While local officials expressed relief at Gov. Davis' revised budget plan, managers at Modesto's Hy-Lond convalescent hospital called a meeting with the facility's 110 employees.

The managers warned of staff and salary cuts and even the prospect the 120-bed nursing home could be sold.

"If we can't make the bottom line, if you can't make the payroll, what are you supposed to do?" said Belinda Guzman, executive director of the Coffee Road hospital.

Davis' plan, unveiled earlier this month, called for raising taxes and borrowing money in place of some drastic cuts he had proposed earlier.

But he still wants to cut $1.1 billion from the Medi-Cal system. That would include a 15 percent reduction in payments to doctors and certain facilities that care for patients under the state's health insurance program.

Guzman said about 80 percent of Hy-Lond's long-term residents are covered by Medi-Cal. Under the governor's plan, daily payments could shrink from $115 per patient to less than $100.

Because the facility must have a certain number of nurses per patient, there is no more room to cut, the director said.

Guzman said she is afraid the facility's Arkansas-based owner, Beverly Enterprises, will decide it can no longer afford to operate in California and sell its facilities in the state.

"My biggest concern is what is going to happen to these patients?" Guzman said.

Cuts wipe out profits

The proposed cuts would cause more than half the state's nursing homes to operate in the red, according to a study by the University of California at San Francisco and the California Healthcare Foundation.

A coalition of nursing homes is trying to fight Davis' proposal and come up with another plan.

Stanislaus County health officials are equally concerned. County health clinics would take a $2 million hit next budget year, and the clinics could also see a wave of displaced patients when doctors have their payments rolled back.

"The impact on community physicians may cause them to no longer see Medi-Cal patients, and that would shift the burden to the county system," said David Jones, spokesman for the Health Services Agency.

The county is legally bound to provide health care for its poorest residents; but, as a policy, it provides care for more than 60 percent of the Medi-Cal patients as well.

"The financial hit for us would be terrible," Jones said.

County officials believe the cuts would be implemented in October, but they are counting on the Legislature to spare the Medi-Cal system. Committees in the state Senate and Assembly rejected the governor's health-care cuts early this year.

One health official in San Joaquin County said he is worried most about a proposed change in Medi-Cal eligibility requirements.

The governor has agreed to a change the regulations so that people reapply for Medi-Cal twice a year instead of once a year. But Davis wants to go further and require quarterly applications, a paperwork nightmare that could result in 200,000 people losing benefits.

"If a significant number of people lose their Medi-Cal eligibility, there is a potential for more people becoming uninsured and seeking our services," said Steve Ebert, director of San Joaquin County General Hospital in French Camp.

Bee staff writer Ken Carlson can be reached at 578-2321 or kcarlson@modbee.com.