Los Angeles County Department of Health Services
Severe Budget Shortfalls For the Safety-Net Threatens Entire Health Delivery System
Presented to the Assembly Select Committee on Los Angeles County’s Health Care Crisis February 25, 2005
Thomas L. Garthwaite, MD Director and Chief Medical Officer
DHS – A Wide Safety-Net
DHS operates:
5 hospitals (LAC+USC, Harbor/UCLA, Olive View/UCLA, King/Drew and Rancho Los Amigos) 1 Multi-Service Ambulatory Care Center (High Desert Health System) 6 Comprehensive Health Centers and more than a dozen other outpatient clinics
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DHS – A Wide Safety-Net
DHS provides each year:
600,000 Inpatient Days
More than 2 million outpatient visits
300,000 Emergency Department visits 350,000 Public Health visits
500,000 outpatient visits from 55 partners in our
Public Private Partnership Program
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DHS Fiscal Outlook**
Fiscal Year FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 Annual Surplus/(Shortfall) $44.8 million ($385.7 million) ($462.4 million) ($496.7 million) Cumulative Annual Surplus/(Shortfall) $44.8 million ($340.9 million) ($803.3 million) ($1.3 BILLION)
**Assumes that both Rancho Los Amigos will no longer be a County hospital and closure of 100 beds at LAC+USC is implemented by June 30, 2006. These actions are currently being prevented by Court order.
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Yearly Deficit/Surplus (millions)
2002
600 400 200 0 -200 -400 -600 -800 -1000 -1200 -1400
2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009
2003
2004
2005
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Yearly Deficit/Surplus (millions)
SPCP Waiver, Orthopaedic Suit Measure B 600 Efficiencies 400 Cuts 200 0 -200 -400 -600 -800 -1000 -1200 -1400
2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009
2002
2003
2004
2005
Nurse Ratio Budgeted but no nurses to hire. Others.
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Why is DHS Facing These Deficits?
Rising cost of care Declining funding sources Large number of uninsured patients Loss of Medi-Cal patients Savings blocked by courts Need for modernization DHS has been an open-door provider with the full spectrum of services Waiver goals are laudable but unsustainable as funding expires
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Rising Cost of Care For DHS
Forecast includes 3% to 4% annual COLAs which is conservative based on industry trends. Pharmacy inflation ranges from 11.5% to 13.4%. Implementation of mandatory nurse staff ratios is estimated to be at least $34 million annually.
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Declining Federal Funding
Federal assistance programs that subsidize care to the uninsured are declining or at risk: 1115 Waiver Phase-Out
Federal Restrictions on Medicaid funds
Relief for LAC under SPCP Waiver was one-time
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Declining State Funding
State funding that subsidizes care to the uninsured is declining or at risk:
Low State investment in Medi-Cal – 51st in nation for per capita Medicaid spending State plan for mandatory managed care for Aged, Blind and Disabled Medi-Cal participants
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Large Number of Uninsured
LACDHS serves over 500,000 uninsured patients annually. LA County’s uninsured rate is 30% higher than California’s overall rate. LA County’s poverty rate is 29% higher than California’s overall rate.
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Loss of Medi-Cal Patients
Admissions in DHS Hospitals
Medi-Cal
Uninsured
FY 1990-91 FY 2002-03 FY 1990-91 FY 2002-03 69% 54% 21% 32%
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1115 Waiver Goals DHS Reforms Accomplished
Ambulatory care expansion Established PPP Program Improved clinical management System efficiencies Workforce development
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Outside Validation of Accomplishments
DHS Hospitals are efficient compared to other benchmark hospitals. (State Bureau of Audits)
DHS making progress in ambulatory care expansion and has achieved savings through efficiencies. (Urban Institute)
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Who Pays for the Uninsured?
No direct revenue for uninsured care. Uninsured care is financed through a patchwork of funding sources, including maximizing Medi-Cal revenue. Many of these sources are capped or declining.
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Who Pays for the Uninsured?
DHS Users By Payor Mix
7%
DHS Inpatient Days By Payor Mix
15%
25%
24% 61%
68%
Medi-Cal Uninsured Other
Medi-Cal Uninsured Other
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Potential Revenue Solutions/Outlook
CBRC - Continuation is critical to not making the deficit worse Medi-Cal hospital financing waiver could provide relief, but its progress is uncertain
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What’s at Risk?
Unless there are new revenue sources identified for DHS, the magnitude of the deficit facing the health system will require the closure of two or more hospitals, closures of most County outpatient clinics and severe reductions in Public Health services.
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What’s at Risk?
Private hospitals depend on the County’s health system to provide care to the uninsured. Reductions in care provided by the County will result in private hospitals becoming saturated with patients. This influx of patients without a payer source will accelerate private hospital closures. These closures will impact the health of every man, woman and child in the region.
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