Start-Up Costs Drive Up Hospital Price Tag

County officials are learning it’s one thing to build a new County-USC Medical Center -- it’s quite another to pay for the bedpans and other furnishings.

The start-up costs for the hospital, whose construction expenses alone are expected to top $800 million, may add as much as $240.5 million to the price tag. The problem is, the Los Angeles County Board of Supervisors has yet to put aside any money to cover the extra costs.

The medical records system will cost up to $100 million, said David E. Janssen, the county’s chief administrative officer. Furnishings, including portable medical equipment, could cost $105.2 million -- twice the price that county officials estimated in 1998. Moving from the old hospital could chew up an additional $35 million.

An interest-bearing fund to cover the start-up costs was created by supervisors in 1998 but is still sitting empty, according to Sheila Shima, the health budget manager for the county chief administrative office.

“We were aware of these costs when the board talked about the project initially” in the 1990s, Shima said. “That’s why we said, ‘Let’s not be blindsided and put aside some money.’ ”

The new hospital is slated to open in 2007 in East Los Angeles, next to the old one, which was finished in 1933 and is considered outdated and lacking many modern amenities.

In an Aug. 12 letter to the board, Janssen identified three potential sources of funding. Two of them would involve borrowing money and using tobacco settlement funds not committed to other programs.

Health-care advocates have angrily objected to a third proposal by Janssen and the county Department of Health Services to use a recently discovered surplus -- about $100 million from last year’s health budget -- for the start-up costs.

Advocates want the money spent on health-care programs, not equipment and furnishings that won’t be used for at least four years. “I do understand that they are going to have to purchase new equipment, but what about the half-million people who can’t get care in the meantime -- who may not even live to see the new hospital?” asked Barbara Frankel, an attorney with Neighborhood Legal Services of Los Angeles.

“You can’t give those people a rain check. Banking the money just doesn’t make sense in this climate,” Frankel added.

Worried about looming deficits, the Board of Supervisors earlier this year voted to cut 400 health-care jobs and close 16 county clinics. The supervisors also voted to shut down Rancho Los Amigos National Rehabilitation Center in Downey and remove 100 beds from County-USC.

A judge blocked the latter cuts, saying they would compromise the well-being of some patients. Frankel’s group is one of several that sued the county over its attempt to close the Downey rehabilitation center.

The county’s problem is finding the money to build and furnish a much-needed facility while maintaining a vast health-care network, one of the largest in the nation.

Officials with the county’s health department said they are careening toward a $840-million budget deficit in the 2007-08 fiscal year -- despite finding a surplus in their budget this year.

The supervisors are expected to vote in September on whether to reserve the surplus to furnish the new hospital.

Supervisor Gloria Molina may not agree to that, said Miguel Santana, her chief of staff. The hospital is in her district.

“She’s concerned about the department’s ability to manage its finances and assess those finances on a regular basis,” Santana said. “Frankly, she was surprised to learn about the surplus and is not sure if she’s ready to use it to support anything” new.

Supervisor Zev Yaroslavsky blamed the health department staff for failing to include a request for money to pay for furniture and equipment in the budget.

“It makes you wonder what other mistakes were made in the process. I’m not a happy camper about this,” Yaroslavsky said. “It’s not like there’s a pile of money there.”

Yaroslavsky said he doesn’t yet know whether he will vote to use the $105-million surplus for the start-up costs.

Fred Leaf, the chief operating officer of the county Department of Health Services, said the increased demand for health care and the ballooning cost of delivering it have left the county with no extra funds.

“We have a really fragile financial situation in the department,” he said.

Leaf said the surplus is an appropriate use of money for the start-up, adding that surpluses are unpredictable and the county shouldn’t rely on them for everyday health-care needs.