County financial troubles tied to indigent population.

Despite cutting 4,300 positions and shifting huge numbers of patients from hospitals to lower-cost outpatient clinics, L.A. County's health care system remains $200 million short of its cost-savings goal.

And that has county officials plenty worried.

The goal was set in the aftermath of the system's near financial collapse in the mid-'90s; the collapse was avoided only when federal officials agreed to waive their normal funding rules and give the county $1 billion in additional funds over five years. Four of those years have passed, and if the federal waiver is not extended next year, the county will face a $300 million deficit in its health care budget - and again be dragged to the fiscal brink.

So why can't the county seem to get out of its financial fix?

The main reason, according to experts both within and outside county government, is a disconnect between funding and cost trends. Federal and state health care funding has been declining for more than a decade. Meanwhile, the county's uninsured population, which constitutes the bulk of its patient load, has soared.

"The county system's mission in life is to treat indigent patients," said Jim Lott, executive vice president of the Healthcare Association of Southern California, which represents area hospitals. "As such, the system has to operate at a loss. The only way it has survived is through massive amounts of federal and state funding. And over the years those funds have eroded, while the number of indigent patients has skyrocketed."

L.A. County is home to about 3 million uninsured indigent patients, roughly one-third of the entire population, according to Miguel Santana, health issues deputy to Supervisor Gloria Molina. That's not only a larger uninsured population than any other county in the nation, it's larger than any other state's uninsured population, he said.

"We have a state mandate that requires us to be the health provider of last resort for those who can't get care elsewhere," Santana said. "But we receive little or no federal or state funding to provide the health care that all these uninsured people need."

The situation has become so acute that in his most recent budget, County Administrative Officer David Janssen proposes sharply reducing the number of indigent patients the county will accept from private hospitals.

Predictably, Janssen's proposal has met with resistance from private hospitals, many of which are under considerable financial stress of their own.

With the health care system in such a crisis mode, all five county supervisors headed to Washington two weeks ago to lobby for an extension of the federal waiver, which exempts the county from funding restrictions other states face. This would make the county eligible for hundreds of millions of dollars a year in additional federal money.

But the system won't regain sound financial footing until the larger problem of how to pay for uninsured patient care is solved.

"Most of the uninsured are working poor whose employers do not provide health care," Sanchez said. "There needs to be a statewide and national movement to get more employers to provide health care."

But there's more to the problem than dealing with the uninsured. The restructuring of the county Health Services Department, which by now was supposed to have saved the county hundreds of millions of dollars, is way behind.

"We just set too ambitious a cost-cutting target," said Health Department Director Mark Finucane. "We had a set of consultants come in, compare us to a number of other hospitals across the country. and make recommendations on how we could cut costs. But the comparisons they used simply didn't fit our situation, which is unique."

As a result, Finucane said, the department is on track to save $41 million this year, as opposed to the $80 million that was initially projected.

Observers outside the department point to another reason why costs haven't been cut further. The county health care unions, they say, have been resistant to sweeping staff cuts.

"Organized labor was instrumental in lobbying for the (federal) waiver," said Lott. "But organized labor since then has basically taken the position that they will not support any re-engineering that results in cuts to the workforce."

Nick Builder, health care restructuring director for Service Employees International Union, Local 660 (the union representing the largest number of county health workers), said more layoffs would be irresponsible.

"We have a system that is stretched beyond its limits," Builder said. "If anything, we need more workers to take care of the poor people, not fewer workers."

Santana agreed, saying that if the cutbacks go too deep, the quality of care could be affected. "That's one of the reasons why we went back to Washington for the waiver, so we could get more funds," he said.

Also, as part of the conditions for granting the waiver, the federal government set a goal that the county reduce inpatient hospital visits by one-third and increase outpatient clinic visits by 50 percent.

Finucane said the county has achieved the inpatient reduction goal, but is still far short of its outpatient clinic visit target, despite contracting with an additional 100 private outpatient clinics. Instead of 50 percent, the number of outpatient clinic visits has only gone up 15 percent.

One reason for this, Finucane said, is the reduction in workers at county clinics, which has reduced the number of outpatient visits that can be handled.