When Stanislaus County officials started a major review of the Health Services Agency almost a year ago, the possibilities ranged from closing all nine medical clinics to changing almost nothing.
The long-term strategy being recommended to the Board of Supervisors on Tuesday takes the cautious middle ground. It would cut back services to about 17,000 people, but would preserve most of the current clinic system and keep the county as the primary provider of medical care to more than 60,000 people. (The board's Tuesday agenda, including the county report on the Health Services Agency, is available online at www.co.stanislaus.ca.us/bos/Agenda/2005/Ag%2009-13-05.pdf.)

The short-term goal is to halve clinic system losses, from $8 million to $4 million a year. But that's an optimistic forecast and, if the red ink hasn't been significantly reduced in three years, the board could be asked to close many or all the clinics.

These proposals affect all residents, not only those who use county clinics. That's because the losses have to be covered from the general fund, reducing the amount available for roads, law enforcement, parks and other countywide purposes.

Key among the 19 recommendations going to the board:

• Capping the number of patient visits at the 1997 level of 207,000, a reduction of about 50,000 visits a year.
• Eliminating direct provision of a few services, including dental care and mammograms.
• Relocating the Urgent Care clinic, family practice center and specialty clinics in the complex along Scenic Drive so the 17-acre site could be sold. The Public Health Department, Behavioral Health and Recovery Services offices and central services unit on the property also would be moved.
• Striving for more efficiency at the clinics and in overall operations.

Part of a bigger problem

The losses forcing change in the county clinic system are symptoms of a nationwide problem. Health care costs are rising twice as fast as the rest of the economy. Workers are being asked to shoulder more of the cost of their health care benefits, making insurance a contentious issue in negotiations. Growing numbers of adults have no health coverage. Medicare looms larger than Social Security as the nation's greatest funding challenge.

Around California, public health systems are strained to the breaking point — not only because of the burden of treating people with no insurance but also because the main government-sponsored insurance, Medi-Cal, doesn't provide adequate reimbursement to cover costs. For example, when a Medi-Cal patient comes in for a routine visit, the reimbursement covers only about $23 of the county's $55 cost.

Counties take different approaches to health care. Some operate hospitals; some have clinics. Others contract with private physicians and clinics or make arrangements with nonprofits. Public hospitals are slowly disappearing. There are only 24 in California today, down from 66 in 1965, and several of those are University of California teaching hospitals.

Situation in Stanislaus

When Stanislaus County closed its hospital in 1997, county leaders opted for a system of community clinics intended to make primary care more accessible. In terms of accessibility, they've been successful.

For patients needing hospitalization, the county signed a 20-year contract with Tenet Healthcare Corp., the parent company of Doctors Medical Center in Modesto. DMC officials are openly unhappy with the contract, but they're locked in for 12 more years — so long as the county lives up to its end of the deal, which includes continuing to operate clinics at 1997 patient levels.

The constraints of the DMC contract are a major factor in the recommendations the county staff is making. The county also has long-term leases for many of its clinics, and contracts with employees that restrict its ability to make significant changes.

Another key factor: If the county were to close all its clinics — which would be the cheapest option — where would all those people get medical care?

The same poor reimbursement rates negatively affecting the county budget also apply to physicians in private practice. Many doctors won't see any — or any more — Medi-Cal and Medicare patients because it costs more to treat a patient than they receive in payment.

With few doctors willing to see them, thousands of people would flood emergency rooms, which are required to treat true emergencies, regardless of a patient's ability to pay.

That's why existing hospitals oppose closure of county clinics. Hospital administrators say they'll be overwhelmed. That's undoubtedly true, though most hospitals aren't doing all that they should and could to reduce ER crowding. (Many people with insurance show up in ERs on the referral of their own doctors or because those doctors have limited office hours. And as much as they complain, hospitals benefit because, on national average, one in seven of those ER patients ends up being admitted as a paying patient.)

The process up until now

The county's Health Services Agency is a $100million-a-year operation. Most of the expenses are covered by reimbursement from Medi-Cal, Medicare and other insurance providers; patients' direct payments; and other sources. But the county has lost money on its clinic system every year since it began in 1998. Until last year, the county made up the difference from other accounts, such as tobacco settlement funds. Most of those sources have been depleted, so for fiscal year 2005-06, there is a predicted operating deficit of $8.7million.

Left unchecked, the mounting health services agency losses will cut dramatically into basic county services. Recognizing this worsening financial squeeze, the Board of Supervisors asked for a plan.

The process so far reflects the style of the county's chief executive officer, Rick Robinson — it's been thorough and deliberate. A consultant did an overview. Physicians, other providers and community representatives were invited to two summits earlier this year. There have been numerous conversations with hospital administrators and others.

But there are no quick or easy solutions.

The recommendations from staff include several optimistic assumptions, such as the county qualifying for certified public expenditures or the clinic gaining status as a Federally Qualified Health Center — either of which would translate to higher reimbursement rates and both of which are difficult to obtain. And there is already a Federally Qualified Health Center in the county — Golden Valley Health Centers, a nonprofit that operates multiple clinics in Merced and Stanislaus counties. Its chief executive officer, Michael Sullivan, said he will object to any application from the county.

Golden Valley wanted to partner with the county, and offered to take over three or four of the county's clinics. No agreement was reached, and the relationship between county and Golden Valley leaders is sour. That's too bad, because the county needs and wants partners in providing health care.

If it can't work out an amicable arrangement with an organization that shares a common purpose — serving the poor — then it's hard to see how other partnerships will be developed.

There are other shortcomings to the plan. The county proposes to raise the amount it charges uninsured people to see a physician from $45 to $90 and the average deposit to $100. Those rates are more likely to deter people from using the clinics than to raise revenue.

The proposal also involves new facilities, remodeling work and other capital projects prone to cost far more than anticipated.

Bottom line: Best option

These drawbacks aside, however, this phased-in plan beats the drastic alternatives — continuing to amass red ink or getting the county out of the health care business. We see a number of significant positives:

• The clinic system would continue to provide access to primary health care to thousands of people in their communities. That's critical in a county with limited public transit and high poverty rates.
• The family practice residency program would survive. At any given time, there are 27 resident physicians working in county clinics and at DMC. They learn, but they also enhance the services available. And 60 graduates of the training program have remained in the county as practicing physicians — benefitting the whole population.
• The plan allows flexibility for an uncertain future. The county needs a system that can be remolded, as needed, based on actions at the state and federal levels. Universal health care or radical changes in funding could change the whole picture.

Another inaccurate perception is that the county is required to provide health care to anyone who needs it. The state law isn't that broad.

Supervisors have to balance the county's legal and moral responsibility to provide health care with serious budgetary demands. The limited reductions in service the county staff proposes seem to be a reasonable starting point.