County Crisis Real but Not Yet Code Red

For 10 years, Los Angeles County’s health system has managed to pull off a remarkable high-wire act--teetering occasionally over a fiscal abyss and drawing gasps from the audience, but always righting itself in the end.

The curtain has risen on the latest act, but it is unclear this time whether the state and federal governments will be standing by with a safety net.

The county’s new health director is working on a plan to close a deficit of $688 million caused by dwindling federal aid. The initial sketches raise the specter of hospital closures, thousands of layoffs and service curtailment, all of which are unnerving to medical professionals, county workers and patients.

There is no guarantee that this crisis will be resolved with as little disruption as the previous two. Both ended when Los Angeles County supervisors secured billion-dollar bailouts from Washington.

Still, any service cuts are months--possibly years--off, and the supervisors, despite their tough talk, have always gone to extraordinary lengths to keep from cutting their politically popular health department.

Indeed, the decade-long ritual of crisis and rescue has diverted the county from making sorely needed structural reforms in how it delivers health care to the region’s nearly 3 million uninsured. After each rescue came vows to streamline the hospital-based system into one geared toward cheaper, patient-friendly outpatient clinics. Then reform stalled until a new deficit loomed and the county had to scramble again to keep from closing hospitals.

“The crisis atmosphere does distract from the ability to have the sort of sustained conversation about reforms and efficiencies that should take place,” said Mark Baldassare of the Public Policy Institute of California, who has studied the county’s health crisis.

Dr. Thomas Garthwaite, the county’s new health director, is supposed to change that pattern. As medical director of Veterans Affairs, he presided over the closure of hospitals and the centralization of computer networks and medical procedures.

Though arguing that the county needs more funding, Garthwaite also says that it needs to change--and consolidate--its business practices so that it can treat patients more quickly and cheaply.

“Some of the redesign can be positive,” he said. “Not to everyone at the moment, but over time.”

County officials have always gone to greater lengths to find more money for their health agency than to streamline its services. In the early 1990s, they mortgaged their own headquarters, the Hall of Administration, to avoid cuts. Then came the two separate billion-dollar federal bailouts, in 1995 and 2000.

There is cause for greater concern this time around. The rosy financial outlook of the past five years is gone, replaced with a need for austerity.

The state is facing a $22-billion deficit, and Washington is preoccupied with the war against terror, meaning there is less money available for any rescue effort.

The political will to help Los Angeles County apparently has waned. The medical financing officials who inked the 2000 rescue plan indicated then they would not bail out the county again. And the Bush administration may not be as willing to help heavily Democratic Los Angeles as was the Clinton administration, which authorized the two prior bailouts, sometimes over the objections of health-care bureaucrats.

Still, the director of the federal Center for Medicaid and Medicare Services, Thomas Scully, said through a spokesman Thursday that he is willing to work with the county. “We very much want to try to help out Los Angeles County and give them as much flexibility as we can.”

On the plus side, the county is in better financial shape than it was in the mid-’90s, when the health department nearly dragged the county into bankruptcy. It has built up a $500-million reserve, which could be used to stave off collapse for a year or two, and its credit rating is higher, meaning it could issue public debt to fund the health department far more easily than in the past.

Both of those options, though, have been criticized as fiscally reckless by the county’s budget chief.

Some are hopeful that the dire scenarios presented will lead to some kind of solution, whether from inside or outside the system.

“Nobody wants to close a hospital,” said Bart Diener, assistant general manager of the Service Employees International Union, Local 660, the union that represents most of the health department’s 22,000 workers.

“It’s not like there are forces at work saying ‘we want to close these hospitals.’ When it becomes clear that without some kind of political action that becomes the result, we’ve been fortunate enough to pull together some kind of funding mechanism.”

The alarms raised by the Hall of Administration not only serve to prod other levels of government to intervene. They also help county supervisors repel other agencies’ requests for money.

That was the case this week when Sheriff Lee Baca led hundreds of deputies and community members into the Hall of Administration to protest a proposed $50-million cut to his $1.6-billion budget. His demands that supervisors consider him their “No. 1 priority” provoked Supervisor Yvonne Brathwaite Burke, normally the most mild-mannered of the five supervisors: “What you’re saying to us is if it’s necessary to close a hospital to fund your department, then you feel that hospital should be closed,” she said.

Baldassare argues that the county can’t, by itself, solve its financial problems. “What hasn’t happened, and what you would hope would happen after a number of crises is the federal and state and local governments would get together and work out a long-term structure,” he said.

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Times staff writer Vicki Kemper in Washington contributed to this report.