Audit Finds Los Angeles County Health Department Budget Deficit $170M More Than Previous Estimates

The Los Angeles County Department of Health Services has a budget deficit $170 million greater than the agency originally estimated, according to an audit released yesterday, the Los Angeles Times reports. The report, ordered by the Legislature last year to "independently assess the department's financial dilemma" and completed by state Auditor Elaine Howle, says the health department will have a $850 million deficit by 2005, when a federal "bailout" is set to expire. County officials originally estimated the budget deficit would be $688 million by 2005, but the audit says that figure overestimated revenues and underestimated expenses. County officials' estimate also did not consider regulatory changes that will reduce federal reimbursement limits, impose higher nurse-to-patient ratios and require seismic hospital retrofitting, among other things, the audit notes. If the department does not receive additional funding from the state or federal governments, it will have to "fundamentally redefine what services it provides," the Times reports (Larrubia, Los Angeles Times, 5/31). Last week, the department said it was considering three plans to address the projected $688 million deficit: a "pessimistic" but "unlikely" plan that would close most public hospitals and more than 100 health clinics; a more likely plan that would convert some hospitals into large-scale outpatient facilities; and an "optimistic" plan that would close one emergency room, eliminate trauma services at one hospital and make changes at a few other hospitals (California Healthline, 5/24). The audit report notes that although some of the department's internal financial projections were "not realistic," it has a "fairly reliable" system of assessing its financial structure and its hospital system is "reasonably efficient" (Los Angeles Times, 5/31).