During the dog days of summer last month, Los Angeles healthcare providers were forging unique partnerships to revive a county healthcare system that once appeared doomed.
"Negotiations are going on hot and heavy in the community. There are more than 16 consortia negotiating with Department of Health Services teams," said Anthony Abbate, Los Angeles regional vice president for the Healthcare Association of Southern California, in mid-August.
By the end of the month, the DHS and an undisclosed number of private providers-including hospitals and clinics-had inked contracts to expand services to county patients at 35 private clinics.
In addition, several kinds of arrangements are being set up for the county's outpatient clinics, according to a copy of the DHS' Outpatient Expansion Plan obtained by MODERN HEALTHCARE.
In the county's initial efforts to privatize its healthcare system for the poor, six of the county's 29 outpatient clinics were privatized last fall. In the second wave, private operators have been chosen to operate two more county clinics, according to the DHS plan. Private partners also have been chosen to operate jointly another two clinics with county staff. The county will reconfigure and continue to operate 18 clinics. One small clinic is not included in the plan.
The county board of supervisors must approve the second wave of partnerships. It's scheduled to review the proposals on Sept. 17. A third and fourth wave of proposals are expected through fall and early winter to determine the fates of the other 18 county clinics.
This year's activity contrasts with the hopelessness of the previous summer. The county faced a $1.2 billion budget deficit for the fiscal year that began July 1, 1995, more than $650 million of it in healthcare services. In an attempt to staunch the flow of red ink, the county began laying off or demoting thousands of healthcare workers.
In July 1995, Sally Reed, former county chief administrative officer, proposed closing 1,402-bed LAC-University of Southern California Medical Center in Los Angeles. In response to a public outcry, the new county health chief, Burt Margolin, came up with two alternatives: closing three of the county's five other hospitals to spare County-USC or closing most of the county's outpatient clinics.
Fearing a huge influx of county patients into their emergency rooms, private hospitals stepped forward and said they would try to partner with the county's clinics in an effort to keep them alive.
Meanwhile, county and hospital officials were working in Washington to obtain a Medicaid waiver for a demonstration project. The waiver would make millions in government funds available to restructure the county system to focus more on outpatient care.
In late September last year, President Clinton announced a $364 million bailout for the county, but it had to submit a proposal to apply for the Medicaid waiver.
Political and bureaucratic bickering then kicked in. Members of the board of supervisors appeared to be dragging their feet in approving the privatization of the 29 outpatient clinics slated for closure. None of the board members wanted the restructuring to take place in his or her district.
Eventually the board approved the takeover of six county clinics by three private coalitions. They've been treating patients since last October with no county funds and only the promise of receiving federal waiver money, which was used to keep the other facilities alive. The privatized clinics have operated on charitable contributions and Medi-Cal and other government funds, and providers' private operations have subsidized the public clinics.
That prompted observers to say the county's policy was hasty. "They're asking private providers to take over running county health centers for basically no money except for the resource of having a health center, and many of the facilities were obsolescent and not great places in which to try to organize and provide care," E. Richard Brown said several months ago. Brown is director of the University of California-Los Angeles Center for Health Policy Research and a professor at the UCLA School of Public Health.
"In my view that represents basically an attempt to dump the problem into the laps of private providers (and) hope they will do a decent job and provide reasonably good access to the indigent*.*.*.*.*I don't think that's a recipe for success but for major disappointments," Brown said.
The situation began to brighten when a new director of county health services, Mark Finucane, took office in January. "We're not going to get out of the business (of caring for the indigent) and turn it over to the private sector. It's too big for us to handle alone, but it's too important to just turn it over," Finucane said at the time.
He wanted "a blended system (part public and part private) so we're not at the mercy of our own arrogance or of the private sector." The first players in such a blended system will be presented to the board of supervisors for their approval this month.
In this round of partnering, there's money to pay providers but at reduced rates. The county has received $172 million more from the federal government for the second year of the Medicaid waiver, $14 million of which is earmarked to pay private providers who partner with the county, said Nancy Rubin, DHS executive officer.
"Last fall the notion was the department was going out of business," Rubin said. "We subsequently got the (Medicaid) waiver, and we're now in an expansion mode in terms of primary care. We want to retain access points and expand beyond that."
"I think the county is experimenting with privatization now in different forms," UCLA's Brown said. These are "true public-private partnerships, which I truly support."
The six clinics that have been turned over to private providers are "basically dumped," he said. Brown is concerned that in these cases the providers might not have "stringent contractual obligations" to serve the indigent.
Elizabeth Forer, executive director of Venice (Calif.) Family Clinic, disagrees. The not-for-profit clinic leads the Westside Health Crisis Coalition, which took over two of the original six county clinics that were privatized (Jan. 15, p. 22). "We're offering more comprehensive services in that there's a greater availability of specialty and primary healthcare services on the West Side (of Los Angeles)," Forer said. Through networking, there is also less duplication of services, she said. The Westside coalition is composed of five private hospitals, including Santa Monica-UCLA Medical Center and Saint John's Hospital and Health Center in Santa Monica, as well as several private clinics.
"We're still building this network of care for the indigent on the West Side, and the county's contribution will help us to keep building it," Forer said. Recently, the UCLA School of Nursing relocated its nurse-practitioner clinic to one of the privatized clinics on the West Side, "a marvelous addition" to the network, Forer said.
The nurse-practitioner clinic is staffed by two nurse practitioners and two nurse assistants. It also runs a teaching program for nurse practitioners for the UCLA nursing school.
The Westside coalition, which will provide about 50,000 patient visits this year, runs on a large base of donated physician and staff services. Such services constitute the most expensive parts of healthcare. Venice Family Clinic also benefits from a large, well-established fund-raising program and counts on federal, state and city funds.
Still, the Venice clinic is running a deficit this year, Forer said. She declined to give the deficit amount.
Nevertheless, she said, "this has been a very positive experience."
The experience has not been completely positive for another of the original private providers that took over county clinics.
"It has been a costly experiment," said Kim Wyard, deputy director of Northeast Valley Health Corp. in San Fernando, a federally funded health center that operates a private clinic in San Fernando and one in Pacoima.
Northeast Valley took over the operations of a county clinic in Canoga Park and one in Valencia.
Northeast Valley is operating at a deficit as a result of not being paid for treating the indigent at the county clinics, Wyard said. The private provider is now negotiating to receive county funds in the future, she said.
Unlike the Westside coalition, Northeast Valley doesn't have a large base of charitable contributions or donated medical services, she said.
But, she added, "any issues are economic*.*.*.*.*Very good things have come out of the working relationship" that Northeast Valley has established with school districts, public hospitals, the county and the community.
"The community has been very supportive," she said, adding that Northeast Valley treated about 9,000 patients through the end of May.
Through a stronger working relationship with Olive View-UCLA Medical Center in Los Angeles, Northeast Valley can now refer indigent patients directly to subspecialty clinics at that hospital, Wyard said.
The new partnership models seek to expand access and, through contractual relationships, they will "help create a system perhaps sponsored by the county but that includes private providers in new clinic settings that have not been available to county patients before," UCLA's Brown said.
For example, a coalition of private providers in the East San Gabriel Valley explored several ways to partner with county clinics in Alhambra, Azusa and La Puente. The coalition members include West Covina-based Citrus Valley Health Partners, a small integrated system including three hospitals; Alta Med Medical Services in El Monte; East Valley Community Health Center in West Covina; and Ramona Health Plan Medical Group in Baldwin Hills.
The coalition's private community clinics already serve low-income patients, Medi-Cal recipients and the uninsured.
"We've been sitting down with that group (of providers) and with the DHS," said Tom McGuiness, vice president of mission effectiveness and community outreach at Citrus Valley Health Partners. "We are learning how to take these next steps together."
In the deal the parties worked out, the three county clinics are expected to see the same number of county patients as before. The private providers will expand their capacity and access to county patients and be reimbursed at a reduced rate, McGuiness said. The private providers also will give diagnostic support to the county clinics, he said.
"To increase capacity and access is the whole goal of the waiver," he said.
In the confusion created by the fiscal crisis last fall, many county patients believed the clinics were closed and sought help from private doctors, who treated them at reduced rates and often on credit, he said.
"There are a lot who are not seeking services," McGuiness conceded. "The real work of the public-private partnerships is to educate the community, let them know we're here, we can help (and) we want to serve."
What has been created is "more a system of care" for low-income individuals, he said. More and better-organized resources are being established to serve them.
Although the private providers are being reimbursed at a reduced rate, "together we have to figure out how to take care of the healthcare needs of this population with a fixed amount of money," McGuiness said. That's why he believes "eventually we're going to have to get into capitation."
The Inglewood-based Watts Health Foundation, which had sought to contract with the county in the past, recently struck a deal to serve county patients at two Watts clinics, according to the DHS plan. Details were not known at press time.
"It took a financial crisis that nearly brought L.A. County to its knees for it to begin to understand that it couldn't be all and serve all at the same time," Clyde Oden, the foundation's president and chief executive officer, said last month.
Watts operates several clinics in areas of the city where large numbers of patients live who now use county facilities. Those patients could be diverted to the Watts facilities, he said. "We have additional capacity to serve those patients," he said.
Watts also is negotiating to operate a county clinic as part of a consortium of other private providers, he said.
"We believe it's about time*.*.*.*particularly when there are private providers who have just as much commitment to serving these populations as the county and who have a proven record of doing so in a far more economical manner," he said.
In addition to seeking partners for its clinics, the county is trying to privatize its Rancho Los Amigos Medical Center in Downey, a 722-bed rehabilitation facility. It plans to reduce the number of hospital beds systemwide by one-third, to about 1,720 beds, by the year 2000. "We aren't envisioning closing any hospitals at this point," said Rubin of the DHS.
The county also has created a new position-director of managed care-to oversee county facilities as providers to other HMOs as well as the county's own health plan, which serves 20,000 Medi-Cal enrollees, Rubin said. The new position is part of "a very different executive management team" evolving at the DHS, she added.
There is one big unknown the county will have to deal with as it forges ahead: "We're just beginning our analysis of how welfare reform will impact this," Rubin said.
When Finucane heard Clinton had signed the welfare reform legislation, he told his staff, "We were hit by a meteor."