County Health Dept. Far Short of Savings Goal

Los Angeles County government got a grim reminder Tuesday of the financial problems that once pushed it to the brink of bankruptcy when its health director reported that his department has fallen up to $212 million short of its promised savings.

The shortfall is more than just a budgeting headache because it indicates that overhauling the health department will be more difficult than county officials believed.

A long-standing deficit in that department nearly dragged the county into bankruptcy in 1995. Only a federal bailout of $600 million averted the catastrophe, and that relief was given with the promise that the health department would be restructured to become more efficient.

Three years and $15.6 million in consultants’ fees later, Health Director Mark Finucane told the Board of Supervisors that he vastly overestimated the money that could be saved from those efforts. His department will save $82 million to $142 million by 2000, rather than the $294 million he initially promised to cut by that date.

“There’s no question that the benchmarks were not adequate,” Finucane told the Board of Supervisors on Tuesday. “There’s also no question that the complexities of reorganizing a health care system over a three-year period is not an easy task.”

The county’s chief administrative officer, David Janssen, added that “the biggest mistake we made was assuming these benchmarks could be met because we wanted it to happen. We really set ourselves up.”

Mindful that they will have to ask the federal government to extend its bailout in 2000, the supervisors responded with anger and disbelief, even as they approved the health department digging into fiscal reserves to cover the shortfall.

“This is very frightening,” said Supervisor Gloria Molina, who said she may have difficulty arguing for the extension with the same fervor as she lobbied for the 1995 bailout. “This is not adding up to an effective change.”

Finucane, who admitted that the initial savings targets were too ambitious, said after the meeting that he did not think the shortfall seriously threatens renewal of the waiver. “There are going to be a dozen things we’re going to have to prove our mettle on.”

And a spokeswoman for the federal department that bailed Los Angeles County out of its financial hole, the Health Care Financing Administration, said the shortfall did not seem likely to jeopardize the waiver.

But Finucane’s report, discussion of which had been delayed for several weeks, was still poorly received by board members whose expectations he raised when he assumed his current post after the 1995 financial crisis.

“We brought you in” to restructure the department, Supervisor Mike Antonovich told Finucane. “We told you bring in the people you need to make sure we’re no longer in the red. . . . Now we come to judgment day and it’s like more of the same.”

Supervisor Yvonne Brathwaite Burke said she has heard complaints that basic services are being cut and hospital maintenance is suffering while administrators are spared.

Questioning how Finucane had itemized some of the savings he claimed to have made, Molina warned him that he needed to earn the board’s trust before being able to successfully secure a waiver extension from the federal government.

And Supervisor Zev Yaroslavsky warned Finucane against relying on the expected $120 million annual revenue from the recent settlement of lawsuits against tobacco companies to close his financial gap.

“I don’t think that’s what the tobacco lawsuit is all about--to prop up a 1950s bureaucracy,” Yaroslavsky said.

But county staffers have already begun to discuss using the tobacco money to help ease the health department deficit, and even included the money in an analysis of future financing for the department presented Tuesday.

The gap has been closed this year. But an analysis from the chief administrative office shows the department $148 million in the red next fiscal year and $257 million the fiscal year after that--assuming that the federal waiver is extended. Tobacco money and changes in federal financing are listed as ways to close those gaps.

Finucane accepted responsibility for being too aggressive in his savings goals, but noted that the department is still saving tens of millions of dollars.

He also said that even if restructuring works as expected, the health department will not be stable until the federal government changes the way it reimburses California and the state’s counties for treating indigent families.

“If they [do] not, there will not only be a waiver two,” Finucane said. “There will be a waiver three, a waiver four, a waiver five, a waiver six.”