CC – Item 7C – Staff Report – Re-Building of the County USC Medical Center �5 E M-
O yR 9
y O�
A' St aft
eport
TO. HONORABLE MAYOR
AND MEMBERS
ROSEMEAD CITY COUNCIL
FROM: FRANK G. TRIPEPI, CITY MANAGER
DATE: OCTOBER 23, 1997
RE: RE-BUILDING OF THE COUNTY USC MEDICAL CENTER
This item has been placed on the agenda at the request of Mayor Pro Tern Bruesch. On November
12, 1997, the Los Angeles County Board of Supervisors will discuss final plans regarding the
rebuilding of the County USC Medical Center. County USC has sustained earthquake damage over
the years, and FEMA has committed $462 million for the reconstruction project. However, that
amount, according to some, will not cover the cost of reconstructing the facility in its current
configuration as a 750 bed hospital. Opponents of the plan to re-build the facility in its current
condition contend that the costs would exceed $1 billion, and cite a current surplus of hospital beds
in the area as justification for their position that a smaller 391 bed facility is sufficient. Supporters
of the larger hospital cite the ongoing need of a large indigent population residing near County USC.
Staff has attached a letter from Supervisor Antonovich supporting the smaller 391 bed facility and
information from Supervisor Moline's office supporting the larger facility.
c�c.c�mKrgi
COUNCIL. AGENDA
OCT 2 81997
ITEM No. lig_ • C.
OCT-23-1997 29:20ANTONOVICHats 974 iuia R.D1/02
SUPERVISOR ANTONOVICH
W.sarb rrf S eri7isurs
Tauntg of tus cArtgElea
MICHAEL D. ANTONOVICH
SUPERVISOR FIFTH DISTRICT
October 22, 1997
Mr. Frank G. Tripepi, City Manager
City of Rosemead
8838 East Valley Boulevard
Rosemead, CA 91770
Dear Frank:
November 12, the Board will be discussing the final plans for the re-building of County
U.S.C. Hospital. The proposals on the table for the hospital range from 391 to 750
beds. I urge you to support the 391 bed option and force the County to build what is
necessary and not to construct a Tel Mahal.
As a result of earthquake damage, FEMA has committed $462 million toward the
construction of a new hospital. This is far short of the nearly $1 billion price tag for a
750 bed facility. The financial uncertainties within the county budget necessitate
looking at creative efficient options for the delivery of health care services to our
residents.
Private industry has been shown time and time again to be far more efficient in the
delivery of health care services and its corresponding administrative responsibilities.
Given the fact that there are currently 800 surplus private beds in Los Angeles County,
it makes far more sense to aggressively pursue the avenue of privatization rather than
to maintain the status quo of solely publicly delivered medical services.
It is often mistakenly assumed that the County is required to provide medical care for all
citizens. his ' si Iv not th
needs of our indigentunfair to epect thed e taxpayers accommodate will to build a facility
dical
citizens. It is
based on politics and not reality.
QOM 869 KENNETH HAHN HALL OF ADMINISTRATION, 500 WEST TEMPLE STREET, LOS ANGELES, CALIFORNIA 90012
TELEPHONE (213) 974-5555 • (213) 974-1010 (Pro()
OCT-23-1994 09 20 SUPERVISOR RNTONOI,4EH 213 974 1�1� P.02ip2
Mr. Frank G. Tripepi
October 22, 1997
Page 2
Working with the private sector will ensure that the medical needs of all our citizens will
be met. Coordination and communication between the public and private sector is
crucial. Support of a 391 bed facility makes economic sense and maintains Los
Angeles County as the safety net provider to indigent citizens in Los Angeles County.
I hope that we can have your support through a resolution prior to the November 12
Board meeting.
Sincerely,
MICHAEL D. ANTONOVICH
Supervisor, Fifth District
MDA:kbr
OCT-23-1997 10:37 CLOT IP NEIL INP O=FICE 213 613 1733 P.22i'_7
LAC +USC
MEDICAL CENTER
,
.,..a e. LAC+USC Medical Center
\OSII@:rM 'I I:I
♦INnM,A,I \I, Service Areas
.I, I A /
/
li
ra. ."
LA 41•1111
Im .A, SO Aliwm''I :\rca - ..... I:ru Ue: w_.
IO LOS r
ANIMA - III
l Dr:ul Vpa
v
1 k
�. , so
. ..-. ! LACtUSC Medical Confer
Ala Mmv+I.IA unlit ravel r
I '
I a Service Area Boundary
r • , 0 510.15 Mile Radius Gimlet
'^7 : Centered on LAC+USC MC
` - i 6�: — Ftco cony
Fs
LACeh9L MaINGwr
1UNS Yuve
0 AO Unhurt..Meats
RtlmY )IM WILSON ID MIC IAN JI,1996
Sustaining the Health Care Safety Net for
LOS ANGELES COUNTY
Today and Into Tomorrow
Prepared by Los Angeles County Supervisor Gloria Molina
OCT-23-1997 1 :37 OLORIP MC_!Ng OFFICE 213 51.3 1739 P.03/17
TABLE OF CONTENTS
INTRODUCTION:
SUSTAINING THE HEALTH CARE SAFETY NET
FOR ALL OF LOS ANGELES COUNTY PAGE 1
LAC+USC MEDICAL CENTER:
PROVIDING CRITICAL, UNIQUE SERVICES TO ALL OF LOS ANGELES COUNTY
EMERGENCY ROOM SERVICES PAGE 2
TRAUMA CARE PAGE 3
OTHER UNIQUE SERVICES PAGE 4
THE UNINSURED WORKING POOR:
LOS ANGELES COUNTY'S DUTY
INDIGENT CARE PAGE 5
STATE MANDATE PAGE 6
STRUCTURAL SAFETY PAGE 7
EARTHQUAKE SAFETY:
SECURING THE CENTER OF LOS ANGELES COUNTY HEALTH CARE PAGER
MEDICAID DEMONSTRATION PROJECT(1115 FEDERAL WAIVER):
MOVING TOWARD THE FUTURE OF HEALTH CARE PAGE 9
WE CAN'T AFFORD NOT To Do 750 PAGE 10
SUPPLEMENTAL CONTRACTING AND TRANSFERRING PATIENTS:
WHY CONTRACTING ISA LIMITED OPTION PAGE 11
CONCLUSION:
THE EXPERTS AGREE- LOS ANGELES COUNTY
NEEDS A 750-BED MEDICAL CENTER PAGE 13
REPORTS CITED PAGE 14
OCT-23-1997 10 37 GLORIR MO'_IMP OFFICE 213 813 1739 ?.04917
•
INT'RODUC'TION:
SUST4I N/NG 771E HE.-I L TH (.'-IRE SAFIE T).IVE f
FOR ALL OF Los ANGELES Couvn'
Under the California Welfare and Institutions Code, Section 17000,Los Angeles County has a mandate
to provide health care services for the medically indigent. We have a long-standing tradition of meeting
this challenge. We continue to accept the same responsibilities today.
One of the critical components of our comprehensive health care system is the LAC+USC Medical
Center. LAC+USC is one of the nation's largest acute care hospitals, with 1,779 licensed beds; 1,405
available beds; and 860 budgeted beds. It is one of the busiest trauma centers in the U. S. and provides
23 percent of Los Angeles County's trauma care. The Medical Center cares for half of the County's
HIV/AIDS patients, provides 50 percent of sickle cell care, and is the largest medical teaching facility
in the country. In 1995-96, LAC+USC admitted more than 56,000 inpatients and provided over
800,000 outpatient and emergency visit to residents throughout the County.
LAC+USC is particularly essential for those who live in its primary service area. Sixty percent of the
County's indigent population lives within a ten-mile radius of LAC+USC. The population of this
region is projected to grow, particularly at or below the poverty level. And since the communities
closest to the Medical Center rely heavily on public transportation, LAC+USC plays an indispensable
role in ongoing efforts to make quality health care accessible to all County residents.
Due to new seismic standards, a deteriorating physical plant, and life safety requirements, the
LAC+USC Medical Center must be replaced. Several studies have been conducted by independent
consultants to assess the health care needs of the County and recommend an appropriate size and scope
for the Medical Center's replacement. Past proposals considered by the Board Of Supervisors include
a plan for the construction of two new hospitals and another plan for a 946-bed replacement facility.
The current discussion focuses on a much smaller alternative—a 750-bed medical center.
Leading independent consultants, the Healthcare Association of Southern California, and the Los
Angeles County Medical Association reached the same conclusion: a 750-bed hospital is the minimum
size necessary to meet the future health care needs of Los Angeles County. This is a significant
reduction— 50 percent— from the current medical center's 1,405 available beds.
The Board Of Supervisors has a responsibility to approve a Medical Center replacement project that
will sustain the countywide emergency and trauma networks and provide: sufficient emergency and
trauma care to its local service area; enough inpatient capacity to care for patients treated in the
emergency room; and the unique, critical specialty services that are not sufficiently available in the
private sector. Any decision must also consider the number and type of available beds in other area
facilities, and any risks and obstacles involved in transferring patients to other hospitals or contracting
with other hospitals.
A new 750-bed medical center is a cost-effective solution to meeting the health care needs of all Los
Angeles County while sustaining the County's health care safety net.
Page-1-
October22, 1997
OCT-23-1997 1O'39 GER 1R MOL INA OFFICE 213 GE 1739 P.05917
LAC+USC MEDICAL CENTER:
PROI'n)ING C'RAT/cAL, UNIQITE SERI ICES
To ALL OF Los ANGELES COL/ATI'
EMERGENCY ROOM SERVICES
LAC+USC provides critical medical services to hundreds of
thousands of County residents. Almost 250,000 people are treated in , BIN
LAC+USC's emergency room (ER) each year. The ER treats
accident, cardiac,and burnvictims,as well as victims of other injuries i.�4d.�j Ui
and illnesses. Emergency care is a pillar ofLAC+USC's fundamental
mission, and all Los Angeles County residents benefit from its
services. Many private hospitals do not have emergency rooms and turn patients away, directing them
to LAC+USC. Because it is central to the County's emergency system, thousands of patients are
transferred to LAC+USC from other hospitals each year. This capacity would be difficult to replace.
The County provides certain services that cannot be immediately replaced by private sector
providers. . . . In Interviews, private providers reported that the threat of closure alone had
increased the burden on their emergency rooms,and,more important, that they would consider
closing their emergency rooms or reconfiguring hospital inpatient capacity to limit ER capacity
If they were burdened with too many additional ER patients as a result of County closuros (Rose
Report,page 52).
ER activity is strongly tied to inpatient care; many emergency patients require continued treatment as
inpatients. Almost 40,000 of the 250,000 patients treated in LAC+USC's ER each year require
inpatient care and are subsequently admitted to the Medical Center. These patients account for
approximately 70 percent of the nearly 56,000 total inpatient admissions each year at LAC+USC.
Therefore, most of LAC+USC's beds must be set aside just to provide adequate medical aftercare for
patients admitted through the ER. The need for emergency services is expected to grow.
The County is orolected to face a significant shortage of emergency room services capacity by
the Year 2005 especially without completion of planned projects. . . . Completion of planned
projects would alleviate almost half of the projected shortage in emergency room services
capacity. . . . The County had a shortage of emergency room capacity in 1985 in most regions
for most visit types (LA Model,pp. 9-11).
The LA Model projects that Region 7(central Los Angeles) will experience a shortage of 353,500 ER
visits in the year 2005, even with the completion of all planned replacement,renovation, or remodeling
projects (this assumes a 946-bed LAC+USC scenario).
Page-2-
October 22, 1997
OCT-23-1997 12:30 GLORIA MOL INA OFFICE 213 G13 1739 0.06/17
TRAUMA CARE r
Not all emergency patients are trauma l Percent of All County Trauma Cases
rr.um. Centers within IAC+us aro a
Primary ser .Ares, rase
victims; only the most critically injured
patients are designated as trauma victims
by professionals. Similarly, not every 20% -
emergency room is a trauma center. While
there are currently 83 ERs in Los Angeles (Does not include bum cases)
County, there are only 13 trauma centers,
down from 23 in 1984. Almost all trauma ta% 7%
patients are brought to the hospital by
ambulance, enter through the ER, and are )11
subsequently admitted as inpatients. • w ,r.
LAC+USC has a specially-trained trauma 0% F
team of doctors, nurses, and other health sl. Francis Children's
LACtLISC Huntington
care professionals.
LAC+USC treats more trauma patients than any other trauma center in the County, and is one of the
busiest trauma centers in the nation. It provided 23 percent of the County's trauma care in 1996.
LAC+USC is the only provider of trauma care within its 20-minute trauma catchment area(a service
area defined by Emergency Medical Services), and is vastly busier than nearby centers (see graph
above).
Given the importance of LAC+USC to the county-wide trauma system . . . if downsizing has a
major Impact on its emergency services capacity(including inpatient services such as Intensive
care units),increased pressures would be placed on all nearby hospitals with emergency rooms,
with particular pressure placed on the trauma hospitals. .. .Such emergency capabilities serve
the entire community, as opposed to primarily Medi-Cal and indigent populations, and thus
directly Impact tax payers. (Tranquada/Zaretsky,pp. 24.25).
In addition to accepting patients from its trauma catchment area, LAC+USC has "open catchment."
This means that, unlike any private hospital, LAC+USC will take patients injured in other catchment
areas that cannot be handled by their closest trauma center. Many of these are patients transported by
air ambulance from critical accident sites or indigent patients transported from other hospitals.
R
Page-3-
October 22, 1997
OCT-23-1997 12:39 G'_ORI47 MOL INg t]FF:CE 213 613 1739 P.07217
OTHER UNIQUE SERVICES
Burn Center: LAC+USC operates the largest of only three burn centers in Los Angeles County,
providing 45 percent of the County's bum care. The other centers are in Sherman Oaks and Torrance.
LAC+USC has an exclusive contract to treat all of Kaiser Perrnanente's bum patients.
HIV/AIDS Care: Health care professionals at LAC+USC care for half of all HIV/AIDS patients in
Los Angeles County, more than any other provider. Both inpatient and outpatient care is provided by
a specialized AIDS ward and the 5P21-Rand Schrader Clinic, respectively. LAC+USC provides
innovative and comprehensive health care to AIDS patients. For example, in 1995 LAC+USC opened
a state-of-the-art Maternal and Child AIDS Clinic to provide individualized care and support to children
and their families.
High-Risk Pregnancies/Neonatal Intensive Care: Thousands of babies in high-risk pregnancies are
delivered at LAC+USC's Women and Children's Hospital each year, more than at any other hospital
in Los Angeles County. LAC+USC has a Level Three Neonatal Intensive Care Unit, where aftercare
is provided to infants confronted with serious medical conditions.
Medical Education: LAC+USC operates the largest medical teaching facility in the country.
Approximately one-third of all private practice physicians in Southern California trained at LAC+USC.
The fact that LAC+USC is a teaching hospital contributes to the quality of care provided to patients.
Research results recently published in The Journal of the American Medical Association concluded that
the risk of death is 19 percent lower and the length of stay is almost 10 percent lower in teaching
hospitals than in non-teaching hospitals.
Nursing School: LAC+USC operates an accredited School of Nursing which trains hundreds of skilled
nurses each year. The School offers a cooperative four-year academic program with neighboring Cal
State Los Angeles. Nursing graduates provide vital nursing services to residents throughout Los
Angeles County.
Medical Research: LAC+USC places a strong emphasis on research programs. Involvement in
medical research ensures that the medical staff is familiar with the latest medical innovations and can
provide the most current medical treatments.
Specialization: LAC+USC provides specialized medical staff, specialized equipment, and unique
medical procedures in the fields of neurology,hematology,oncology,dermatology and diabetes. Many
of these services are rare in the private sector.
Sickle Cell Care: LAC+USC provides fifty percent of the sickle cell care in Los Angeles County.
Jail Ward: LAC-I-USC operates the only inpatient jail ward in Los Angeles County. This secured
facility could not be easily duplicated in the private sector.
Page-4-
October 22, 1997
OCT-23-1997 10:39 G_ORIfl MOLINP OFFICE 213 913 1739 P.98/17
'NE UNINSURED WORKING POOR:
/.Os ANGELES COLINTY's Dvii
INDIGENT CARE
Many providers are taking measures to secure their future financial viability in reaction to current trends
in the health care industry. According to the DWP report,there is an increased unwillingness to provide
health care services to indigent patients.
"Instead, the burden of this population Is likely to become even more concentrated on the few
private hospitals still willing to accept them and the public providers obligated to accept them"
(DWP,page 89).
Los Angeles County is home to more medically
uninsured residents than any state except Texas ( Uninsured Population
(and, of course, California). Almost one-third of
the County's non-elderly population is uninsured. (proportion)36%
This is almost twice the national rate of 17.4 30.9% I
percent. Most of the uninsured in Los Angeles _
25%
5 22.1%
County — 84 percent — are workers and their
20%
dependents; many are working poor. These are s,s
people who, although they are employed, do not _ -Tv V.. ,°x
o% - �y ,x..� .
earn enough to afford health insurance for 6% _„_ ,;r41i8E'I�
themselves or their families. While some of themo,x _ 14f?+i�„�f"N4^' U
may have health insurance, many remain
underinsured because their plans have limited National California L. A. County
coverage or require prohibitive co-payments and sa °V'P
deductibles.
The ranks of these medically indigent are expected to swell as Medi-Cal eligibility becomes more
limited and benefits for non-citizen immigrant are restricted. According to Steve P. Wallace, Ph.D.,
Associate Director of the UCLA Center for Health Policy Research, "Los Angeles County could find
itself with an additional 25,000 uninsured residents per year—with a total of 200,000 more uninsureds
by the year 2005. . . . " Other experts have also recognized this growing need.
. . . . It appears that 750 to 780 beds would be warranted in the year 2000. This bed complement
would enable LAC+USC to maintain Its current county indigent Inpatient volume, and ifs role as
the hub of the trauma system in Los Angeles County(Tranguada/Zaretsky,page 39).
LAC+USC is providing critically needed services that cannot be reduced without significantly
impacting the surrounding community. Of the thirteen Medically Underserved Areas in Los Angeles
County designated by the U.S. Public Health Service (USPHS), nine are in LAC+USC's primary
service area. The USPHS has also designated fourteen Health Professional Shortage Areas in the
County; six are in LAC+USC's primary service area.
Page-5-
October 22, 1997
OCT-23-1997 13:39 GLORIR VOL INP OFFICE 213 513 1739 ?.119/17
STATE MANDATE
Due to California's statutory requirements, the County is the health care provider of last resort for
anyone who cannot afford to cover the costs of necessary health services. Los Angeles County has a
longstanding tradition of providing health care for all of its residents. In 1860, the State Legislature
authorized counties to extend the services of their hospitals to "every person who is blind, lame, old,
sick, or decrepit, or in any other way disabled so as to be unable by his or her work to maintain
themselves." This authorization later became the following mandate under the California Welfare and
Institutions Code Section 17000:
Every county and every city and county shall relieve and support all incompetent,poor, indigent
persons, and those incapacitated by age, disease, or accident, lawfully resident therein, when
such persons are not supported and relieved by their relatives or friends, by their own means,
or by state hospitals or other state or private institutions.
Until the State decides otherwise, the County has a duty to provide health care to those in need. And
the County must plan its future health care system in a way that fully acknowledges this responsibility.
The State mandate takes on greater importance as uncompensated care provided by private hospitals
continues to decline.
The private sector has a different set of financial pressures and is not bound by the same
statutory obligations as the public sector. The County cannot elect not to provide certain
services to the indigent. . . (Rose Report,page 52).
Los Angeles County will continue to face a
growing responsibility for patients who f County vs. Private Hospitals
require medical care but are uninsured and
cannot afford to pay for medical services Los Angeles County, FY 9S-9S
rendered. The LA Model found that the 100% iC —
population in Region 7 (which includes so%
LAC+USC) is projected to grow in coming box SI
aox
years. The proportion of persons in the 20 =
region at or below the federal poverty ox
level is also projected to rise. Based on
DNS Hospitals Private Hospitals
recent experience (see graph), Los Angeles
County cannot depend on private hospitals to III Indigent Days
voluntarily absorb a significant amount of its Medi-Cal Days
mandated responsibility. • other
OSHED, Quarterly Repons
Page-6-
October 22, 1997
OCT-23-1997 10I39 GLOR!P MOL INA OF=ICE 213 613 1739 =. 10617
ST14 1.1It.AL SAFEIN'
While LAC+USC Medical Center is currently safe for patients and staff, state and federal authorities
have determined that the facility is in dire need of replacement. Interim measures have been instituted
to assure the safety of everyone who uses the facilities.
Critical Life Safety Standards: The existing healthcare facilities at LAC+USC do not meet minimum
life safety standards, and are deficient in terms of system capacity, reliability, and code compliance.
Bringing the building up to seismic and fire safety level as required by today's codes is simply not
feasible.
Problem areas include fire detection and prevention,ventilation, and emergency power. For example,
inpatient facilities lack fire sprinklers and do not meet fire exit requirements. Medical gases cannot be
piped in, and there is no central air conditioning. Facilities do not meet the minimum standards for
organ transplantation. The U.S. Health Care Financing Administration is allowing the buildings to
continue to function as health care facilities as long as the Department of Health Services commits to
and makes progress toward replacing existing facilities with a new hospital under a specific time
schedule.
Functional Obsolescence: LAC+USC Medical Center is comprised of 130 buildings, including four
hospitals,an outpatient clinic, and an AIDS clinic. The main inpatient facility, General Hospital,was
built in 1928. Since then, health care practices and the facilities they demand have changed
dramatically. The building, therefore, has lost functional efficiency. Estimates show that a new 750-
bed replacement facility will cost approximately$100 million a year less to operate than the current
medical center and allow all activities to be consolidated in one modern, efficient facility.
I`' , n�
"Y' i • '1I ! I �' I 1
I1:di0 �y i f r\ ,I I x 4"'
M
'i II I 1 li
f I�. i , I I
ily " , it lr
�' � Y�. 111 i ,I �f,Vd ' �"
i
wNIIj,I ld t
l i
L I) 1 i j ' '1 2
r t
9 I
-
yz,: il
Page-7-
October 22, 1997
•
OCT-23-1997 1040 GLORIP MDL Nn C°FICE 2:3 613 1739 °. 11/17
EARTHQUAKE SAFE-Ell:
SECURING THE CENTER OF
LOS ANGELES COUNTY HEALTH C:-1 RE
State law, under SB 1953, requires all acute-care hospital buildings to meet State seismic standards by
January 1, 2008. Buildings cmiently used for acute-care inpatient services that are designated high risk
must be closed, retrofitted, rebuilt, or shifted to non-acute care by this date. Los Angeles County's
private hospitals are now assessing their options and deciding their futures.
The LA Model, a computer-based decision support tool developed in 1995, projects a 23 percent
decrease in private hospital capacity as a result of seismic requirements and financial pressures. The
LA Model report stressed that these projections are understated. In fact, the report concluded, some
hospitals may close because they are unable to comply with the State's requirements. LAC+USC's
Psychiatric Hospital has already been closed due to earthquake damage, and services moved to another
location.
In 1996 FEMA, the Federal Emergency Management Agency, approved disaster assistance to help
replace LAC+USC. In an August, 1997 letter, FEMA expressed concern that construction on many
major projects related to the Northridge earthquake has not begun, especially projects funded under its
program for hospitals. The letter states, "These delays may jeopardize Federal funding in the future.
. . ." In a September 19, 1997 memo to the Board of Supervisors, the County's Chief Administrative
Officer stated that "The Board needs to make a decision on the LAC+USC Medical Center
Replacement Project by the end of this calendar year to strengthen the County's case for a
reasonable time extension and guarantee we will receive the maximum reimbursement."
I I
ip
� r^
!tad*:'r
• _
During the 1994 Northridge Earthquake, the second floor of this day clinic completely collapsed. The
structum was unoccupied at the time. A total loss, the building was torn down soon after the earthquake
--its value, as estimated by one source, was about$35 million.
(photo: Gregory Davis)
Page-8-
October 11, 1997
OCT-23-1997 10:40 GLORIA wOLINP OFFICE 213 613 1739 7. 12'17
NIEDIC'AID DEMONSTRATION PROJECT ( I l l5 WAIVER):
MOI 'IVG TOII ARD THE FI/TIRE OF' HEALTH CARE
RE
The Medicaid Demonstration Project for Los Angeles County (called the "1115 Waiver") is a
cooperative plan between the County and the federal government to restructure the County's health care
system. The project is designed to move the County health system away from more expensive hospital
and inpatient services by increasing access to community-based primary and preventive care. The graph
below illustrates the dramatic changes being taken at LAC+USC to meet this goal.
Changes in Inpatient Capacity Under the Waiver: By the year 2000 the County will have reduced
the inpatient census in its hospitals by almost 40 percent(from the 94/95 Fiscal Year baseline of 2,595
to 1,583 beds a decrease of 1,012 budgeted beds). The County has already eliminated over 500
inpatient beds systemwide in an effort to move toward this goal. As part of the plan to reduce inpatient
capacity, the Waiver anticipates that LAC+USC Medical Center will be replaced by a smaller(750-bed)
replacement facility. Replacing the current LAC+USC with a 750-bed facility will reduce the County's
inpatient census by more than 150 beds beyond what is required by the Waiver(see graph below).
Changes in Outpatient Capacity Under the Waiver: By the year 2000 the County will have also
increased access to ambulatory care services by 50 percent in order to reduce the inappropriate use of
hospital-based services,particularly those of its emergency rooms. While all replacement options being
considered will provide fewer outpatient visits than the current LAC+USC (contrary to the provisions
of the Waiver), a 750-bed replacement facility will retain the highest proportion of these visits. The
intent of the Waiver is to reduce health care costs while improving the way in which health services are
provided. An across-the-board cut in services does not fully acknowledge this intent. The 750-bed
option gives the greatest indication that the County understands the purpose of the Waiver and is
prepared to face the future of health care in Los Angeles County.
The Future of LAC+USC
Average Deily Census (ADC)
OEM
1,200 -- - -
Lone -��
ao an 0 ® Note—ADC of a 750-bed
BOO ----- 1" facility it 638.
600 - I I I
91/92 93/94 95/96 97/98' 99/00•
90/91 92/93 94/95 96/97 98/99•
Fiscal Year (* projected) Source: DHS
Page-9-
October22, 1997
OCT-23-1997 1041 G_ORTP MO'_INA OFZJCE 213 513 '_739 P. 13/17
WE CAN'T AFFORD NOT To Buil) 750
Annual Operating Costs
Los Angeles County's Department of Health Services (DHS) has been wrestling for years with
questions surrounding the financial aspects of replacing LAC+USC Medical Center. DES recently
asked APM, Inc. to provide new, more accurate estimates for the annual operating costs of a
replacement facility. APM's findings were incorporated into DHS' October 3, 1997 Options Book for
the LAC+USC Medical Center Replacement Project. The final numbers clear up previous uncertainties:
there is no net difference between operating a 750-bed replacement medical center or a 500-bed
facility. This takes into account operational savings that will result from the current re-engineering
effort, as well as efficiencies that will result from a state-of--the-art facility.
. . the largest percentage of savings will come from moving from the current bed scenario to
the 750 bed size case. Even with the adjustment for economies of scale, there is a greater
percentage of fixed costs remaining as bed size declines(APM,page 8).
Annual revenues to offset these expenses, including State and federal funding and other sources, are
calculated by a complex DHS model that incorporates the number of beds, type of beds, mix between
compensated and uncompensated care, level of contracting with private facilities, and debt service.
750 BEDS — TO MEET THE NEED — IS AFFORDABLE
Annual County Contribution (in millions)
Current Medical Replacement 750 beds 500 beds Difference
Center Project (Option 17) (Option 15)
$250.3 DHS estimate, 1/97 $358.7 $264.0 $94.7
New estimate, 9/97 $251.6 $251.9 '4444.Wit
The difference between operating a 750-bed medical center and a 500-bed medical center is
approximately$300,000 per year, assuming an Average Daily Census of 860 inpatients, regardless of
hospital size. The January estimates did not include the costs to contract out for indigent patients.
Construction Costs
Most of the cost to build a new medical center—approximately 70 percent—will be funded by federal
and state programs. FEMA,the Federal Emergency Management Agency,will provide 45-50 percent
of the construction cost through disaster assistance associated with the Northridge earthquake. It is
anticipated that the State SB 1732 program will reimburse 50 percent of the County's debt service, or
approximately 20-25 percent of the total construction cost.
Construction of a 500-bed facility will take three-and-a-half years longer to complete than construction
of a 750-bed medical center, due to the need for additional design and review. This means three-and-a-
half years more of operating the outdated existing medical center.
Page-10-
October22, 1997
OCT-23-1997 IOI41 GLORIR HOLING OFFICE 213 813 1739 P. 14117
Supp1 .v i ?NTAI. CONTRACTING AND
TRANSFERRING PATIENTS:
WH I' CONTRACTING OUT Is .'1 LIMITED OPTIOiv
LAC+USC Medical Center is currently budgeted for 860 beds. Since 85 percent is considered by
experts to be an appropriate occupancy level,at current usage levels any replacement hospital with less
than 1,000 beds will require some inpatients to be cared for elsewhere.
When capacity is reached at the replacement facility,based on the seriousness of their medical condition
patients may be directed or transferred elsewhere. Some of the patients treated at other hospitals will
be unable to pay for their medical care—medically indigent. For these patients,private hospitals will
have to provide uncompensated care or contact with the County at a specified rate to provide indigent
care. Contracting out for care and transferring patients presents several risks.
Medical Risk: Any process that involves directing patients to another medical center or accepting
patients and then transferring them will involve considerable medical risk. Medical professionals
strongly maintain that it is poor medical practice to transport ill patients. A complicated process would
have to be implemented to establish medical protocols, clearly define medical liability, and protect the
best interests of the patient at all times.
Only a few area hospitals have the specialized vehicles—mobile intensive care units— that are used
to transport emergency or trauma patients. These units are expensive to use and reflect the substantial
costs and liabilities involved in transferring patients in critical condition.
We do not believe the private sector has the willingness or ability to absorb the level of service
presently offered by tAC+USC Medical Center. Further, even if the County would be able to
contract for services at this level [the current level of service at LAC+USCJ, successful
implementation of the contract program would require that the County establish comprehensive
methods for monitoring patient accessibility, and the level and quality of care provided by
contractors(Rose Report,page 56).
Practical Aspects of Contracting: While there may be empty beds at private hospitals in the county,
the medical conditions of patients may not always match the bed type available. And the County would
be limited in its flexibility when it has to regularly negotiate prices, availability, procedures, and other
parameters.
We found that although there appears to be significant excess inpatient bed capacity in the County,
this capacity is generally for lower acuity care(Rose Report,page Iv).
The County provides certain services that cannot be immediately replaced by private sector
providers(Rose Report,page 52).
Page-1/-
October 21, 1997
OCT-23--1997 10:41 GLORIR :ILL INP OFFICE 213 613 1739 P. 15417
Experience with Contracting: Previous efforts to develop contracts with private providers to care for
indigent patients in Los Angeles County have been unsuccessful. In the early 1990s, Los Angeles
County developed an Alternative Delivery Option (ADO) to serve the east San Gabriel and Pomona
Valleys. The financial and capacity projections were not met, making the system more expensive and
less effective than originally envisioned, The ADO was never realized.
More recent DHS efforts to partner with the private sector for indigent care, including attempts to
privatize High Desert Hospital and Rancho Los Amigos Medical Center, have also failed. In these
cases, it was determined that contracting with the private sector would be more expensive than if the
County continues to operate the facilities itself.
San Diego County's County Indigent Health Services program has contracts with private providers and
reimburses them for care provided to indigent patients. Due to reimbursement levels, two hospitals
have dropped out of the program, leaving the north section of San Diego County without any
participating hospitals.
Orange County's Medical Services for Indigents program has had challenges, including difficulty in
obtaining sufficient specialty services for patients. Orange County officials have gone so far as to
contact Los Angeles County DHS officials to discuss their interest in acquiring specialty services from
DHS physicians,
Financial Risk: Although the County provides the majority of indigent care, private hospitals do
provide millions of dollars to each year in uncompensated care. If there arc contracts in place,will they
continue to do so? Or will the County be expected to begin covering the costs of all indigent patients,
even those who would have previously received charity care?
The County will also face increased financial exposure when Medi-Cal patients are transferred to other
hospitals. We are currently reimbursed by Medi-Cal at a flat rate based on our average cost of care.
Typically, the early days of an inpatient admission are the most expensive, involving emergency
services, surgery, or intensive care. If a Medi-Cal patient is admitted for emergency or intensive care,
stabilized and then transferred to another hospital,the County will be providing only the most expensive
care, but will be reimbursed at a lower rate.
ESTIMATED CONTRACTING COSTS FOR 860 ADC
•
(in millions)
Inpatient Outpatient Total
Current Facility -0-
750-bed Facility $38.3 $11.1 $49.4
500-bed facility $77.1 $39.0 $116.1
Page-12-
October 22, 1997
OCT-23-1997 1042 GLORIA MOL INA OFFICE 213 513 1739 P.16/1?
CONCLUSION:
tLvl'ERJS A GREE- Los A NULL ES' Cm NT}'
NEEDS /1 750-BED MEDICAL CENTER
Leading independent consultants and health care industry professionals have conducted comprehensive
analyses based on many factors to assess the health care needs of the County and recommend an
appropriate size and scope for the Medical Center's replacement. All analyses have reached the same
conclusion:
The range of beds needed at 90 percent occupancy of from 684 to 833 beds Is remarkably
consistent for disparate methods of estimation. The mean of the five separate methods Is 769
beds. Thus, it is our recommendation that the replacement facility be sized at 750-780 beds
(Tranquada2aretsky,page 4).
We believe that Alternative 3: LAC+USC 788 would provide the
raver county with the most effective program for ensuring a balance of
geographically based services in the County (Harvey M. Rose
Accountancy Corporation, October 24, 1995 letter,page 11).
The LAC+USC Medical Center should be rebuilt within a range of 675 and
750 Inpatient beds to ensure availability of EMS/trauma services
rA throughout the county. Additionally, endorsement of a facility this size
ensures continued access to inpatient medical services for Indigents
residing In the region served by the facility.
HEALTHCARE
ASSOCIATION The unanimous vote reflects LAHC's belief that the unique medical needs
OF SOUTHERN CALIFORNIA of Los Angeles County will not improve but will deteriorate because of:the
growth of Indigent and uncompensated populations; a lack of adequate
funding for EMS and trauma centers; and a decline in hospital
reimbursements from government agencies and health plans(Health Care
Association of Southern California, June 13, 1997 letter).
. . . . we are in agreement with the conclusions and supporting
�� arguments(of Tranquada/Zaretsky). The LACMA Council,at its April
Los.kngelei Cot'nr 14 (1997)meeting, voted unanimously to support a rebuild facility
Medical with a bed capacity of approximately 750-780, Anything less appears
AuocEaUon to shortchangepublic need . . .
g (Los Angeles County Medical
Association, May 1, 1997 letter).
Page-13-
October 21, 1997
OCT-23-1997 10:42 GLORIA M9LINA OFFICE 213 613 1739 P. :7/17
REP012'I's CrriaD
This document includes findings from the following reports:
APM: APM Incorporated, "LAC+USC Facility Replacement
APM Incorporated Project: Estimated Operating Budget"May, 1997.
DWP: Feldstein, Paul, Ph.D., Alyssa Lutz, Ph.D., and Bruce
Strombom,"Trends in Southern California Healthcare: The Role of
Hospitals in Southern California's Managed Care Environment"
" ' " ` IT
'II ""' Report commissioned by the Los Angeles Department of Water and
Power. (DWP), 1997
LA Model: National Health Foundation, "The LA Model: Inpatient and Emergency Services
Component Update." May, 1997.
Lewin Study: Lewin-VHI, Inc., "Study Report Prepared for the Steering Committee for the
Study of Los Angeles Health Resources." May, 1995.
Rose Report: Harvey M. Rose Accountancy Corporation,
"Evaluation of the Los Angeles Department of Health Services
Facilities Replacement and Improvement Plan." October, 1995.
Tranquada/Zaretsky Report: Tranquada, Robert E., M.D. and Henry W. Zaretsky, Ph.D,
"County of Los Angeles Health Facilities Improvement and Replacement Plan Analysis,"
October, 1996.
UCLA Center for Health Policy Research: Wallace,Steven P.,Ph.D.,"Welfare Reform Could
Add 25,000 Uninsured L.A. County Residents Per Year." August, 1997.
Page-14-
October 22, 1997
TOTAL P. 17