Los Angeles CountyDepartment of Health ServicesSevere 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
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
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 5
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. 10
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 Declining Federal Funding 7
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 Declining State Funding 8
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. 6
Loss of Medi-Cal Patients Admissions in DHS Hospitals 9
1115 Waiver GoalsDHS Reforms Accomplished • Ambulatory care expansion • Established PPP Program • Improved clinical management • System efficiencies • Workforce development 11
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) 12
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. 13
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
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.
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.