If you had to list Los Angeles County’s leading economic industry sectors, where would you place our County’s hospitals on that list? Top five? How about top ten?

It might surprise you that Los Angeles County’s hospitals account for almost 12% of the County’s total economic output and support approximately 352,000 direct and indirect jobs with $15.6 billion in wages.  The sector contributes over $1 billion in tax revenues to the State’s coffers, $69 million to the County and another $42 million in sales tax revenues to Los Angeles County cities. What’s more, the sector is poised to expand even in these bad economic times, and its expansion is almost certain to accelerate as our County’s population continues to age and swell from about 10.2 million residents currently to 11.2 million by 2020.

Why then are so many of Los Angeles County’s hospitals struggling to keep their doors open?
In short, this vital economic sector is in a titanic struggle for survival against “the perfect storm” of deep budget cuts, unfunded seismic retrofit mandates, an ER network under siege and laboring on the fringe of profitability, a rapid increase in the number of the uninsured, and workforce shortages that aren’t keeping up with overcrowding, staffing requirements and anticipated retirements. Meanwhile, increased demand for healthcare services attributable to a growing elderly population is expected to increase by 75% in California by 2020.

We’ve already lost 17 hospitals and emergency departments in the County during the last decade, including the recent closure of King-Harbor in much underserved southern Los Angeles County – eliminating about 40,000 ER visits per year. And with two out every five hospitals losing money, we are in grave danger of losing another three to four hospitals very quickly without aggressive action. If we continue to turn a blind eye to the industry’s problems, we potentially risk the solvency of our entire countywide health care system.

Despite these problems and the pressures local hospitals face in ensuring they can provide appropriate care to everyone in need, California lawmakers have proposed a series of large budget cuts totaling about $1.5 billion and creating an additional loss of $1.2 billion in federal matching funds.  The proposal would target low income working families, seniors, and the disabled through reduced payments to MediCal providers, cuts to community clinics, new MediCal eligibility restrictions and red tape, as well as elimination of important services.  Combined, these cuts would result in almost 60,000 children and 50,000 working parents being terminated from the MediCal program. In total, over 400,000 individuals could lose MediCal coverage over a three-year period, adding to the ranks of LA County’s 2.1 million residents currently without health care coverage. 

While lawmakers attempt to reduce the deficit now, their actions will only increase the amount of money spent on healthcare in the future by cutting preventative services and forcing our County’s most at-risk patients to rely on emergency facilities for basic medical care. Already the average federal payment per Medicaid patient in California is the lowest in the nation (51st), almost 83% lower – at $813 – than the state of Alaska at $4,792. Today in Los Angeles County, Medicare and Medicaid pay only a portion – about 87% and 78% respectively – of the costs of providing medical services. County hospitals that rely on these federal reimbursements are left struggling to pay their bills, much less think about turning a profit.

The Medicaid payment disparity between California and other states is further exacerbated in Los Angeles County by the fact that an average community hospital here receives about 17% less MediCal dollars than does its counterpart in Northern California. Essentially, this means that poorer County hospitals which subsist predominately on MediCal reimbursements – and are at the core of the County’s safety net system – are already losing big dollars and chronically operating in the red.

Additional budget cuts will aggravate these MediCal inequities between north and south and threaten the supply chain of healthcare services for everyone in Southern California, not just the poor. With these budget cuts, fewer doctors in Los Angeles will be inclined to treat MediCal patients, which will shift the critical mass of MediCal patients seeking care even further towards our already overloaded emergency care system. This means bad news for all of us, in the form of significantly longer ER wait times, reduced access to hospitals and physicians, and further decline in the availability of emergency care.

It is the job of our elected officials to make tough choices under challenging conditions. Ultimately, these choices should be made with the long term goal to make the day-to-day lives of their constituents better.  Our County’s hospitals are currently fighting for their lives. Their future is now. Instituting budget cuts that will further debilitate our besieged hospital system and significantly weaken the fragile MediCal link that already discriminates against L.A. County is the wrong prescription to cure our budget deficit and protect the long term future of the County’s economy and the health of its residents.

Bill Allen, President & CEO, Los Angeles County Economic Development Corporation

Gary Toebben, President & CEO, Los Angeles Area Chamber of Commerce

Yolanda Vera, Director, LA Health Action

Ron Wood, President & CEO, San Gabriel Valley Economic Partnership

Bruce Ackerman, President & CEO, Economic Alliance of the San Fernando Valley

Randy Gordon, President & CEO, Long Beach Area Chamber of Commerce

Data is from 2004. See, Hidden in Plain Sight: The Economic Contributions of Southern California’s Hospitals and Related Services, Los Angeles County Economic Development Corporation (February 2006), at pages 12, 14-15 (In LA County, hospitals directly employed over 132,000 people in 2004, which is roughly the population of the City of Palmdale or Lancaster in 2004.).