Los Angeles County Health Director Outlines Financial Problems in Health System

Service reductions and additional funds have improved the financial condition of the Los Angeles County public health system, but without "significant changes," the system could face multimillion-dollar budget deficits within the next few years, county Department of Health Services Director Thomas Garthwaite yesterday told the county Board of Supervisors, the Los Angeles Times reports. Garthwaite said that the department will likely face a $265 million budget deficit by the end of the next fiscal year. The county health system has received some financial help from the closure of 15 health clinics; plans to shut down two hospitals; the passage of Measure B, a ballot measure that will raise property taxes and provide about $140 million in additional revenue to fund the county's trauma care centers and emergency rooms; and $150 million from the federal government in February, but "those measures will keep the system solvent only through 2005-2006," the Times reports (Briscoe, Los Angeles Times, 4/2). The county received a $1.2 billion federal bailout in 1995 and an extension of the funds in 2000, but the bailout funds expire in 2005. The federal government will likely not provide the county health system with a third large bailout (California Healthline, 2/10). Garthwaite said that county officials will seek a revision in state law that would allow the county to receive more federal funds for outpatient services and a revision in Medi-Cal rules that would provide federal matching funds for some of the revenue raised from Measure B.

In related news, supervisors yesterday also reviewed a report on negotiations to convert Rancho Los Amigos National Rehabilitation Center, one of the hospitals scheduled for closure, into a private not-for-profit hospital. The report called the conversion "not feasible" and said that "having an existing not-for-profit hospital or hospital system take it over would be speedier and would cost less," the Times reports (Los Angeles Times, 4/2). Three public interest law firms last month filed a lawsuit against the county to block the closure of Rancho Los Amigos and the elimination of 100 beds at County-USC Hospital. Supervisors in January voted to close Rancho Los Amigos to help cover a budget deficit in the county health care system; the board estimated that the move would save the county $58.6 million in 2004 and $65 million to $70 million in future years. Rancho Los Amigos provided specialized rehabilitation services to 2,600 inpatients and 8,700 outpatients in 2001 (California Healthline, 3/13). The county would have to spend about $18 million to continue operations at Rancho Los Amigos after July 1, county Chief Administrative Officer David Janssen said. Jack Shakely, president of the California Community Foundation, said that the foundation has received $15 million in private donations to fund Rancho Los Amigos. The foundation plans to complete a report by April 15 to outline a plan that would allow Rancho Los Amigos to continue to operate through a merger with a not-for-profit hospital, Copley/Torrance Daily Breeze reports. However, Garthwaite wrote in a memo that "there is not a revenue source to offset the net county cost associated with operating Rancho during a transition" (Zahniser, Copley/Torrance Daily Breeze, 4/1).