L.A. County health system again facing major deficits

Los Angeles County's public health system -- which has been without permanent leadership in its top position for a year -- is once again facing budget deficits that threaten to grow into the hundreds of millions of dollars.

A lifeline for many of the county's 2 million uninsured residents, the nation's second-largest health system is expected to run a deficit of $344 million during the fiscal year beginning in July. By 2011, the annual deficit is expected to reach $1.2 billion, according to a memorandum issued Tuesday by John Schunhoff, the health department's interim director.

In a sign of the turmoil the department has confronted over the years, many county officials said they were not alarmed. "I recall circumstances when the analysis was more dire," Supervisor Mark Ridley-Thomas said.

Earlier this decade, the county faced the prospect of shutting down parts of its trauma and hospital network. This time, no service or job cuts are on the table, Schunhoff said.

County officials said they hoped the Department of Health Services, a $3.4-billion enterprise with 20,000 employees, will be able to find new sources of revenue in addition to tens of millions of dollars provided by the federal stimulus package.

"We have a number of proposals that we think are achievable," said William T Fujioka, the county's chief executive. "I can't share them yet."

The county, however, will be working against harsh financial head winds. Some supervisors' aides said they are concerned that the department's current forecasts, as foreboding as they are, rely on unrealistically rosy projections for sales taxes and state vehicle licensing fees.

The financial challenges come as the department lacks permanent leadership. Schunhoff has held the top position on a temporary basis since Dr. Bruce A. Chernof abruptly resigned one year ago this week. Schunhoff's top two deputies, who supervise clinical practices, quality control and regulatory issues, are also working on a temporary basis.

Fujioka said the county has struggled to find top-quality candidates.

Indeed, even coming up with a qualified search firm proved to be a struggle. Los Angeles-based executive search firm Korn/Ferry International was not hired to search for a new director until October -- six months after Chernof's departure -- and the search did not begin until December.

At least once, Fujioka has rejected Korn Ferry's list of candidates as insufficient. Fujioka said he plans to interview finalists for the top health job in the coming weeks.

Chernof's predecessor, Dr. Thomas Garthwaite, said politics have been a significant factor hurting the county's ability to attract talent. Chernof, for example, had privately complained about the harsh criticism county supervisors directed his way during public meetings. Most major metropolitan public health systems now operate under independent health authorities, but the Los Angeles County Board of Supervisors has refused to relinquish direct control.

"You can't get the tools that you need to do the job well. The political nature of all decision making and the personnel issues get in the way," Garthwaite said, referring to the Civil Service rules that make firing problem employees extremely difficult. "Every one of those supervisors want the right outcome. They want the best healthcare for the most people possible," he said. "The other concerns of their job, however, get in the way."