State's 'managed care' plans for Medi-Cal sound hospitals' sirens.

The State of California's massive effort to reduce health care costs and improve service to the state's indigent population by shifting Medi-Cal patients into "managed care" has many L.A. County health care providers in a frenzy.

Not only is the state's timetable unreasonably fast, said local health care officials, but the shift to "managed care" -- health care provided in exchange for set monthly fees, per patient -- could seriously cut funding to local hospitals, doctors and other providers who bill Medi-Cal.

L.A. County has 1.5 million Medi-Cal patients, 33 percent of the state's total, and hospitals receive billions of dollars in government funds to take care of those patients. Officials at facilities that treat large numbers of Medi-Cal patients but do not currently offer managed care are concerned they could suffer substantial reductions to their patient loads if the state follows TABULAR DATA OMITTED through on its plan to shift all Medi-Cal patients to managed care.

Medi-Cal, the state's form of Medicaid, is a federal and state-funded insurance program created during President Lyndon B. Johnson's War on Poverty in 1965. It helps pay for health care to the needy, aged, blind and disabled and for low-income families with children.

One-third of L.A. County's Medi-Cal patients are now being served by the county health care system on a standard fee-for-service basis. The other two-thirds are either served by a private "managed care" system or contract directly with a doctor.

The state's Department of Health Services released a draft strategic plan in mid-January to require county health departments to shift the state's Medi-Cal patients into managed care as a means of improving access to primary and preventive health care and controlling costs. If counties do not accomplish that shift fast enough, the state would step in and undertake the shift to managed care itself.

To gauge reaction to its plan, the state is now holding hearings throughout California.

Those who stand to lose the most under the state's new plan are county-owned and private hospitals that generate most of their revenues from Medi-Cal patients.

Critics of the state's plan said hospitals will not be the only losers. They said the shift to managed care will also reduce indigents' access to health care.

As David Langness, a spokesman for the Hospital Council of Southern California, summed up the problem: "Some hospitals could go out of business, and there will be less resources for poor people."

Some critics argued that managed care systems would be too complicated for many indigent patients to use effectively.

Michael Cousineau, executive director of Homeless Health Care in L.A., said managed care won't work for a transient population because they can't be locked in to seeing a primary care doctor in the San Fernando Valley, for example, if they are now living downtown.

"Our clients use a variety of services depending on where they are staying," he said.

Nonetheless, the state Department of Health Services wants to eventually have the majority of its 4.5 million Medi-Cal population under a managed care system. Its immediate goal, however, is to increase the number of Medi-Cal beneficiaries in managed care to 1 million. The number of Medi-Cal patients currently under managed care is about 400,000.

By the end of fiscal year 1994-95, state officials want at least half the state's Medi-Cal population enrolled in managed care.

The aspect of the state's plan that has health care providers most concerned is the rapid pace at which counties would be required to implement the shift. Under the state's draft plan, selected counties would have just 45 days to notify the state whether or not they would form a consortium of public and private providers to organize managed health care. If a county decided to form such a consortium itself, the state would allow an additional 60 days for the county to form that consortium. State officials want those consortiums operating by the 1993-94 fiscal year. If counties choose not to form a consortium, the state would take control of enrolling Medi-Cal patients into managed care.

L.A. County health providers are trying to put the brakes on the state's timetable long enough to allow county officials to work out the details of the managed care system.

L.A. County's Department of Health Services, which runs the county's hospitals and clinics, is leading the effort to slow down the state's timetable. That county department received $970 million from Medi-Cal in 1992, which represented 45 percent of the county health department's total annual budget.

The county could lose at least part of its Medi-Cal population, and the millions of dollars in revenues generated by those patients, to private managed care systems if the state's proposed shift takes place. That loss of funding, in turn, would further limit the county's ability to act as a safety net provider for the estimated 2.5 million people uninsured in L.A. County, said Toni Saenz-Yaffe, director of contracting and management for the L.A. County Department of Health Services and chair of the L.A. County Task Force on Medi-Cal Managed Care.

Los Angeles County does want to take the lead in creating a Medi-Cal managed care system, under which the county's Department of Health Services would be linked with a network of public and private providers, said Saenz-Yaffe. "We're not out to serve 100 percent of Medi-Cal patients," she said. "We don't see the private sector as adversaries. We want to link up with them."

She mentioned as an example the county's partnering with the private sector in 1990 to deliver 10,000 babies. The county helped patients attain their Medi-Cal eligibility and paid for their malpractice insurance and prenatal visits, and the private hospitals actually delivered the babies.

Many private-sector health care practitioners, however, also seem to have serious reservations about the state's plan.

Dr. C. David Molina, president of Molina Medical Centers in Long Beach, has built his business on providing outpatient care to Medi-Cal patients.

He said the state's plan is not going to work because it is too large and too diverse and because the county has no experience in managed care.

"The county can't come in and do great things overnight," he said, rehashing the struggle his company went through in the mid-1980s to get started. He said his company now has 53,000 Medi-Cal enrollees at its 21 clinics in seven counties across the state.

He started his business in 1982, in the wake of state legislation that allowed private-sector companies to contract for Medi-Cal business. He said the best system for dealing with Medi-Cal patients is to let companies like his bid for Medi-Cal contracts through the state using uniform guidelines, not through the county. He said adding the county to the equation just adds another layer of bureaucracy.

Few would likely contest that the level of services offered at a private-sector medical facility far exceed those offered at county-owned facilities. Instead of sitting in overcrowded emergency rooms at county hospitals for up to 13 hours to see a doctor, Medi-Cal patients at private-sector centers are usually treated quickly, with a much higher level of personal service.

County hospitals, on the other hand, are required to see anyone who walks in the door, which has increasingly overwhelmed the system. This situation has made Medi-Cal patients even more attractive to county hospitals because, unlike uninsured indigents, Medi-Cal patients generate revenue.

The state has put a moratorium on private companies enrolling new Medi-Cal patients until after it completes its Medi-Cal managed care plan.

Institutions most at risk due to the state's plan are the 20-some hospitals in L.A. County that have large numbers of Medi-Cal patients. These hospitals, which the state refers to as "disproportionate-share hospitals" because they serve a disproportionately large number of Medi-Cal patients, receive extra government funding.

For Children's Hospital Los Angeles, this bonus amounted to $12 million in 1992, said Dr. Paul S. Kurtin, director of the hospital's newly formed Department of Quality Management. He said 68 percent of the hospital's patients are on Medi-Cal and the $12 million bonus they received last year helped them balance their budget.

Kurtin expressed concern that many hospitals are now clamoring for Medi-Cal patients, and that increased competition could cause Children's Hospital to lose some of its Medi-Cal patient load.

With hospitals in L.A. County running at a 50 percent occupancy rate and managed care contracts squeezing profit margins, Medi-Cal patients are suddenly seen as desirable, said health care providers.

Traditionally, Medi-Cal patients were unwanted because they were seen as money losers.

The Hospital Council's Langness said hospitals receive only 61 cents for each dollar of costs on Medi-Cal patients.

He said hospitals' sudden affinity for Medi-Cal patients is a sign of their desperate financial situation.

Consumer advocates are asserting that the biggest losers in the state's plan could be the patients themselves.

In the mid-1970s, when Ronald Reagan was governor of California, a similar effort was made to shift Medi-Cal patients into pre-paid health plans. But it failed miserably, said health providers. Lax scrutiny of the managed care providers led to a number of rip-offs, with the end result being poor-quality service.

Many health care providers expressed concern that the state's new plan will not contain sufficient protections to prevent this from happening again.

Despite those grave reservations, most health providers said want to see a system that emphasizes primary care and preventative care.

Under a managed care system, each patient would be assigned a primary care physician.

"Managed care is a good thing because we need to control costs," said Children's Hospital's Kurtin. "California is going to do this one way or another. We just hope the special role of a children's hospital will be recognized."