Hospitals catering to poor brace for budget cuts.

Public- and private-sector institutions to be hit

Regardless of how the federal budget war turns out, one thing looks certain: L.A. hospitals that serve the poor are about to take a big hit.

Within L.A. County, a handful of hospitals provide most of the inpatient care for recipients of Medi-Cal - the state- and federally funded program of health care for the poor. The list of local hospitals that rely heavily on Medi-Cal revenues includes all L.A. County hospitals and a number of private institutions.

L.A. County's six public hospitals are: County-USC Medical Center in Boyle Heights, Harbor-UCLA Medical Center in Torrance, Martin Luther King Jr.-Drew Medical Center near Watts, Olive View-UCLA Medical Center in Sylmar, Rancho Los Amigos Medical Center in Downey, and High Desert Hospital in Lancaster.

In the private sector, meanwhile, hospitals with a heavy reliance on Medi-Cal funds include: Queen of Angels-Hollywood Presbyterian Medical Center in Hollywood, California Medical Center in downtown L.A., White Memorial Medical Center near downtown, Daniel Freeman Memorial Hospital in Inglewood, and St. Francis Medical Center in Lynwood.

L.A. County's public hospitals are bracing themselves for a potentially hard hit following Medi-Cal cutbacks, though the magnitude of the blow remains to be seen, according to Irene Riley, chief of government relations for L.A. County's Department of Health Services.

Under proposals now being considered in Washington, L.A. County's DHS stands to lose as much as $1.5 billion in Medi-Cal funding over the next seven years, said Riley. Put differently, the county could lose as much as one full year's worth of Medi-Cal revenues over the next seven years, she added.

Bailout in jeopardy

Also in limbo in the current budget battle is the fate of President Clinton's recent one-year bailout for L.A. County's public health system. Last September, the president announced a $364 million package to rescue L.A.'s financially strapped health care system. Now, however, that bailout could be in jeopardy, according to Riley.

"Regardless of what happens to Medi-Cal, we want to make sure that last year's ($364 million) relief program provisions are incorporated into any Medicaid reform," Riley said. Medicaid is the federal program that provides U.S. government funds to Medi-Cal.

Riley and sources at private hospitals dependant on Medi-Cal funds all agreed that some of their programs for the poor - particularly peripheral programs - may have to be cut in the wake of impending Medi-Cal cuts.

California Medical Center, which gets about 50 percent of its revenues from Medi-Cal patients, was already operating close to the edge, even before the proposed federal budget cuts, according to hospital President and CEO Melinda Beswick.

"If we take too much of a hit (from Medi-Cal reductions), we'll have to start closing some services. If we had to, we'd even look seriously" at closing our emergency room, she said.

Beswick said California Medical Center began a cost-cutting campaign four years ago, which has already resulted in considerable savings for the hospital. Still, she and other sources said improving operations can only squeeze out so much savings.

"At some point in time, you just can't lower costs anymore through increased efficiency," said Beswick.

State clout

Most sources agreed that states will likely assume a larger role in allocating health care dollars for the poor under any eventual federal budget. At present, most federal government dollars spent on indigent health care are earmarked for specific purposes, with the condition that states match federal dollars on a one-for-one basis.

Under a reformed federal program, states would likely be given more discretion over how health care dollars for the poor are spent. Furthermore, the one-for-one matching dollar requirement would probably be eased, according to sources.

"There's a real concern that the people in the state and those in power could use (federal) money for whatever is important to them at the time" under a reformed system, said Beswick of California Medical Center. Specifically, Beswick and other sources expressed concern that federal health care dollars could end up going to pet projects of politicians in Sacramento.

Peter Bestone, president and CEO of Daniel Freeman Memorial Hospital, expressed concern that only hospitals with the highest percentage of Medi-Cal patients may continue to get federal and state funds following budget cuts. Specifically, he said, hospitals such as Daniel Freeman could stand to lose much of their Medi-Cal revenues to hospitals that serve larger Medi-Cal populations.

Among several hospital administrators interviewed, nearly all said they are resigned to taking a major hit of some kind when federal budget cuts are finalized. Still, few have mapped out specific strategies on how to absorb the blow, and most administrators said they are taking a wait-and-see attitude.

"We haven't begun making any specific plans yet. It's a time-consuming process, and there are still too many unknowns at this time," said Linda McCray, senior vice president for finance at Adventist Health of Southern California, which operates White Memorial.