Rehabilitation Center in Downey will still be closed this year, but the new infusion of funds will forestall other cuts for the time being, Burke said.

But county officials also took pains to characterize the deluge of federal dollars as a short-term fix for a long-term problem.

“What it does is extend the cliff, but it doesn’t solve the underlying problem,” said David Janssen, the county’s chief administrative officer.

That problem, state and federal officials agree, is an outsized population of uninsured residents. The county’s health system has been in distress for a decade, charged with providing services to the “medically indigent” in a county where about a quarter of 10 million residents are without insurance.

Two federal bailouts totaling more than $2 billion failed to spur the changes federal officials said were necessary to bring stability to the system. For instance, the county had some success in shifting patients to its outpatient clinics, but still treats too many patients in more expensive hospitals.

Tom Scully, the federal official in charge of Medicare and Medicaid, said the county also needs to be more aggressive in pursuing Medicare patients because the public insurance program for the elderly and disabled is a reliable and relatively generous payer. He said only 4% of the county’s health revenue comes from Medicare, while most public hospitals receive 15% of funding from the program.

“The goal is to help gently push the L.A. County hospitals to do what they said they would do earlier, which is to modernize” and to look at other revenue sources, Scully said.

Davis agreed that Medicare and private insurance patients ought to be courted.

“You see hospitals advertising all the time,” Davis said. “There have to be ways to reach out to the whole community, not just whoever walks in the door.”

Rep. David Dreier (R-Glendora), who helped broker the agreement, said it was not easy to reach an accord, given the federal government’s other priorities.

“We’re dealing with the war on terrorism. We’re dealing with the prospect of the war with Iraq. We’re dealing with the deficit,” he said. “It’s not easy work.”

Dreier said he is working to gain additional dollars for the county, but echoed calls by Thompson and Scully for significant reform in the county health system.

“I hope that this is a start toward working on an overall solution, rather than the belief that this is the opening of a huge flow of dollars,” he said.

The benefits of the accord extend beyond Los Angeles County. It provides $90 million for extra payments to public safety-net hospitals elsewhere in the state. The California Medical Assistance Commission, a board appointed by the governor and legislative leaders, will determine how that money will be distributed among counties.

Denise Martin, president of the California Assn. of Public Hospitals and Health Systems, said the number of uninsured people is rising in many parts of the state, while money to treat them is dwindling.

“When I talk to public hospitals around the state, they like to describe themselves as L.A. counties-in-waiting,” Martin said. “L.A. County was certainly the leader in terms of meltdowns in their system, but that’s not to say that those same dynamics are not occurring in other public hospitals around the state. And those conditions are worsening.”

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Times staff writer Sue Fox contributed to this report.