Final Report 2004 - 2005

Recommendations 2

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  Governing bodies responsible for policy and oversight relating to Real Property issues should instruct and encourage Asset Managers to pursue opportunities to increase collaboration. All of the models for collaboration could positively affect real property management by governmental entitles located within the County. The governing bodies responsible for giving direction to real property asset management – especially the Los Angeles County Board of Supervisors and the City Councils of Los Angeles and Long Beach – should encourage these collaborative efforts by directing the managers to investigate and pursue increasingly formal opportunities for collaboration. Specifically:  Begin with formal quarterly meetings. Managers and Directors responsible for Real Property management of large jurisdictions should meet quarterly to discuss common issues, and to inform one another of major real property strategic directions for their areas. In this fashion, it will be possible to consider formal and informal ways of collaborating on projects in the early development stages. 90  Evaluate and introduce policies which foster intergovernmental cooperation for Real Property management. Governing bodies should consider implementing policies such as: ¤ Requiring their responsible departments to request comments from other entities on proposals for specific transactions that would benefit from intergovernmental cooperation ¤ Authorizing joint use of service agreements, brokerage arrangements, and other contracts ¤ Holding annual public meetings with counterparts in other jurisdictions to discuss and review common real estate strategic and property management issues and directions
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  4). 2.2 Develop recommendations for enabling legislation that requires the Board of Supervisors to appoint a Task Force comprised of DHS representatives and other health care professionals, practitioners and consumer representatives to develop a slate of nominees for appointment to the Health Authority Board of Directors, consistent with the composition outlined in Recommendation 2.1. 2.3 Develop recommendations for enabling legislation that requires the creation of Healthcare Consumer Advisory Commissions in each of the County's regional service areas or networks with one role being nominations to the two consumer representative positions on the Health Authority Board of Directors. 2.4 Develop recommendations for enabling legislation that establishes an ongoing nomination and appointment process for the Health Authority Board of Directors, where: (a) nominations are made by the Board of Directors for the five hospital and health care professional slots, by DHS’ medical school affiliates for the two physician members, and by the recommended Healthcare Consumer Advisory Commissions for the two consumer representatives; and, (b) all nominations are confirmed by the Board of Supervisors. COSTS AND BENEFITS There would be no direct costs to implement these recommendations, although staff time will be required to provide analytical support to the Board of Supervisors. The benefits of implementing these recommendations would be that the Health Authority Board would include members who possess appropriate hospital and health care system management, finance and other business expertise, as well as members who represent consumer interests. By segregating ongoing member appointment responsibilities between consumer groups, medical school affiliates and the Health Authority Board of Directors, a less politicized and more balanced organization should be in place, better reflecting the diverse interests of the community. 3. HEALTH AUTHORITY FINANCE AND PERFORMANCE REQUIREMENTS Summary of Findings: v Executive Summary • Only 34.2 percent of the Department of Health Services $2.4 billion hospital and ambulatory care net operating budget is funded from direct patient revenues. The remaining 65.8 percent, or $1.6 billion, is funded from intergovernmental transfers from the federal and State governments, designated tax revenues, grants and subsidies received from the County. The substantial portion of income received from the federal, State and County governments are received by DHS to fund health services for the County's medically indigent and uninsured population. • The creation of a health authority will not relieve the County of the significant financial responsibility it bears for the care of the medically indigent and will not alone resolve the fiscal problems facing DHS. While net operating costs could be lowered by implementing service efficiencies and initiatives to maximize revenues, it is likely that a significant operating deficit will continue unless the County redefines service responsibilities presently included in California Welfare and Institutions Code § 17000, case law and policy of the Board of Supervisors. Even with such a redefinition, challenges to the County's ability to fund medically indigent service demand will likely continue as the federal and State governments attempt to reduce their costs through Medicaid reform. • To provide financial stability to the health authority, adequate financial provisions must be incorporated in the operating agreement with the County. A coordinated care approach, using standard rates for each covered patient or episodic treatment category, that can be adjusted each year based on changes in patient population and service profile, is recommended. The rate should incorporate planned cost reductions from efficiency improvements and redefined services, and cost enhancements for investments in areas such as information technology. • To ensure that a desired level of service quality and cost- effectiveness is achieved, the operating agreement should include specific performance and financial goals for the health authority and measurements to use for periodic reports to the Health Authority Board of Directors and the County on actual accomplishments. vi Executive Summary RECOMMENDATIONS Based on the above findings, it is recommended that the Board of Supervisors: 3.1 Clearly and effectively define a patient benefits package and the population for whom the health authority will provide services, within the context of State law, case law and local priorities, to be included in the operating agreement between the County and the new health authority. 3.2 Direct the CAO to work with the Department of Health Services representatives to establish a funding mechanism that will reasonably finance the health authority’s operations. At a minimum, the health authority should retain all patient revenues and other resources that result directly from the services that it provides, as well as dedicated tax revenues and maintenance of effort guarantees for sufficient County General Fund subsidies to finance its operations. 3.3 Direct the CAO to work with County Counsel and the Department of Health Services representatives on the development of an operating agreement for services that provides revenue and cost-based incentives for (a) the County to provide sufficient resources to the health authority using a coordinated care standard rate per patient or episodic treatment approach, and (b) the health authority to use those resources effectively, as demonstrated by reductions in cost per patient over several years. 3.4 Direct the CAO to work with Department of Health Services representatives to establish baseline costs based on current operations, and to determine the planned timing of cost reductions and efficiency improvements and needed investments in areas such as information technology so that the standard rates used in the agreement between the health authority and County can be adjusted each year, in accordance with this plan. 3.5 Direct the CAO to work with the Department of Health Services to develop (a) hospital and health care system financial and performance goals and measurements, for inclusion in the operating agreement between the County and the health authority; and, (b) systems to measure actual financial and service quality performance of the health authority, including cost measures, patient outcome and satisfaction measures and improvements in efficiency. These goals and measurements should be regularly reported to managers, the Health Authority Board of Directors and the County Board of Supervisors, supplemented by periodic analysis of results by an independent party. vii Executive Summary COSTS AND BENEFITS There will be initial costs to implement the service quality and performance monitoring system, primarily in County staff time. However, we did not estimate that cost within the scope of this study. The health authority will be provided with greater assurance that sufficient funding will be provided by the County for designated levels of service. The County will have greater assurance that it will receive high quality, low cost services for the indigent and uninsured population that the health authority will be serving. 4. HUMAN RESOURCES Summary of Findings: • The Department’s hospitals had a 12.7 percent position vacancy rate for the first five months of FY 2004-05, with even higher rates for key classifications such as nurses and technicians and specialists. These vacancy rates, measured in full-time equivalents, are one indication of potential human resource management problems in areas such as recruiting, hiring and/or compensation. A review of the Department’s and County human resources processes and systems indicates that all of these areas are affecting the Department’s ability to hire and retain staff. A fiscal impact of this situation is the use of Registry personnel to fill vacant positions. For Staff Nurses, the Department will spend an estimated $9 million in FY 2004-05 for Registry positions compared to the cost of in-house County employees. • Adherence to County civil service rules means that the Department’s recruitment and hiring processes are lengthy and time consuming. Review and approval of job bulletins, selection criteria, position information, and classifications can delay the hiring process. • To address some of these concerns, DHS has begun to reengineer its human resources function. Many responsibilities have been centralized within the Department. The DHS Director has sought and received increased authority for making compensation and hiring decisions; and, much of the hiring process has been automated with the development of an in- house system available to program managers. Despite these achievements, the process is still governed by County civil service requirements and many DHS managers continue to viii Executive Summary assert that the Department’s human resources system is ineffective and cumbersome. • With the creation of a health authority, many of these inefficiencies could be eliminated. Current restrictions placed upon DHS by the County Charter, Civil Service Rules, and employee bargaining agreements could be lifted; compensation levels could be strategically set by the health authority board within the context of the health authority's singular mission and budget; the recruitment and hiring process could be streamlined and made more efficient; and, the rules associated with employee disciplinary actions could be reconsidered. RECOMMENDATIONS Based on the above findings, it is recommended that the Board of Supervisors: 4.1 Direct the CAO and DHS to collaborate on development of a human resource plan for transition to the health authority, with detailed recommendations regarding timelines and alternatives for addressing the various labor and collective bargaining issues identified in this report. 4.2 Direct the CAO to expedite negotiations with employee bargaining groups to implement the proposed Flexible Staffing Pilot Program, in an effort to immediately reduce outside Registry costs. 4.3 Direct staff to include goals for key human resources measures in the operating agreement between the County and the health authority, including reducing turnover and vacancy rates, improving hiring cycle time and achieving compensation parity with the hospital and health care market, with the results reported annually to the Board of Supervisors. The Department of Health Services should: 4.4 Continue efforts to improve the internal human resources organization, process, resources and tools for effectively administering human resources processes prior to the date of transition to the health authority 4.5 Conduct an analysis of the existing classification and compensation system and identify specific changes needed under the new health authority. 4.6 Develop a proposed expedited hiring system for implementation under the health authority. ix Executive Summary COSTS AND BENEFITS There would be unspecified costs to implement an effective human resources function within the Department of Health Services. The human resource process within DHS should continue to improve until the health authority is created. The new health authority would be provided with critical information regarding labor and collective bargaining agreements, needed changes to civil service processes and other critical human resource concerns. The net result should be faster and more flexible hiring processes, fewer vacancies and turnover and reduced costs from decreased use of Registry personnel. 5. HEALTH SERVICES PROCUREMENT Summary of Findings: • In FY 2004-05, the Department of Health Services procured goods and services worth up to $1.7 billion. Procurement occurred in a structure featuring formal rules codified in State law, the County charter, County ordinance and Board of Supervisors policies, emphasizing maximum opportunity for vendors to bid to provide goods and services, and focusing on competition as the primary way to achieve the lowest prices. • Department staff criticized the rigidity of this process, complaining that the plethora of rules slows down the procurement process unnecessarily, and does not achieve substantially better prices than could be achieved for lower dollar value items by more informal processes that permit informal negotiations with vendors. In addition to these interview comments, a review of a limited number of service contracts negotiated by the DHS Contracts and Grants unit revealed instances where technical violations of procurement rules led to contract protests, and significant delays in the award of contracts. DHS staff estimates that approximately 80 percent of all service contracts issued are subject to protest over the award and related delays. • Because the rigid procurement system that currently exists is defined in State law, the County charter, County ordinance and Board of Supervisors policies, establishment of a health authority would provide the opportunity to eliminate some of those strictures, establishing a more flexible procurement system, while still providing some centralized control of procurement to prevent abuses. x Executive Summary RECOMMENDATIONS Based on the above findings, it is recommended that the Board of Supervisors: 5.1 Direct DHS staff to develop recommendations for enabling legislation that exempts a new system of health care governance from the requirements for a County purchasing agent in State law, and from the procurement requirements of the Los Angeles County Code and Board of Supervisors policies. The Department of Health Services should: 5.2 Develop procurement procedures to be implemented under the health authority that eliminates a rigid focus on formal bidding processes and that emphasize maximum vendor access in favor of a more flexible system that focuses on getting goods and services quickly, at reasonable prices. 5.3 Develop procurement policies for the health authority to increase the value of goods and services that individual health care facilities can purchase on their own with less formal bidding requirements based on an analysis of current purchasing amounts and financial risk so that formalized bidding is used only when there will be substantial benefits or price advantages resulting from the additional time and administrative requirements. 5.4 Design a consolidated procurement structure to be established under the health authority that includes a centralized procurement office overseeing all components of the system, including the Contracts & Grants Division, that would process bids above the newly established threshold for formal bidding, provide organization-wide oversight and monitoring of compliance with the Health Authority’s new regulations to ensure that procurement abuses are not occurring, and would be headed by a purchasing manager established at the same management level as a health system director of nursing, or director of clinical care. 5.5 Develop a system for ensuring and reporting to management and the Health Authority Board of Directors that competitive bidding is used when appropriate and advantageous to the organization and that procurement abuses are not occurring. 5.6 Determine the number of positions that should be transferred from the Internal Services Department to the new health authority for the new centralized procurement function, recognizing that fewer formal bids will be required in the new system and that more items will be standardized and purchased through a Group Purchasing Organization. xi Executive Summary 5.7 Determine the number of positions that will be needed for the Contracts and Grants Division under a new more streamlined contracting procedure. COSTS AND BENEFITS There would be no costs to implement these recommendations. A new system of procurement, based on a new system of health care governance, would be more flexible, allowing the health care system to get the items needed for patient care more quickly, at reasonable prices, by eliminating rigid bureaucratic rules and processes. Benefits would include reduced cycle time for procurement and reduced administrative costs as fewer staff would be needed to process purchases without all of the procurement rules and regulations and processes with which DHS must now comply. There should be some cost reductions from a reduced need for the current ISD staff that processes DHS purchase orders since fewer procurements would be subject to formal bidding procedures and in the Contracts and Grants division since the service contract procedure would be streamlined. 6. INFORMATION TECHNOLOGY Summary of Findings: • The Department of Health Services’ past approach to information technology has been decentralized, with each hospital and department developing its own systems and protocols. As a result, it is not possible to track patient records across the Department as there are no common patient identifiers and no common methods for recording patient transactions. • The Department has recently developed a system for centrally collecting and standardizing some patient data from each cluster after it is entered into each independent system, allowing for better management monitoring of patient outcomes and quality of care across the system, and has been used to develop some new clinical protocols. Further integration of the Department’s information systems is a key component to managing the Department as a single system, consistent with the Department’s strategic plan. • The Department completed a business automation plan in 2005 that sets its strategic information technology objectives and goals and assesses strengths and weaknesses of the current information technology resources. The key weaknesses identified are the level, mix, compensation, and skills and abilities of the Department’s information technology staff. As xii Executive Summary one indication of staffing limitations, vacancies in the Department’s information technology classifications averaged approximately 14 percent in FY 2003-04, and were even higher for core classifications such as Systems Analysts and supervisors. • Under a health authority, the new organization would be free of County constraints on classifications, compensation and hiring processes. The organization could redesign or establish new classifications more appropriate to its needs and adjust compensation accordingly. At the same time, the organization should establish a stronger management function centrally by converting the current Chief, Information Systems in Health Services Administration to a chief information officer, responsible for overall information technology development and maintenance for the entire organization. RECOMMENDATIONS Based on the above findings, it is recommended that the Board of Supervisors direct the Department of Health Services to: 6.1 Expand the current business automation plan into a five year strategic information technology plan for the health authority linked to the priorities and principles of the 2002 DHS strategic plan and detailing current hardware, software and utilization throughout the Department, future priorities, proposed projects, costs and benefits of projects, funding sources and project selection criteria. 6.2 Determine the unit cost for the highest priority, most cost-effective information technology projects to include in the payment rate that the health authority will receive from the County. 6.3 Design and implement a skills assessment process for current information technology staff and compare results to skills needed as detailed in the five year strategic information technology plan. 6.4 Begin preparation of new or redesigned job specifications for information technology positions for the health authority, including creation of a chief information officer classification. 6.5 Conduct or obtain existing information technology salary survey data to determine market rate compensation levels for new or redesigned classifications. 6.6 Prepare a formal plan, including an implementation schedule, for restructuring the information technology function under the health authority with a centralized chief information officer responsible for overall xiii Executive Summary direction and priority setting for the function and overseeing centralized and decentralized staff, with the latter responsible for day to day operations at hospitals and other facilities. 6.7 Participate in the funding for a fully integrated, comprehensive information technology system for the health authority, that will be able to provide cross-system data on patient care and costs that will be necessary to monitor health authority performance. COSTS AND BENEFITS The primary cost of implementing these recommendations will be staff time. One-time direct costs could be incurred if an appropriate salary survey cannot be obtained and needs to be commissioned to assess current salaries for information technology positions. Benefits of the recommendations would include preparation of a plan to guide future information technology investments under the health authority, consistent with the 2002 strategic plan, a more consistent approach to information technology across the organization, an improved information technology staffing plan that will enable the organization to achieve its goals and improved information to assess performance and patient outcomes. 7. COUNTY SUPPORT SERVICES Summary of Findings: • The FY 2004-05 Countywide Cost Allocation Plan (CCAP), allocates nearly $1.4 billion in County costs to departments for services that are provided centrally, such as payroll, accounting, building maintenance, facility rent and use, utilities, insurance, legal and other general support activities. DHS was charged approximately $203.9 million for these services in the current year plan. Approximately $185.6 million was direct charged and the balance was allocated to the Department using a variety of allocation methods. • A separate health authority would not be required to use County support services, but would likely continue to use many of them at little or no cost savings. In addition, many of the costs presently charged to DHS such as rent, facility use and utilities would still be incurred even if the services are no longer provided by the County. In some instances the combined cost for both the health authority and the County could increase because the County would be unable to sufficiently lower its costs to offset losses in income from the health authority. • Nonetheless, some County overhead costs charged for support services provided to DHS could be eliminated, by providing the xiv Executive Summary services in-house or through less costly contractors. Costs for some external County oversight and control services that would no longer be required under a separate health authority could also be eliminated. • Conservatively estimating reductions in overhead costs for some County support services, savings could amount to an estimated $10.8 million per year. However, this is a relatively small amount of savings when compared with the projected cumulative DHS operating deficit of over $1.3 billion. • After an initial transition period, the health authority should be given the option to (a) continue to purchase services from the County, (b) purchase services from contractors, or (c) provide services in-house. Each alternative should be fully analyzed for the potential to produce savings for the health authority and the County, but should primarily be chosen based on business considerations for the health authority. RECOMMENDATIONS Based on the above findings, it is recommended that the Board of Supervisors direct the Chief Administrative Officer to: 7.1 Conduct a thorough analysis of current County costs to support DHS services. The analysis should include:  A comprehensive accounting of costs, such as rental expenses, utility charges, judgments and damages, insurance and security services, that would likely offer little opportunity for health authority savings;  An analysis of services, such as legal and information systems, where some limited health authority savings could be achieved; and,  An analysis of services, such as auditing, accounting, budgeting, financial management and employee relations, where more substantial savings may be possible. 7.2 Conduct a thorough analysis of County cost impacts that might result from possible health authority decisions to discontinue the use of County services and possible offsets under the health authority. 7.3 Estimate the net countywide cost or savings (i.e., the combined finances of the County and the health authority) that might be achieved with the creation of a health authority, considering fixed support services costs that the County might still incur even if the health authority no longer uses the support service. 7.4 Work with the Department of Health Services to identify and report back support service overhead costs that could be eliminated by DHS providing xv Executive Summary the services in-house or contracting to a lower cost contractor for services now provided by County departments, and, to identify other cost reductions that would be achieved for external verification and monitoring of DHS operations that would no longer be needed under a separate health authority and is now performed by departments such as County Human Resources, the Chief Administrative Office and the Auditor- Controller. The Board of Supervisors, with input from the County Counsel, the Department of Health Services and other County departments, should: 7.5 Develop legislative provisions that ensure the most cost effective partnership between the County and the health authority. At a minimum, these provisions should require that:  The health authority be required to purchase support services from the County during a transition period lasting no less than two years; and,  The health authority be required to give a one year notice when it intends to discontinue the use of County support services. COSTS AND BENEFITS There would be no direct cost to implement the recommendations, although staff would be required to conduct the recommended analyses and report to the Board. Taxpayer interests would be protected, while providing the health authority with the eventual autonomy that would be required to operate in an efficient and effective manner. The County would be provided sufficient notice to plan for transition when the health authority determines that County services are no longer required. While further analysis is recommended for more precise quantification, annual savings to be realized by the health authority for reduced overhead costs for support services and reduced oversight and monitoring by external County departments could amount to as much as $10.8 million per year. 8. TRANSFER OF COUNTY ASSETS AND LIABILITIES TO THE HEALTH AUTHORITY Summary of Findings: • The County has invested significant resources in facilities and equipment used by DHS to provide hospital and health services. Many of these facilities are in need of significant rehabilitation or replacement. For example, the County is presently involved in a major construction effort to replace the LAC+USC Medical Center, which will cost an estimated $820.6 million. As a result, xvi Executive Summary complex legal and financial decisions need to be made as part of creation of a health authority regarding asset ownership, responsibilities for debt repayment and the ongoing maintenance and improvement of the County's infrastructure. • The County has significant long-term unfunded liabilities for employee retirement obligations and prior workers compensation, general liability and medical malpractice self- insurance program claims against DHS. These obligations amounted to nearly $920 million as of June 30, 2004, and do not include unfunded liabilities for retiree health care benefit costs which are in the billions of dollars. • Since these unfunded liabilities are the result of policies and decisions made by the County over the years, they should be retained as an ongoing County expense, not an expense of the new health authority, until they are fully paid. In fact, some of the County’s self-insurance policies reflect exemptions from State Controller insurance guidelines to ensure federal grant reimbursement to local agencies and therefore would probably not be allowable for new health authority. As a result, the health authority will most likely have to fully fund the insurance liabilities that it incurs starting the day of its inception. The operating agreement between the County and the health authority should be structured and external approvals obtained to ensure that all existing and future liabilities are fully funded and that the County can effectively leverage federal and State funding. Unless the County can successfully obtain such external approvals, there is a risk that the substantial unfunded liability that exists at the time of separation would become a General Fund cost and would not be considered eligible for reimbursement from federal and State grants. RECOMMENDATIONS Based on the above findings, it is recommended that the Board of Supervisors direct the Chief Administrative Officer, the Auditor-Controller and County Counsel to collaborate to: 8.1 Develop strategies and recommendations for either (a) transferring ownership of health and hospital facilities to the health authority; or, (b) retaining ownership of all health and hospital facilities, but defining rights and obligations regarding facility use, rehabilitation, maintenance, expansion and replacement. 8.2 Determine federal and State requirements regarding the funding of retirement and insurance liabilities under the health authority that must be xvii Executive Summary complied with for the County to be able to leverage all available federal and State funding for the health authority. 8.3 Seek authority from the federal and State governments to permit the County's unfunded liability to be partially financed by federal and State grants made to the health authority. 8.4 Develop estimates and report back on the financial implications to the County of (a) fully funding the LACERA pension plan, (b) repaying pension obligation borrowings, (c) establishing appropriate post-retirement health care benefit reserves, and (d) fully funding the unfunded liabilities for the County’s self insurance programs. This analysis should assume that the County would be required to proportionately fund its share of all current and future pension and insurance costs through its operating agreement with the health authority. 8.5 Include a reduction in hospital and health system insurance costs, including general liability, medical malpractice and workers compensation, as a goal in the operating agreement with the new health authority, to be measured and regularly reported back to the Health Authority Board of Directors and the Board of Supervisors. The Department of Health Services should: 8.6 Determine the costs and impacts of alternatives to the current post- retirement health benefits that could be established under a new health authority. 8.7 Establish systems and reporting mechanisms to be established under the new health authority that would track and report insurance costs, including liability, medical malpractice, and workers compensation. COSTS AND BENEFITS Although there are no direct costs associated with the implementation of these recommendations, staff time will be required to perform the analysis and report on the results to the Board of Supervisors. The County Board of Supervisors would have a clear understanding of the significant financial consequences related to the formation of a health authority. Health authority representatives would have a more comprehensive understanding of the financial obligations that should be retained by the County and assumed by the new entity. xviii Executive Summary 9. HEALTH AUTHORITY LEGISLATION AND TRANSITION PROCESS Summary of Findings: • The Department of Health Services, the Chief Administrative Office and County Counsel will all be very involved in the analysis and preparations for implementation of a health authority to govern Los Angeles County’s hospital and health care system. To formalize and facilitate these efforts, the Board of Supervisors should appoint a health transition team comprised of representatives of those departments, health care professionals from within and external to the County system and consumer representatives. The main task of the transition team should be preparation of a health authority implementation plan. This approach, used in other jurisdictions, would bring cross-departmental cooperation, accountability and continuity to the process. • The transition team’s tasks should also include development of draft State legislation needed to authorize creation of the health authority. The legislation authorizing creation of a health authority in Alameda County should be used as a model, with some modifications specific to the needs and principles of a health authority in Los Angeles County. The Alameda County implementation plan could also be used as a model, though it was prepared after the enabling State legislation was adopted, so should be expanded for Los Angeles County to include tasks that the County should perform to prepare for drafting the legislation. RECOMMENDATIONS Based on the above findings, it is recommended that the Board of Supervisors: 9.1 Appoint a health authority transition team comprised of representatives of the Department of Health Services, County Counsel, the Chief Administrative Office, health care professionals from within and external to the County system, consumer representatives and other County representatives as needed, responsible for preparation of a detailed transition plan needed for implementation of a separate health authority in Los Angeles County. 9.2 Direct the transition team to identify the areas where outside counsel or other expertise will be needed to assist with certain implementation issues and report back to the Board of Supervisors with the estimated costs and timelines for procuring such services. xix Executive Summary 9.3 Assign responsibility and due dates for each implementation plan task and classify each as one of the following: 1) issues to be resolved prior to drafting of enabling legislation; 2) issues to be resolved prior to drafting of necessary County Code and Charter amendments; 3) issues to be resolved prior to transfer of authority to the health authority; and, 4) issues to be resolved after transfer of authority to the health authority. 9.4 As part of the implementation plan, direct the transition team to prepare draft State legislation to enable creation of a health authority in Los Angeles County, including each of the components outlined in Exhibit 9.1 of this report. 9.5 Determine a sponsor in the State legislature to introduce the proposed legislation. COSTS AND BENEFITS The primary costs of implementing these recommendations will be County staff time for participation on the transition team. The use of outside counsel and possibly other experts needed to assist in this effort will result in direct County costs of an amount that cannot be determined at this time. The benefits of implementing these recommendations will include a process for transition to a new health authority that is well planned and executed, with all key areas addressed and decided on based on thorough analyses of all key issues. This will assist the health authority smoothly begin it operations and start achieving its mission as soon as possible: the cost-effective provision of high quality health care services to the indigent and medically needy. xx INTRODUCTION The Harvey M. Rose Accountancy Corporation is pleased to present this Analysis of Implementing a Health Authority for the Los Angeles County Hospital and Health System. This study was conducted in accordance with the Harvey M. Rose Accountancy Corporation task plan submitted and approved by the FY 2004-05 Los Angeles County Civil Grand Jury in December 2004. PROJECT PURPOSE AND SCOPE The purpose of this analysis as defined by the FY 2004-05 Los Angeles County Civil Grand Jury, is to determine the necessary steps for Los Angeles County to take to create an independent health authority. This Health Authority would provide a governance entity through which hospital and health services currently provided by the Los Angeles County Department of Health Services and other County departments could be provided more efficiently and effectively. Whereas other County analyses and studies have considered whether or not a health authority should be created, this audit commences with the premise that the question to answer is not whether to create a Health Authority, but rather how best to create a Health Authority After reviewing the current state of the Departments of Health Services and Mental Health and various alternatives available, the FY 2004-05 Los Angeles County Civil Grand Jury concluded that creation of a separate health authority is the recommended course of action for Los Angeles County. Creation of a singular purpose health authority governing board comprised of individuals with training and expertise in hospital and health care operations would provide the opportunity to realize improvements in the areas that have been affecting the County’s hospital and health system for years: operational efficiency; quality of care; and, fiscal stability. The Grand Jury defines a health authority as, “a separate public entity existing independently of local government and governed by a separate board, often with involvement of local government.” One such model that the Grand Jury reviewed was Denver Health, the primary safety net health system that provides medical services to uninsured, Medicaid and insured patients in the City and County of Denver. The scope of the study included all components of the Los Angeles County Department of Health Services (DHS), the Department of Mental Health (DMH), the Board of Supervisors as the governing body over the County’s hospital and health system and other County departments that provide support services to DHS and DMH, particularly County Human Resources, the Internal Services Department, the Auditor-Controller and the Chief Administrative Office. The focus of the study was the County’s hospital and health system but the components of that system were not defined at the outset of the study. Instead, the recommended components of County government to be placed under the governance of a separate health authority were defined as part of this analysis, as discussed in Section 1 of this report. Introduction PROJECT METHODS The Analysis of Implementing a Health Authority for the Los Angeles County Hospital and Health System was conducted in accordance with Government Auditing Standards, 2003 Revision by the Comptroller General of the United States, United States General Accounting Office1. This publication provides guidance to auditors who perform audits and financial analyses of governmental entities. The standards provide an “overall framework for ensuring that auditors have the competence, integrity, objectivity and independence in planning, conducting and reporting on their work.” Methods used to complete the study included interviews with all key managers and staff at DHS and DMH and directors or representatives of the Chief Administrative Office, the County Department of Human Resources, the Internal Services Department, the Auditor-Controller, the Los Angeles County Employees’ Retirement Association (LACERA) and external stakeholders. Previous studies on alternative governance structures for the hospital and health system in Los Angeles County and elsewhere were reviewed and other jurisdictions that have established health authorities or alternative governance structures were reviewed and contacted for interviews in some cases. Budget, staffing and workload data were collected from DHS and DMH to assess the current state of both departments and for analyses of how governance by a health authority might affect operations. Key business processes were mapped and analyzed to determine if they could be streamlined under a health authority. Sample cases were reviewed from DHS’ hiring records and procurement and contracts records. The current and planned state of information technology at DHS was reviewed and analyzed. Focus groups were conducted with managers from the County’s hospitals and comprehensive health centers. Board of Supervisors’ agendas, transcripts and media coverage were reviewed from the 1990s through the present. The County’s cost allocation plan as it pertains to DHS was reviewed in detail with Auditor-Controller staff. Retirement, insurance and County asset records were reviewed and analyzed to determine the impact in these areas from conversion to a health authority. PROFILE OF THE LOS ANGELES COUNTY DEPARTMENT OF HEALTH SERVICES Los Angeles County, covering 4,061 square miles, had a recorded population of 9,871,506 persons in 2003, representing 28 percent of all Californians. This population is greater than all but eight of the 50 states in the United States according to Census Bureau data. In 2000, the Census Bureau documented that 14.4 percent of families and 17.9 percent of individuals living in Los Angeles County had incomes below the poverty level. The Los Angeles County Department of Health Services has the responsibility and obligation under California Welfare & Institutions Code to provide some level of health care to the 1 Now the Government Accountability Office. Introduction indigent and the County of Los Angeles has chosen to provide health services to the uninsured and under-insured. The following description of the Los Angeles County Department of Health Services is posted on the County’s website2: The Los Angeles County Department of Health Services (DHS) is the second largest public health system in the nation providing direct patient care and public health services for its 10 million county residents. DHS is the major source of medical care for the more than 2 million residents without health insurance and provides the vast majority of all uncompensated medical care in the county. DHS has an annual budget of more than $3 billion, employs more than 22,000 individuals and is governed by the Los Angeles County Board of Supervisors. In its 2003-04 Annual Report, the Department of Health Services described itself as follows: The Department operates the nation’s second largest public health system, with five hospitals, one multi-service ambulatory care center, six comprehensive health centers, a network of more than 100 public and private primary care clinics, and 11 public health centers. The department is responsible for providing a full range of health services, such as communicable disease control and treatment; preventive and investigative public health functions, including the prevention of infectious diseases; trauma and emergency medical care; primary, specialty, and hospital inpatient services; training of health care professionals; environmental management programs, such as restaurant inspections; substance abuse and treatment; HIV/AIDS prevention and treatment services; and enforcement of all state and county laws related to public health. The County hospital and health system and Department of Mental Health, with budgeted staff exceeding 24,000 positions, constitute a complex, organization and combined set of programs and divisions. The Department of Health Services expects to provide approximately 600,000 inpatient bed days during FY 2004-05 and to provide approximately 3.5 million ambulatory care visits across the medical, mental health, alcohol and drug and public health service programs. Patients and clients accessing services across the system may or may not recognize the various providers they encounter as members of a single system; and integration of the various programs is challenging, given the enormity of the services alone. The Los Angeles County Charter, Section 22, establishes that the Director of Hospitals as the authority under the Board of Supervisors to supervise the County’s hospitals as well as other health institutions and activities, as indicated by ordinance or law. The organizational chart of the County of Los Angeles reflects a structure where the Board of Supervisors, as established by ordinance, appoints the Director of Hospitals, currently referred to as the Director of Health Services. 2 http://lapublichealth.org/phcommon/public/unitinfo/unitdirview.cfm?unitid=68&alphalist=all 3 Introduction Fiscal Year 2004-05 Final Approved Budget Table I.1 depicts the Fiscal Year 2004-05 Final Approved Budget of the Los Angeles County Department of Health Services at the broadest level possible, based on a budget summary schedule provided by the Department. The primary categories include budgeted expenditures, budgeted revenue, the subsidy required from the County General Fund and other sources to continue to operate, and total funded positions. Table I.1 Fiscal Year 2004-05 Final Approved Budget Los Angeles County Department of Health Services ($ in millions) Comprehensive/ Commty. Health General Hospitals Centers Fund Other Total Expenditures $2,204 $205 $1,018 $45 $3,472 Revenues 1,501 110 794 6 2,410 Subsidy 1 704 95 225 39 1,063 Positions 16,660 1,694 5,897 86 24,337 Source: DHS Finance Department 1 Subsidy is defined as the required General Fund contribution to maintain operations in a fiscal year. The budgeted subsidy of the Los Angeles County Department of Health Services has grown 39 percent since FY 2001-02, when it equaled $763,744,000. This increase and the projected additional subsidy necessary when the federal waiver expires, represent what many consider to be a pending crisis in Los Angeles County. Hospitals The Hospitals budget of the Department of Health Services includes five hospital sites and one ambulatory care center that constitutes 61 percent of the entire DHS budget, an amount equal to $2.204 billion in FY 2004-05. The DHS Hospital sites range significantly in size and the scope of services provided, ranging from a Rehabilitation Center to a large County/University hospital. Ultimately, the responsibility to maintain these hospitals rests with the Board of Supervisors, which acts as the governing body of the entire Health System. In addition to the hospitals within the Los Angeles County Department of Health Services, there is an extensive network of over 100 private and not-for-profit hospitals across Los Angeles County according to the California Office of Statewide Health Planning & Development. Table I.2 Fiscal Year 2004-05 Budgeted Financial Data 4 Introduction LA DHS Hospital Locations Rancho Harbor/ MLK Jr./ Los Olive High LAC+USC UCLA Drew Amigos View Desert Total Budgeted Expenditures (in millions) $925 $409 $359 $186 $269 $57 $2,204 Budgeted Subsidy (in millions) $323 $96 $107 $68 $72 $38 $704 Subsidy as Percentage of Total Budget 35.0% 23.4% 29.7% 36.7% 26.7% 66.9% 31.9% Budgeted Positions 7,071 3,092 2,887 1,393 1,830 388 16,660 Expected Average Daily Census 745 332 204 191 171 - 1,643 Expected Ambulatory Care Visits 498,689 273,637 167,861 54,294 180,368 61,100 1,235,949 Source: DHS Finance Department Comprehensive and Community Health Centers The Los Angeles County Department of Health Services provides ambulatory health care through its regional clinics, operated by both DHS and private and not-for-profit agencies. There are over 100 clinic locations according to the DHS web site where clients can access primary care health services. A major focus of the Department has been to increase clinic visits and better integrate the clinic, specialty and inpatient systems within the County. Introduction Table I.3 Comprehensive and Community Health Centers by Region Fiscal Year 2004-05 Budgeted Financial and Expected Utilization Data by Region ($ in millions) San Southwes Fernando Antelope Northeast Coastal t Valley Valley Total Budgeted Expenditures $98 $25 $32 $33 $17 $205 Budgeted Subsidy $48 $11 $10 $15 $10 $95 Subsidy as Percentage of Total Budget 49.2% 45.5% 31.5% 46.3% 60.3% 46.4% Budgeted Positions 759 182 342 288 123 1,694 Expected Ambulatory Care Visits 397,417 108,867 145,475 125,084 52,868 829,711 Source: DHS Finance Department General Fund Units In addition to the hospital and ambulatory care services of the Department of Health Services, General Fund departments provide various public health, managed care and substance abuse services. The Department of Mental Health is not included in the DHS budget and constitutes an independent budget unit. Table I.4 displays the Final Approved FY 2004-05 Budget information for the programmatic DHS General Fund Departments. Table I.4 Fiscal Year 2004-05 Budgeted Financial Data for DHS General Fund Departments Budgeted Budgeted Subsidy % Expenditures Subsidy (in Budgeted (in millions) millions) Total Budget Positions AIDS Services $87 $16 18.3% 238 Alcohol & Drug $151 $4 2.5% 210 Children's Medical $86 $25 28.5% 953 Public Health $299 $125 41.7% 2,675 Health Svs. Admin. $261 $50 19.2% 1,440 Office of Managed Care $128 $(0) -0.1% 191 Juvenile Court Services $6 $6 98.6% 190 Total $1,018 $225 22.1% 5,897 Source: DHS Finance Department Department of Mental Health 6 Introduction The Department of Mental Health (DMH) in Los Angeles is a separate General Fund Department that is not organizationally located within DHS. DMH acts as a “purchaser” of inpatient mental health services from private and community hospitals, including four DHS hospitals. Table I.5 Department of Mental Health Budget Information Approved Fiscal Year 2004-05 Budget from County Approved Budget Document ($ in thousands) FY 2004-05 Final FY 2002-03 Actual FY 2003-04 Actual Approved Adjusted $977,014,628 $985,299,937 $1,013,876,000 Expenditures* Revenue 861,422,020 851,337,225 907,984,000 County Contribution 115,592,608 133,962,712 105,892,000 Positions 2,801.0 2,856.6 2,861.6 * Includes Intrafund transfers Source: County of Los Angeles Final Approved Budget (lacounty.info/budget.html) Proposition 63, which went into effect on January 1, 2005 will provide additional financial resources to the Department of Mental Health. Portions of allocated Prop 63 funds may ultimately support innovative and necessary mental health programs and services in other County Departments, including Alcohol and Drugs, Probation, DHS inpatient units and correctional medical care. ALTERNATIVE GOVERNANCE OF PUBLIC HOSPITAL AND HEALTH SYSTEMS ELSEWHERE In a 2002 survey by the National Association of Public Hospitals and Health Systems, only 40 percent of respondents reported that they were operated directly by their local or state government. The survey report states that local government control, “… offers little flexibility and often imposes civil service requirements, procurement rules and sunshine laws. These requirements provide health systems little autonomy, affecting their ability to plan strategically and to react proactively in competitive situations.” In California and across the United States, alternative governance structures have been established in an effort to sustain the provision of healthcare services to indigent, uninsured and underinsured persons. While a thorough comparison of other jurisdictions with Los Angeles County was not part of the scope of this 7 Introduction study, the report includes references and comparisons to other jurisdictions with health authorities or alternative governance structures when relevant and appropriate. A primary difference between the obligations of the various entities may be the specific definition of indigence in each state and the statutory obligation of the local jurisdiction to provide a defined level of health care to such individuals. Denver Health Since 1997, an independent Board of Directors that is separate from the City and County government, has governed Denver Health. Prior to 1997, the Denver Health system was part of Denver’s City and County government organization. The Board of Directors is comprised of nine members appointed by the Mayor of Denver and includes physicians and health professionals. The Board’s responsibilities include financial management; education and quality assurance; and personnel and compensation matters. Denver Health offers a managed care approach to health care through its integrated system of hospitals, community health centers, school-based clinics, substance abuse and mental health services, and advice line and public health services. The reported benefits of such a large integrated system is that a managed care approach can be used; primary and specialty care access can be coordinated so that patients receive the most appropriate level of service in the least costly environment. At Denver Health, for example, many patients reportedly receive primary care at less costly community health centers rather than hospital emergency rooms. And because the system is integrated, community health center costs can be subsidized by hospital revenue. Alameda County Medical Center The Alameda Alliance for Health was created under the enabling legislation adopted by the State to create MediCal managed care programs in California counties. Because Alameda County was creating a Health Authority at the time, special legislation was adopted and included in California Welfare and Institutions Code § 14087.35 that merges the enabling legislation to establish a Health Authority and the authority to create the County’s MediCal Managed Care Plan. The composition of the 11 member Board that governs the Health Authority is laid out in the W&I Code, and includes a member from the Alameda County Medical Center (ACMC). ACMC includes hospital and ambulatory care centers; services to indigent and MediCal clients are augmented by Highland Hospital, a facility managed by the Health Authority. Introduction New York City Health and Hospitals Corporation The following description of the New York City Health and Hospitals Corporation (HHC) is drawn from the City’s website: The New York City Health and Hospitals Corporation (HHC) was created by legislation in 1970 as a public benefit corporation, governed by a Board of Directors, to oversee the City’s public health care system in all five boroughs. The Corporation consists of 11 acute care hospitals, 6 Diagnostic and Treatment Centers, 4 long- term care facilities, a certified home health care agency, and more than 100 community health clinics, including Communicare Centers and Child Health Clinics. Through its wholly owned subsidiary, MetroPlus, HHC operates a Health Plan which enrolls members in Medicaid, Child Health Plus and Family Health Plus. HHC facilities treat nearly one-fifth of all general hospital discharges and more than one third of emergency room and hospital based clinic visits in New York City. Source: http://www.nyc.org/html/hhc/html/about/faq.shtml According to a presentation by the former CEO and President of the NYC HHC to the Robert Wood Johnson Clinical Scholars Program in November 2004, the system had made significant gains in both the application of technology in the healthcare environment and in delivering preventive care to the system’s population. However, a more recent press release indicates that the FY 2005-06 budget as proposed by the Governor’s office could result in a loss of over $300 million, and require reductions in services and benefits. In New York City, a separate Department of Health and Mental Hygiene includes traditional Public Health functions such as disease control, environmental health and epidemiology. The mission of this Department is to “Protect and promote the health of all New Yorkers,” and it is therefore similar to the Los Angeles County Public Health Department in its statutory focus on all residents rather than those who are under or uninsured. The Department of Mental Hygiene manages the provision of mental health and chemical dependency services, as well as services to developmentally disabled persons. (Source: New York City Health and Hospitals Corporation Website) Hennepin County, Minnesota Beginning in June of 2004, Hennepin County began a process to investigate and ultimately create a public-benefit corporation to govern public healthcare services in the County. To date, the Governance Committee has reported back to the County Board, and on January 14, 2004 the Board approved a resolution to seek legislative authority of the creation of the new entity and the eventual transfer of the hospital and its employees on January 1, 2006. HF1827 has been introduced and as of April 13, 2005 was under consideration by a Committee in 9 Introduction the Minnesota State Legislature. According to a House Bill Summary, HF1827 would, in part, create the “Hennepin Healthcare System (HHS) as a public corporation and subsidiary of Hennepin County to take over the operation and management of Hennepin County Medical Center. The county has two county commissioners on the corporation's board and reserves powers over the corporation related to its mission, budget, ability to incur debt, governance and care for the indigent”.3 Maricopa County, Arizona In July 2003 the Governor of Arizona signed House Bill 2530 that allowed Maricopa County to create a voter-approved district to operate its county healthcare system. The legislation describes the governance of the district and its obligation to provide healthcare services within a three-mile radius of the previous hospital for at least ten years. A fact sheet on the legislation from the Arizona State Legislative website provides the basis for the County and the Legislature creating the Special Healthcare District: The Task Force concluded that MIHS (Maricopa Integrated Health System) is facing a financial crisis due to the uncompensated care incurred, pressures on county expenditure limits, loss of income from the shift to competitive bidding for long-term are contracts, loss of federal and state disproportionate share hospital (DSH) program funds and lack of capital improvement funding.4 In November 2004 the County of Maricopa and the Maricopa County Special Health Care District executed an amended Intergovernmental Agreement detailing the responsibilities of each party, the details of the phased transfer of Medical Staff, assets and liabilities from the County to the District. 3 http://ww3.house.leg.state.mn.us/hrd/bs/84/HF2187.html 4 Fact Sheet for H.B. 2530/S.B. 1359, www.azleg.state.az.us 10 Introduction PREVIOUS STUDIES OF ALTERNATIVE GOVERNANCE STRUCTURE FOR LOS ANGELES COUNTY’S HOSPITAL AND HEALTH SYSTEM Four key prior studies concerning alternative governance structures for the Los Angels County hospital and health system were reviewed: 1) a 1995 study by Burt Margolin, the Crisis Manager for the Los Angeles County Health Crisis Center; 2) a 2001 study by the Los Angeles County Chief Administrator’s Office; 3) a 2002 study by the Ad Hoc Hearing Body on Governance; and 4) a 2003 study by the University of Southern California Keck School of Medicine School of Policy, Planning & Development. The following summarizes the findings from each of these studies. The 1995 Burt Margolin Study On August 1, 1995, in response to a request from the Board of Supervisors, Mr. Burt Margolin, Crisis Manager for the Los Angeles County Health Crisis Center, submitted recommendations to the Board of Supervisors regarding the governance of the Department of Health Services. In this report, Mr. Margolin proposed establishing a semi-autonomous Health Authority to oversee the Department of Health Services. In determining which governance system would be best, Mr. Margolin reviewed the experience of other jurisdictions. He found a wide range of governance models have been employed which vary considerably in the degree of independence from an elected body, breadth of decision-making powers, and involvement in the day-to-day management of operations. Exhibit I.1 Alternative Hospital and Health System Governance Structures AUTONOMOUS GOVERNANCE SEMI-AUTONOMOUS GOVERNANCE STRUCTURES STRUCTURES Semi-Autonomous Public Benefit Health boards or Advisory Corporation Health Authorities commissions Governance Structures • New York • Dallas • San Francisco • San Luis Obispo Health and • Louisiana Health Health County Hospitals Authority Commission • Ventura County Corporation • Denver Health & • Sonoma County • Hawaii Hospital • Monterey Authority County Mr. Margolin concluded that simply transferring one of these existing models to the County would not be the best course of action. Instead, he recommended a semi-autonomous health authority designed specifically for the needs of Los Angeles County. Although the independent health authority was suggested by many involved in the governance discussion, Mr. Margolin did not recommend 11 Introduction the completely autonomous health authority because he believed the changes needed were so far reaching that the Board of Supervisors needed to retain a role in the ultimate ratification of the restructuring. Also, Mr. Margolin believed a fully autonomous health authority would require a County charter amendment or specific State Legislation which would focus scarce resources on changing the process rather than on health care policy and finance issues which he found to be more important. Under Mr. Margolin’s proposed semi-autonomous health authority structure the health authority would have responsibility for developing and presenting major policy and implementation recommendations for the Department of Health Services. These recommendations would be submitted to the Board of Supervisors who would ratify them by a simple yes or no vote. The board, under Mr. Margolin’s proposal, would be made up of seven individuals who are recognized experts in the health field and possess experience in areas such as public policy, business, finance, and labor. These members would serve on a voluntary basis. The chair and vice-chair of the authority would be selected by the authority’s membership. Mr. Margolin proposed that the semi-autonomous health authority would meet with the Director of Health Services, at a minimum, biweekly to receive budget and policy recommendations. The Director would continue to report to the Board of Supervisors on the day-to-day operation and management of the Department. The health authority would have delegated authority by the Board of Supervisors for approval of contracts up to a set amount, without subsequent ratification by the Board. Mr. Margolin’s report recommended several initial items upon which the authority would focus, such as analysis of the DHS budget, development of mechanisms to respond to changes in health care financing, and access to funding strategies to meet future health service needs. The 2001 Los Angeles County Chief Administrative Office Study On August 29, 2001, Mr. David E. Janssen, Chief Administrative Officer (CAO), submitted an analysis of various governance models for the County’s hospital and health system to the Board of Supervisors. In this analysis, the CAO considered four possible governance structures: the health commission; health authority; private non-profit public-benefit corporation; and health care district. Under any of these models, the report points out that the ultimate responsibility of meeting the Welfare and Institution Code Section 17000 obligation would remain with the County. The analysis considered the following criteria for evaluating the alternative structures: (a) span of control and degree of separation from County rules and policies, (b) ability to meet the county’s obligation to care for the indigent, (c) 12 Introduction impact on organizational flexibility, both personnel and contracting/procurement, (d) revenue and budget implications, (e) relationship of the entity to the County government, (f) application of special laws affecting public entities, and (g) interaction with the Medicaid 1115 Waiver. The CAO concluded that the benefit of implementing one of these alternative governance models would be an increase in the flexibility related to contracting, procurement, and personnel activities. Elsewhere, he reported that these alternative models have increased the ability of the systems to establish specific job classifications and compensation levels that improve their ability to hire and retain medical personnel. Alameda County Medical Center, Denver Health and Hospitals, and New York Health and Hospitals Corporation all noted their governance structure have improved their ability to recruit and retain physicians and other clinical personnel. The level of administrative autonomy of any of these governance models is dependent upon the breadth of authority that is vested in the entity by the Board or the enabling legislation upon its creation, according to the CAO. Financially, the CAO reported that the results of these governance models were more mixed. For Alameda County Medical Center, separation from the County led to a declining investment, both fiscally and politically, in the medical center and its activities. Under a health authority there has been a decreased share of County revenues received. While the New York Health and Hospitals Corporation was financially stable at the time of the analysis, it expected within the following two years to be in a deficit situation, which it attributed, in part, to the fact that the indigent population it served was growing, while the subsidy from the City of New York had remained flat. The CAO reported that an indirect benefit that may be derived from establishing a new governance model could be increased responsiveness from federal or State officials who may view the change as an indication that the County is seriously addressing the structural issues that have led to the need for repeated infusions of federal dollars. However, given the size of DHS’ structural deficit, the report concluded that it is unlikely that an administrative change such as this would solve the Department’s budgetary problems. A key issue for consideration under any of the models, according to the report, was the ability to secure public financing for low-income and indigent patients. With the possible exception of the County’s Medicaid 1115 Waiver, the same funding mechanisms presently used to finance DHS would continue to be the primary funding sources. An “1115 Waiver” refers to section 1115 of the federal Social Security Act, which allows the Secretary of Health and Human Services to waive any provision of Medicaid law for direct patient care and demonstration projects that provide program improvement or innovations. Los Angeles County applied for and received two five year 1115 Waivers since 1995 to pay for various aspects of restructuring of the Los Angeles County health system. Introduction The CAO also concluded that because of the sheer size of Los Angeles County it was unreasonable to assume that any of the new governance structures could be implemented either quickly or successfully. The CAO stated that the implementation, including significant planning, could be three to five years. Since the County would retain legal responsibility to assure that the obligations of W&I Section 17000 to provide medical care to eligible residents is met, there would still be challenges regarding the definition of who is entitled to services under Section 17000 and what services are provided, as well as whether the contracting entity is fulfilling these obligations, according to the CAO. Under its Memorandum of Understanding with unions, the County must notify the unions of the transfer of operation to another entity. The CAO noted that if the transition to a new entity, such as a health authority, resulted in the elimination of jobs or a significant reassignment of functions, the County would be required to make an intensive effort to reassign or transfer the affected employees to other positions for which they qualify, or train them for new positions in order to retain their services. The County should consider the costs related to the legal, administrative and personnel costs of transitioning to another governance structure, the CAO stated. During the transition in Alameda County, the health authority’s first independent action was to secure their own legal counsel to protect its interest during the contract negotiations with the county; the cost was approximately $500,000. The legal and administrative costs could be significantly higher for LA County since they have six hospitals instead of one and the health system is more complex. Upon transfer to a health authority, the CAO reported, employees would no longer be part of the County civil service though they could opt to return back to the County. The CAO noted that based on the results of Alameda, of the 24,000 budgeted position in DHS, approximately 400 employees would opt back into the county civil service system, if the 1.7 percent remains true for DHS. However, if there is a greater number of employees opting to continue their civil service status and to the extent they are not able to be absorbed back in the system, the County could face potential layoffs and union involvement in the transition, according to the CAO. Based on their experience, the Alameda County Health Authority believes there are cost savings by purchasing services elsewhere or by providing the services in-house. They estimate overhead represents approximately 25 percent of the total cost to purchase services from other county departments. The analysis points out that if the governance structure that is established determines to purchase services from providers other than the County departments, the County will need to address the impact to these departments regarding the loss of revenue from DHS. The 2002 Ad Hoc Hearing Body on Governance Study 14 Introduction On September 4, 2001, the Los Angeles County Board of Supervisors received a report from the CAO that outlined a series of options related to the governance of public health care delivery systems. One of these options was the Health Authority. In response, the Board of Supervisors established an Ad Hoc Hearing Body on Governance, to hold a public hearing and evaluate options for governance. The Ad Hoc Hearing Body was instructed to evaluate the creation of a separate Department of Hospitals, within the current governance structure, which would oversee the provision of both inpatient and outpatient health care services. The Ad Hoc Hearing Body was also expected to identify whether a Health Authority could create a mechanism to charge a fee for certain services for which the County does not presently charge. A major consideration in the evaluation of the several options was whether access to patient care services would be limited by a change in governance to a model such as a Health Authority. The Ad Hoc Hearing Body on Governance broke into three Task Forces to consider the legal, fiscal, and administrative issues pertaining to the selection of a new form of governance. Several conversations were also held with Denver Health Authority and Alameda County Health Medical Center. Public testimony was heard by individuals and organizations that interact with the Department of health Services. Both Denver Health Authority and Alameda County Medical Center agreed that the greatest benefit realized from the new governance structure was increased autonomy with regard to personnel, contracting, and procurement. A strong relationship with the city, both fiscally and operationally, was a strength for Denver while the lack of this relationship had created challenges for Alameda. The study notes that the task force determined that DHS’ fiscal problems were secondary to the issues of flexibility, autonomy, and accountability and should be addressed at the time of the transfer of authority to a new entity. Key legal factors pertaining to a Health Authority were identified. As an entity separate from the County, a Health Authority would not be subject to Beilenson requirements, reducing public involvement significantly according to this report. Since state statute establishes a Health Authority it could be written to include whatever its authors’ desire. A Health Authority would have access to the same funding sources that presently exist but would set its own budget apart from the County budget, according to the study. The report stated that the Health Authority would not be subject to civil service or County contracting or procurement rules and would be required to obtain licenses for non-hospital clinics, which are currently exempt. Because of State corporate practice of medicine laws, the reports stated that the Health Authority would be prohibited from directly employing physicians. The County would still have the legal mandate to provide and/or pay for health care services to the indigents. Introduction According to the study, those in support of the Health Authority noted that the reform and redesign should include the consideration of the 2.5 million of uninsured in Los Angeles County. With decreased funding for DHS, starting with passage of Proposition 13, the report stated that new governance should be able to increase funding available. The study points out that DHS has assumed the role of provider of emergency and trauma services, which has allowed the private hospitals to survive. Changes to the County based care must also consider the impact it will have on the private care system. The Ad Hoc Hearing Body recommended that the Board of Supervisors not make any change to governance of the hospital and health system at the time, but should first attempt to make improvements recommended by a previous Blue Ribbon Commission. If these changes were not accomplished , the Ad Hoc Hearing Body recommended that the Board of Supervisors explore the desirability and feasibility of establishing a health authority to govern the Department of Health Services. The 2003 University of Southern California Keck School of Medicine Study This study revisited the issue of alternative governance by describing its potential for stabilizing the health care system in Los Angeles County, and understanding stakeholder views about the relevance, potential benefits and obstacles to accomplishing system reform and stabilization. Over the past 20 years, the study reported that DHS has been through major cutbacks, threats of closures and public health emergencies. The crisis of 1995 nearly shut down the system and the federal government responded with nearly $1 billion in federal aid-commonly through the first of two five year Medicaid Waivers. The study notes that with the expectation of the expiration of the second and final waiver in 2005, the County will face new crises and discussions about the benefits of new governance. The authors of the study recommend a new governance to help stabilize the county health care system, improve efficiency and attract new revenue. A governance change, they say, will entail substantial transition costs and so must provide substantial long-term benefits for the County’s mission to serve the indigent population of Los Angeles and protect and improve the health of the public. Key stakeholder interviews conducted by the authors revealed several concerns about new or alternative governance. Opponents argued that new governance would not solve the underlying structural problems facing the health care system, which include insufficient revenue and high numbers of uninsured. Also, new governance was not needed to address existing administrative problems. Moreover, governance change could not achieve the desired integrated planning or enhanced role for consumers and it might not be effective. Finally, others argued that governance change would create new problems for the system. Some say it could diminish the county’s commitment to maintain indigent 16 Introduction services as mandated by State law and merely add a new layer of bureaucracy, reduce revenues, destabilize the private system by increasing competitive pressure on private hospitals for 3rd party reimbursement, and eventually lead to privatization and a loss of jobs. Supporters indicated that new governance would lead to more efficient and effective decision making by removing the politics from decision-making, by promoting system-wide planning and program integration, by defining target populations, and by providing new opportunities for community input. Many also felt that new governance could help make the health care system more competitive within the existing health care market, thus enhancing revenues. Finally, supporters argued that new governance would enable the BOS to focus more attention on broad public health issues, such as reducing the number of uninsured and protecting and promoting health, and less on day-to-day administrative issues. The authors propose an independent Authority created by the State Legislature in cooperation with the County of Los Angeles to operate personal health services, primarily hospitals and ambulatory care centers. This model would separate the administrative oversight of personal health services from policy development and most core public health services. The delivery of health services, including mental health, would fall under the new Authority. Core public health activities, including environmental health would remain as a direct county function. The provision of clinical preventative services such as communicable disease treatment, and family planning would fall under the Authority. The Board of Supervisors would assure health care to the poor through a contract with the Authority. 17 1. HEALTH AUTHORITY COMPONENTS AND ROLE • A number of proposals to create a Los Angeles County health authority have been made over at least the past ten years. However, the health services components included in each proposal have differed greatly and have been vaguely defined. • Until recently, these proposals have not fully addressed whether responsibilities related to mandated public health or mental health services should be retained by the County or absorbed by the health authority. Further, these proposals have not answered critical questions related to the complex responsibilities for providing indigent medical care services defined by California Welfare and Institutions Code Section 17000, case law and policy of the Board of Supervisors. • Before considering the complex governance, operational, funding and legal questions associated with the creation of an independent health authority, the Board of Supervisors, with input from the Department of Health Services (DHS) and the healthcare community, should clearly define the health authority’s mission and functional components. A preferred model would: transfer authority and responsibility for all personal health services now provided by DHS including hospitals, ambulatory care centers, comprehensive health centers and personal health clinics, to the health authority; charge the health authority with the responsibility for providing specified levels of healthcare services to the uninsured and indigent; and, establish emergency and acute psychiatric care services at levels negotiated with the Department of Mental Health. Public Health services, Emergency Medical Services and other broad regulatory or coordination functions should be retained by the County. The Department of Mental Health should remain an independent County department that is separate from the health authority. Since at least 1995, the Los Angeles County Board of Supervisors has received recommendations to modify the governance structure of the health services delivery system within the County. Plagued with the ongoing financial crises experienced by the Department of Health Services (DHS), the various experts 18 Section 1: Health Authority Components and Role commenting on the system have made recommendations focusing primarily on the need to establish a health authority that would govern hospital and clinic services provided to the County's uninsured and indigent population. Common to all proposals has been the perception that the creation of a health authority would provide opportunities for improving governance, create administrative flexibility for functions such as human resources administration and procurement, and make the services more cost effective. However, there has been little analysis or discussion in the previous recommendations regarding the health authority’s mission or of the DHS and non-DHS components of the County's health care delivery system that should be transferred to the proposed authority or retained by the County. In 2001, representatives from the University of California at Los Angeles (UCLA) School of Public Health, the Los Angeles County Medical Association (LACMA) and the University of Southern California (USC) School of Medicine formulated recommendations that would charge a health authority with the responsibility to provide "hospital services, ambulatory medical services, emergency medical services, and perhaps school clinics, mental health and possibly correctional health" (emphasis added).1 Following those recommendations, in May 2003, the University of Southern California conducted An Analysis of Alternative Governance for the Los Angeles County Department of Health Services,2 which went further than any of the earlier studies and made specific recommendations regarding the components of an independent health authority. That report described "the key components of the new Authority," as follows:  "The Board of Supervisors ensures California Welfare and Institutions Code Section 17000 obligations and other mandated services through a contract to the Authority.  The new Authority would govern the delivery of mental health, and drug and alcohol services.  Core public health services remains separate and directly under the control of the Board of Supervisors.  All funding for safety net will fall under the Authority, including DSH dollars." Therefore, under this 2003 proposal, the health authority would be given responsibility for providing physical health services to the indigent and uninsured 1 An ad hoc task force, composed of Dr. Lester Breslow, UCLA School of Public Health, Dr. Brian Johnson, Los Angeles County Medical Association, and Dr. Robert Tranquada, USC School of Medicine, Health Authority for the County of Los Angeles - A Summary, submitted in response to a Board of Supervisors request for the Chief Administrative Officer to study Health Authority governance options, July 2001 2 Division of Community Health, Department of Family Medicine, USC Keck School of Medicine and the USC School of Policy Planning and Development, An Analysis of Alternative Governance for the Los Angeles County Department of Health Services, A Report to the John Randolph Haynes and Dora Haynes Foundation, May 2003 19 Section 1: Health Authority Components and Role population under contract with the County (broadly referred to as "safety net services"), mental health services, and alcohol and drug treatment services. The County would retain responsibility for providing "core" Public Health services. The rationale for leaving the core Public Health functions with the County was described by the USC team, as follows: "Several respondents felt that new governance would enable the DHS to focus more on its core public health responsibilities. Many felt that all services currently under DHS (including public health) would fall under the new Authority, while others felt that keeping public health separate from the Authority made administrative and legal sense. By preserving core public health as a county function, and shifting the delivery system under new governance, the County can better focus attention on disease prevention, environmental health and broad health assurance functions." Although recommended, the report did not provide a rationale for transferring mental health or alcohol and drug treatment services to the new Authority. In addition, there was no recommendation or discussion regarding the responsibility for the placement of correctional health or juvenile court services within the new health services structure. CURRENT ORGANIZATION OF HEALTH RELATED FUNCTIONS IN LA COUNTY The current organization of health related functions in the County of Los Angeles is steeped in the history of the County and decisions that were made many years ago by previous boards of supervisors. The current Department of Health Services provides a wide range of services, but is focused primarily on safety net medical services that are provided through a combination of its five hospitals, one ambulatory care center, six comprehensive health centers and clinics, and through various contracts with private providers that serve uninsured and indigent patients whose care would otherwise be the direct responsibility of the County. While most of the Department is directed toward this mission, a review of the DHS organization suggests that there are several functions that do not fully align with the safety net patient care emphasis of the rest of the Department. These include:  P ublic Health (4,062 positions) - charged with a variety of functions that are designed to monitor, assess and report on the broader public health concerns of the Los Angeles County community; regulate health safety and the spread of communicable disease; coordinate health services that are provided by both public and private organizations within the County; and, educate the public concerning certain health risks. In addition, Public Health has been charged by the Board of Supervisors with overseeing direct patient care provided by contract through the Alcohol and Drug Program Administration section (ADPA). Section 1: Health Authority Components and Role  E mergency Medical Services (181 positions) - charged with coordinating emergency medical services that are provided by disparate agencies throughout the County, including fire departments, private ambulance companies, and public and private hospitals.  M anaged Care (136 positions) - charged with a managed care insurance function for a segment of the MediCal patient population and certain other select groups, that is akin to the managed care insurance function performed by Health Maintenance Organizations (HMOs) in the private sector.  J uvenile Court Services (190 positions) - charged with providing medical services to juveniles who are housed in County juvenile institutions, such as the juvenile halls. In total, these activities have been allocated 4,569 of the 24,303 DHS positions in FY 2004-05, or 18.9 percent of the Department's total workforce. In the same year, total expenditures for these services exceeded $470 million of the Department's $3.5 billion operating budget, or approximately 12.4 percent. In addition to the DHS health services described above, the County provides mental health services through an organizationally independent department. The separate Department of Mental Health (DMH) is established in County ordinance and the Director reports to the Board of Supervisors. DMH provides care for patients exhibiting symptoms of mental illness either directly – with its own staff – or through community based contractors. In addition, the Department of Mental Health is the fiscal intermediary that pays MediCal to private sector mental health treatment providers on a fee for service basis. The following discussion evaluates factors related to the need to clearly define the mission for a new health authority, and analyzes organizational and service complexities that should be considered when the County moves forward with the creation of the health authority. HEALTH AUTHORITY MISSION The Department of Health Services is a complex organization that provides a wide array of services to Los Angeles County. One approach for organizing the health authority would be to simply transfer all of DHS and other health related functions (such as the Department of Mental Health) to the new entity. As an alternative, and to maximize the effectiveness of the new health authority, the County should consider taking advantage of this unique opportunity and restructure its existing approach to health care delivery. As part of this restructuring, the County may wish to retain and/or reorganize certain health related functions, while transferring others to the health authority. Our experience suggests that public sector organizations are most successful when they adhere to the following organizational principles:  The mission is clearly defined for the public, policy makers and employees. Section 1: Health Authority Components and Role  Services are focused on a narrow client base which shares common interests.  The organization is charged with fulfilling complementary mandates and is not required to implement policies that might conflict with one another. Our analysis suggests that the current organization of DHS does not conform to these principles. Despite its broader mission, the current DHS organization is largely structured to provide safety net medical services to the uninsured and indigent population within the County. Based on interviews conducted for this study, it is clear that most of the organization views this emphasis as its primary mission. Further, the major financial concerns of the Department currently focus on the funding difficulties related to these safety net services. However, it is also clear that the emphasis on this overriding mission may result in unintended consequences for other parts of the Department. This became clear after interviews and a review of documents, which generated several examples of the organizational consequences arising from the operations of a department that has a broad and varied service delivery structure. The following discussion provide some of these examples.  Representatives from Public Health and the Mental Health Department spoke of their concerns that service integration within a health authority, which is primarily focused on providing hospital and clinic services to the uninsured and indigent populations, and would be organizationally distant from the County, might diminish the standing of the public health and mental health functions within the organization. Because the direction of the organization may become disproportionately influenced by the overriding safety net health care mission, these individuals expressed added concern that diminished standing could result in losses in funding that otherwise might not occur.  Several organizations within DHS serve a broad client base with different interests and concerns than the larger DHS organization. For example, a September 2003 report from the Emergency Medical Services (EMS) Agency Director responded to concerns expressed by the EMS Commission that "the EMS Agency's organizational status as part of the Department of Health Services creates potential bias with respect to decisions affecting public and private system constituents." This report was requested when DHS changed its patient transfer policies in a manner perceived by some to adversely impact private sector providers. The EMS Agency, which is charged with coordinating emergency medicine across both the public and private health care systems, was charged with implementing this change.  An organization such as Public Health is required to fulfill mandates that can be inconsistent with the primary service emphasis of the rest of DHS. As discussed previously and described more fully below, the County's Health Officer is charged with a variety of regulatory, communicable disease control and prevention, and health education functions that are directed toward the general population of the County and not just the uninsured and indigent 22 Section 1: Health Authority Components and Role populations that receive care at DHS hospitals and clinics. Some services are functionally very distant from the rest of DHS (e.g., restaurant inspections) while others are more closely aligned (e.g., maternal and child health), but few are consistent with the safety net service emphasis that drives most policy and budget decisions at DHS. As the County considers the formation of a health authority, these types of considerations should be made and addressed within the context of the health authority mission. While there may be benefits from organizational consolidation of disparate services, we believe these are outweighed by the concerns discussed above. By more narrowly defining the health authority as an organization that is primarily focused on providing safety net health services to the County's uninsured and indigent population, the chances for organizational success are strengthened. Further, the impediments resulting from being part of the County have a more detrimental impact on the personal health service functions than they do on the other County functions that have been considered for placement into a health authority. Welfare and Institutions Code §17000 As discussed in Section 3 of this report, the County's responsibilities related to Welfare and Institutions Code §17000 should be clearly defined in relation to the mission of the health authority. Welfare and Institutions Code §17000 states: "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." Section 17000.5 allows boards of supervisors to "adopt a standard of aid, including the value of in-kind aid which includes, but is not limited to the monthly actuarial value of up to forty dollars ($40) per month of medical care." However, Section 17000.51 clarifies that Section 17000.5 "was not intended, and shall not be construed, to do any of the following: 1. Satisfy, in whole or in part, the duty of a county or a city and county to provide health care services to indigent and dependent poor persons under Section 17000. 2. Permit a county or a city and county to cease providing health care services to indigent and dependent poor persons under Section 17000. 3. Affect the eligibility of indigent and dependent poor persons for health care services under Section 17000." As a result, eligibility for healthcare services has been defined by Los Angeles County as including "General Relief recipients and individuals aged 18 to 64 with income between 100 and 200 percent of the Federal Poverty Level (FPL)."3 3 January 29, 2002, Department of Health Services Strategic and Operational Action Plan 23 Section 1: Health Authority Components and Role Other sections of the law and various court decisions have further complicated this definition. Patients and advocacy groups have previously sued counties in California when attempts have been made to reduce benefits, curtail services or significantly redefine the health care delivery systems, using legal challenges rooted in California statute and federal Medicaid regulations. A recent example occurred when Los Angeles County was challenged in federal court after announcing its intentions to close Rancho Los Amigos Rehabilitation Hospital and reduce the number of beds at the LAC+USC Medical Center.4 In its 2002 Strategic Plan, DHS attempted to define the population which the County is legally responsible to serve under the definition previously discussed, and for whom it actually provides services. The Plan stated that, "The legally- mandated population is estimated to be some 700,000 residents of the County. In Fiscal Year 1999-2000, DHS (including the PPP network) provided services to 140,000, or 20 percent of this mandated population. These services included 637,000 outpatient and emergency room visits and 68,000 inpatient days." It is difficult to measure the proportion of this population that receives services from other community providers or receives no care at all. However, in its Strategic Plan, the Department recognized that in order to reduce the County's costs, the scope of safety net services and service delivery strategies would need to be redefined. According to the Department, opportunities for reducing costs would involve a range of alternatives that would (a) utilize managed care principles for the "legally-mandated" population, (b) discontinue or discourage service for the non-mandated population (e.g., non-County residents), and (c) redefine the scope of services that would be provided by DHS, based on decisions regarding service emphasis. Under each of the scenarios that were presented, the Department anticipated that there could be legal challenges. Within the scope of this study, we have not evaluated the accuracy of the Department's legally-mandated population projections or made recommendations regarding the scope or level of services that should be provided by a health authority. However, the legislative mandate for the health authority should be designed to include (a) a minimum level of service requirements that meets the minimum service mandate, and (b) sufficient flexibility to permit the County to purchase additional services if determined appropriate by the Board of Supervisors. ORGANIZATIONAL COMPONENTS OF A HEALTH AUTHORITY Consistent with the criteria discussed previously in this finding, the health authority should include the following components as the core infrastructure required to provide services to the County’s indigent and uninsured population: 4 Harris v. Board of Supervisors, Los Angeles County, Federal Court of Appeals, Ninth Circuit No. 03-56028, and Rodde v. the California State Department of Health Services and County of Los Angeles, United States District Court for the Central District of California, No. 03-55765. Section 1: Health Authority Components and Role  DHS’ five hospitals  High Desert multi-service ambulatory care center  Six comprehensive health centers  Clinics (non public health)  Public Private Partners (PPPs) This configuration would appropriately focus the organization’s mission, narrow the client base and minimize possible conflicts between the organization’s mandates. In accordance with this basic organizational approach, it would therefore be appropriate to disassemble DHS and retain certain DHS functions within the County. The following discussion provides a framework for structuring both County health and health authority functions. Public Health As discussed previously, Public Health is a division of the Department of Health Services. As a division of DHS, the Public Health Director reports to the DHS Director for purposes of the budget and administrative management of the Public Health Division. However, the position of Public Health Officer, which is dually held by the Public Health Director, is established in State statute. In this role, the Public Health Officer has independent responsibilities and authorities for certain regulatory, disease control, disease prevention and health education functions.5 Most of the functions assigned to the Public Health Officer are defined by these statutes and are typically found in public health departments in California. Very few of the statutes relate directly to the provision of safety net hospital and ambulatory care services to the uninsured and indigent population within the County. Some of the more prominent organizational functions of Public Health that follow this statutory framework are described below.  S ervice Planning Area Health Offices - The Public Health Department has established eight Service Planning Areas (SPAs) that operate out of four Area Health Offices. The staff from the Area Health Offices are responsible for planning public health and clinical services according to the health needs of local communities. Such activities may include the coordination of services through DHS clinics, private providers and other community groups.  E nvironmental Health - Primarily a regulatory function, this section provides consumer protection, food and housing health safety inspections and 5 Health and Safety Code §101000 and §101460 require counties and cities to appoint health officers. Section 101460 further permits cities to make "other arrangements" for counties to exercise health officer powers and duties within the cities. Other sections of the Health and Safety Code define the specific powers and duties of public health officers related to the enforcement of statutes, regulations, ordinances and orders issued by local governing boards or councils, or the State Department of Health Services. Section 1: Health Authority Components and Role environmental protection services (e.g., water, sewer, pollution control, ocean water monitoring, waste management, etc.).  D isease Control and Emergency Response - This section provides services related to the monitoring and control of sexually transmitted diseases (excluding AIDS, which is in a separate section) and acute communicable diseases. The section also provides the public health investigation and laboratory functions of the office.  M aternal Child and Adolescent Health (MCAH) - This section facilitates the healthcare needs of pregnant and parenting women, infants, children, adolescents, and families living in the County. While many of the MCAH programs assist low income women to access quality prenatal and post- partum care and support, through the work of the Children's Health Initiatives Unit, the division also conducts policy and planning for children's health issues, and serves as a liaison to other DHS offices and external organizations working on matters concerning children's health.  H ealth Assessment and Epidemiology - This section performs community health assessment functions and houses the public health response teams. In addition, the section is responsible for public health data collection and analysis, and performs toxic material and HIV epidemiology functions. It also houses the County's tobacco control program and injury and violence prevention functions. Alcohol and Drug Program Administration The Alcohol and Drug Program Administration (ADPA), that has been assigned to Public Health by the Board of Supervisors, could be retained by Public Health or assigned elsewhere without affecting the health officer mandates found in California statute. The ADPA states that it has the "primary responsibility for administering the County's alcohol and drug programs . . . to reduce community and individual problems related to alcohol and drug use." Through ADPA, the County reportedly contracts with "over 300 community-based organizations to provide an array of alcohol and drug prevention, intervention, treatment and recovery services throughout the County of Los Angeles. These services include: alcohol and drug prevention, residential and outpatient treatment, alcohol and drug detoxification, perinatal day care habilitative (sic), community prevention and recovery programs, methadone maintenance, homeless day care, in-custody drug treatment, alcohol and drug free living centers, driving under the influence programs, and drug diversion programs."6 Data available for FY 2002-03 indicates that the major portion of services are provided to alcohol and drug program clients who are (a) involved in the criminal 6 http://www.lapublichealth.org , Alcohol and Drug Programs Organizational Description, 3/21/2005 26 Section 1: Health Authority Components and Role justice system, or (b) are receiving General Assistance or participating in the CalWORKS program. The following table distributes these clients according to major referring program.7 As demonstrated with data contained in Table 1.1, over 70% of ADPA program participants are accessing the programs in response to requirements of the criminal justice and welfare systems within the County. While some of these clients may also be utilizing hospital and clinic services provided by DHS, there is no demonstrated linkage between the services. Two conclusions can be drawn from the analysis of Public Health functions and their relationship to the formation of a health authority within the County. First, as suggested in the 2003 USC report on health services governance, the core public health functions should be retained by the County because it more universally serves the general public, and provides all of the regulatory, disease control, disease prevention, and health education functions described in this report. Second, the County should retain responsibility for the ADPA program, which has been placed within Public Health by policy of the Board of Supervisors, since this program primarily serves persons involved in the criminal justice system and welfare departments of the County. This program could remain a part of Public Health, be established as a separate department or be merged with the Department of Mental Health, as discussed below. Annual review of Participants in Alcohol and Drug Programs Contracted by the Alcohol and Drug Program Administration 2002-03 Fiscal Year, ADPA Research and Evaluation Planning Division 27 Section 1: Health Authority Components and Role Table 1.1 Alcohol and Drug Program Administration Client Participation for FY 2002-03 Program Percent Program Percent Participants Participants Admissions Admissions Criminal Justice Drug Court 1,283 5.8% 1,381 5.4% Female Offenders 87 0.4% 92 0.4% Prison Parolee Network 591 2.7% 676 2.6% Proposition 36 (a) 8,703 39.2% 10,397 40.4% TOTAL CRIMINAL JUSTICE 10,664 48.0% 12,546 48.8% Welfare General Relief 3,435 15.5% 3,597 14.0% CalWORKS 1,608 7.2% 1,785 6.9% TOTAL WELFARE 5,043 22.7% 5,382 20.9% Perinatal and Adolescent Perinatal 1,364 6.1% 1,452 5.6% Adolescent 2,141 9.6% 2,251 8.8% TOTAL PERINATAL & ADOLESCENT 3,505 15.8% 3,703 14.4% Narcotic Treatment Methadone and LAAM 2,996 13.5% 4,082 15.9% TOTAL NARCOTIC TREATMENT 2,996 13.5% 4,082 15.9% GRAND TOTAL ADPA PROGRAMS 22,208 100.0% 25,713 100.0% (a) Substance Abuse and Crime Prevention Act. Emergency Medical Services The Emergency Medical Services Agency within DHS is charged with planning, implementing, monitoring and evaluating the local EMS system within the County of Los Angeles. To accomplish these responsibilities, EMS is appropriated more than $36.7 million each year to:  Establish policies and procedures for EMS operations;  Develop an emergency medical services system plan;  Designate EMS base hospitals and specialty care centers;  Develop guidelines, standards and protocol for the triage, pre-hospital treatment and transfer of emergency patients;  Authorize and implement a pre-hospital advanced life support program;  Certify and accredit pre-hospital medical care personnel; and,  Approve EMS personnel training programs. In addition, the EMS Agency manages the countywide EMS geographic information system and communications system, directly provides paramedic training for EMS operators, establishes and maintains provider contracts for exclusive operating rights within designated service areas, and provides other countywide EMS support services. Section 1: Health Authority Components and Role This functional structure is designed to ensure that the emergency medical response system within the County is comprehensive and competently provided. The EMS Agency must therefore work with a wide range of providers, including fire departments, private ambulance companies, and public and private hospitals. The EMS Agency reports to an Emergency Medical Services Commission established by County ordinance. The Commission is charged with duties and responsibilities defined in the California Health and Safety Code §1750, et seq., directs elements of the EMS Agency's operations and serves in an advisory capacity to the Board of Supervisors. As with Public Health, the EMS Agency provides services that address broader needs than the proposed narrower mission of a health authority, which would be charged with providing health services to the uninsured and indigent population within the County. Because its major purpose is to coordinate and standardize EMS services provided by a variety of public and private sector organizations, it should have this broader perspective. Accordingly, we believe that the EMS Agency should remain with the County. When considering the organizational placement of the EMS Agency, the County may wish to consider the benefits of placing the function under Public Health to ensure that appropriate medical authorities are retained. However, such a placement is not essential for EMS program success. Managed Care The DHS Office of Managed Care (OMC) is responsible for managing the State Knox-Keene licensed Community Health Plan (CHP), which is a federally qualified Health Maintenance Organization (HMO) designed to provide low or no cost health care services for clients who receive benefits through California's MediCal Managed Care Program and Healthy Families Program. OMC also provides coverage for in-home support service workers and a small number of Los Angeles County temporary employees. According to OMC, the CHP health plan provides coverage for approximately 159,544 clients who receive primary care from both DHS network providers and non-DHS network providers. The table below provides data on the distribution of clients by program and primary care provider category. As shown, approximately 68,000 clients receive primary care from non-DHS network providers (approximately 42% of all clients). The remainder receive services from DHS or one of its private partner providers. Section 1: Health Authority Components and Role Table 1.2 Office of Managed Care Client Profile December 2004 DHS Non-DHS Total Program Providers Providers OMC Clients MediCal Managed Care 4 8,565 6 7,680 116,245 Healthy Families 2 5,288 - 25,288 IHSS Workers 1 8,000 - 18,000 Temporary Employees 11 - 1 1 Total OMC Clients 9 1,864 6 7,680 159,544 Under this program, the OMC receives payment from the State or the County based on the number of clients – or "lives" – for whom services are provided. OMC staff is then charged with reviewing patient service utilization and managing payments to the various healthcare providers who serve those clients, including DHS. The OMC goal is to ensure that payments for services do not exceed the revenues that are received. According to OMC representatives, DHS benefits from this program because it receives payment for services from an insured source. While OMC provides services to individuals who use the DHS system, a substantial portion of the services are obtained from other providers. As shown in the table, at least 42% of primary care services are obtained by clients from non- DHS providers. OMC representatives cited a number of concerns that have caused this phenomenon and which impact OMC effectiveness:  Prior to budget reductions, DHS had substantially more services it could offer to OMC clients. With the budget reductions, DHS services become less attractive for clients who have provider choice.  OMC does not have the information systems or analytic capability to assess provider cost effectiveness.  As a primary healthcare provider for OMC clients, DHS impacts OMC’s ability to control costs. OMC representatives believe that the DHS cost accounting system is not appropriately designed for insurance cost reporting and that the inability of the Department to produce itemized charges has been problematic from a managed care perspective.  As a County function, the OMC is subject to all County civil service rules and budget policies. In the past, the external requirements imposed by the County have made it difficult to hire staff or respond to changes in membership and healthcare activity. Section 1: Health Authority Components and Role It is clear that the OMC manages a patient population that includes more than just DHS clients. On this basis alone, it would be more appropriate for the County to retain direct management of the function in order to more directly influence the healthcare cost factors for the managed care population assigned to the County. However, the role of OMC could also be expanded with the creation of a health authority. In other sections of this report, we discuss the need for the County to establish a performance based evaluation function to ensure that the new health authority is providing services in a cost effective manner. We also discuss the need for the County to establish a reimbursement mechanism with the health authority that is designed to control costs, yet respond to the dynamics of the healthcare environment and service demands. One mechanism to accomplish these objectives is to reimburse the health authority on a capitated or standard rate basis (i.e., reimbursing the health authority a fixed amount per client or diagnosis category, rather than on a fee for service basis). Establishing healthcare contracts with providers, assessing provider cost effectiveness and influencing care management are primary functions of an HMO. Accordingly, the Office of Managed Care could be used to oversee these processes for the County to ensure cost-effective performance by the health authority. Juvenile Court Health Services Juvenile Court Health Services (JCHS) is administered by DHS as part of the LAC+USC Healthcare Network. It is assigned approximately 190 employees who provide ambulatory care services at seventeen juvenile probation facilities. Services include basic pediatric medical care, nursing, dental, pharmacy, laboratory, radiology, medical records management and health education. These services are critical components that support the County's general custodial responsibilities for these juveniles, as defined in California Welfare and Institutions Code. Health services are regulated by the California Code of Regulations, Title 15. The health programs at each of the County’s seventeen juvenile facilities are accredited by the National Commission on the Accreditation of Healthcare (NCAH). This structure differs from that which exists in the Sheriff's Department for adults. The Sheriff independently operates a Medical Services Bureau, in association with a physician's group, to provide services to adult inmates in the County’s jails. Under this alternative structure, the Sheriff possesses organizational responsibility for the healthcare function. The physician group supports this function and is licensed accordingly within the State of California. Because medical services within the juvenile facilities support the County's general custodial care responsibilities defined in State statute, management of the service should be retained by the County to ensure strong accountability. The organization of medical services within the Sheriff's Department is a model which could ultimately be adopted for juvenile facilities within the County, or the 31 Section 1: Health Authority Components and Role Board of Supervisors could contract with the health authority or a private provider for the services. MENTAL HEALTH DEPARTMENT As discussed previously, the Department of Mental Health is presently an independent department with a Director who reports to the Board of Supervisors. Based on our review of data available from the Department, and information gleaned from interviews and other sources, we believe that DMH should remain with the County in its current status as an independent department. Service delivery methods, the client base and the funding structure for mental health services differ significantly from the safety net physical health services provided by DHS for the County’s uninsured and indigent populations. Data from FY 2002-03 indicate that approximately 87.6% of the clients who receive mental health services that are funded by DMH, receive such services from non-DHS providers. However, clients who receive services from DHS tend to require some of the most cost intensive treatment. These include emergency psychiatric services, acute psychiatric inpatient services and a small amount of outpatient clinic services. According to DMH, approximately 60 percent of all DMH treatment services are provided by community care contractors. These services are provided at private hospital emergency rooms; with a small number of acute psychiatric inpatient beds within private hospitals; at Skilled Nursing Facilities (SNF); Institutes for Mental Disease (IMD); crisis residential facilities; board and care facilities; and, community clinics. Mental Health Department officials interviewed for this study estimated that probably 90 percent of Department of Mental Health patients never see a County hospital. However, the officials stated that the remaining 10 percent – which include the most acutely ill mental health patients – have been found to disproportionately use DHS physical health services because of the high degree of co-occurring physical illnesses (e.g., diabetes) that are associated with mental disease and the medications that are used for treatment. Although DHS provides care for only a small portion of DMH clients, the medical treatment and hospitalization costs for that small population are reportedly high. Table 1.3 shows the results of a sample taken by DMH, which demonstrates the level of co-occurring physical health and mental health diagnoses for “high utilizer” patients who use both of the systems.8 8 For purposes of the study, a “high utilizer” was identified as a patient with six or more mental health treatment visits or one or more hospitalizations. All patients in the sample were receiving services from both DMH and DHS. Co-occurring illness was listed by primary diagnosis for both services. For example, a patient might have a primary DMH diagnosis of major depression and a primary DHS diagnosis of hypertension. Although that person might also be receiving treatment for substance abuse, such treatment would not be listed in the table data. Section 1: Health Authority Components and Role Table 1.3 Co-Occurring Mental Health, Physical Health and Substance Abuse Diagnoses in the DMH High Utilizer Population FY 2002-03 Bipolar Schizo- Major Disease phrenia Depression Psychosis Others Total Hypertension 4 9 7 1 2 45 2 24 3 91 COPD* 2 8 3 2 7 7 - 19 1 56 Diabetes 3 3 5 8 1 66 2 19 2 78 Others 4 60 5 86 1 ,354 1 4 465 2 ,879 Subtotal 5 70 7 47 1 ,842 1 8 527 3 ,704 Substance 3 33 5 20 6 12 6 265 1 ,736 Total 9 03 1 ,267 2 ,454 2 4 792 5 ,440 Sample Size 5 ,440 5 ,440 5 ,440 5 ,440 5,440 5 ,440 % w/Health 10.5% 13.7% 33.9% 0.3% 9.7% 68.1% % w/Substance 6.1% 9.6% 11.3% 0.1% 4.9% 31.9% % w/Both 16.6% 23.3% 45.1% 0.4% 14.6% 100.0% sisongaiD htlaeH Mental Health Diagnosis Source: Department of Mental Health Study As shown in the table, 68.1% of this subgroup of DMH clients also had primary physical health diagnoses that were being treated by the Department of Health Services. The remaining 31.9% also had primary substance abuse treatment diagnoses and were receiving services funded by ADPA. In total, DMH estimated that nearly $300 million in services were being provided to the “high utilizer” patient population in FY 2002-03. Although only 31.9% of “high utilizer” DMH patients were also identified as having a primary substance abuse diagnoses, this percentage may not fully describe the degree to which mental health clients require substance abuse treatment. Although we were not provided data to support his assertion, the Mental Health Director has suggested that “probably 60 percent to 80 percent of all mental health clients also exhibit some form of drug or alcohol dependency.”9 Like the “high utilizer” population, many of these "dual diagnosed" patients receive services from both DMH and from contractors funded by the Alcohol and Drug Program Administration section of the DHS Public Health Division. This assertion has been challenged by DHS, who believe that the percentage of patients with co-occurring mental health and substance abuse diagnoses may range closer to 5% to 10% of the total DMH population. Section 1: Health Authority Components and Role There has been much controversy within the mental health and substance abuse communities regarding the relationships between the two populations of clients. During interviews we were advised that substance abuse clients generally do not want to be "stigmatized" by being associated with mental illness. On the other hand, mental health clients and their families see mental illness as a disease which encompasses much more than the substance abuse issues that are presented by the patients. Despite these perceptions, government agencies have been moving toward combined "behavioral health" organizations in recent years in an attempt to merge the two closely related services. As the Board of Supervisors considers the County's healthcare organization after the creation of a health authority, it should examine the possibility of moving the Department of Mental Health and Alcohol and Drug Administration Program into a combined Behavioral Health Agency structure. This structure would provide opportunities to enhance interaction between the two services. SUMMARY OF ORGANIZATIONAL ALIGNMENT FACTORS Based on the analysis previously presented, DHS’ hospitals, comprehensive health centers and other ambulatory care clinics should be transferred to the health authority. The responsibility for all other functions reviewed as part of this study should be retained by the County, including managed care, core public health, emergency medical services, juvenile court services, alcohol and drug treatment and mental health treatment services. The County should also look for opportunities to better align those healthcare related services that it retains, as discussed in this report. Table 1.4 Organization Planning Matrix for Aligning Health Related Functions in Los Angeles County Primary Mission Client Base Preferred Alignment Public Physical Behavioral General Uninsured/ Health Program Health Health Health County Indigent Other County Authority Hospitals X X X Ambulatory Care X X X Managed Care X X X Core Public Health X X X Emergency Medical Services X X X Juvenile Court Services X X X Alcohol & Drug Treatment X X X Mental Health Treatment X X X By aligning services in this manner, the health authority would be given a clear and focused mission, which would increase its chances of operational success. Regulatory, disease management, countywide coordination and health education functions would be retained by the County. By retaining the managed care function and expanding the current role to include health authority monitoring functions, the County would be better equipped to monitor the services and costs of the health authority. Section 1: Health Authority Components and Role By retaining the mental health and alcohol and drug program administration functions, behavioral health services will receive more focused attention and prominence in the organization. This is appropriate since both programs serve a broader population than just the uninsured and indigent residents of the County, and are more closely aligned with non-health services functions such as criminal justice and welfare. By retaining responsibility for medical services provided to juveniles that are housed in County institutions, the Board of Supervisors will be better able to ensure appropriate levels and quality of care. The Board could choose to contract with the health authority to provide these services, as a supplementary service that would exceed the authority's statutory mandate. Currently, the staff assigned to health services administration functions within DHS are shared by the programs some of which would be separated from the County when the health authority is created. As a result, decisions will need to be made regarding the allocation of administrative personnel and other resources between the health authority and the DHS divisions that remain as part of the County organization. The Board of Supervisors should direct the Chief Administrative Officer, with assistance from DHS, to determine the most appropriate allocation of personnel and resources as part of a health authority transition plan. CONCLUSIONS Several proposals to create a Los Angeles County health authority have been made over the past ten to fifteen years. However, the health services components included in each proposal have differed greatly and have been vaguely defined. Previous proposals have not fully addressed whether responsibilities related to mandated Public Health or Mental Health services should be retained by the County or absorbed by the health authority. Further, these proposals have not consistently answered critical questions related to the complex responsibilities for providing indigent medical care services defined by California Welfare and Institutions Code Section 17000, case law and policy of the Board of Supervisors. Before considering the complex governance, operational, funding or legal questions associated with the creation of an independent health authority, the Board of Supervisors, with input from DHS and the County’s healthcare community, should clearly define the health authority’s mission and functional components. A preferred model would transfer authority and responsibility for all physical health services to the health authority; would charge the health authority with the responsibility to provide specified levels of healthcare services to the uninsured and indigent; and, establish emergency and acute psychiatric care services in hard to serve areas of the County. Public Health services, Emergency Medical Services and other broad regulatory or coordination functions, should be 35 Section 1: Health Authority Components and Role retained by the County. The Department of Mental Health should remain an independent County department that is separate from the health authority. RECOMMENDATIONS The Board of Supervisors, with input from DHS and the County’s healthcare community, should: 1.1 Develop a clearly defined mission for the new health authority that is focused on the delivery of safety net physical health services for the uninsured and indigent populations within Los Angeles County. 1.2 Clearly define the minimum level of service to be provided by the health authority, based on Welfare and Institutions Code §17000 and case law. 1.3 Develop a structure that retains the County's responsibility for providing public health, mental health, drug and alcohol, emergency medical, managed care and juvenile court health services. The Board of Supervisors should: 1.4 Retain the Department of Mental Health as a distinct County department not under the jurisdiction of the new health authority. 1.5 Establish Public Health as a distinct County department not under the jurisdiction of the new health authority. 1.6 Consider placing the Emergency Medical Services function under the authority of the Public Health Officer. 1.7 Consider placing Managed Care under the authority of the Public Health Officer, and expanding its role to include the monitoring of health services provided by the health authority under its contract with the Board of Supervisors. 1.8 Consider placing the Alcohol and Drug Program Administration function under the Department of Mental Health and creating a Behavioral Health Department. 1.9 Retain responsibility for health services functions provided to juveniles who are in County institutions (Juvenile Court Services), but contract with the health authority or another provider to provide such services. 1.10 Direct the Chief Administrative Officer, with assistance from DHS, to determine the most appropriate allocation of DHS Health Services Administration personnel and resources as part of a health authority transition plan. Section 1: Health Authority Components and Role COSTS AND BENEFITS There would be no direct cost to implement these recommendations. However, staff time would be required to provide the analyses that will be necessary for the Board of Supervisors to make informed decisions. The health authority would be given a clear and focused mission, which would increase its chances of operational success. Regulatory, disease management, countywide coordination and health education functions would be retained by the County. By retaining the managed care function and expanding its current role, the County would be better equipped to monitor the services and costs of the health authority. By retaining the mental health and alcohol and drug program administration functions, the behavioral health services will receive more focused attention and prominence in the organization. This is appropriate since both programs serve a broader population than just the uninsured and indigent residents of the County, and are more closely aligned with non-health services functions such as criminal justice. By retaining responsibility for medical services provided to juveniles that are housed in County institutions, the Board of Supervisors will be better able to ensure appropriate levels and quality of care. The Board could choose to contract with the health authority to provide these services, as a supplementary service that would exceed the Authority's statutory mandate. 37 2. HEALTH AUTHORITY GOVERNANCE STRUCTURE • The Board of Supervisors has been criticized for its lack of health care expertise and difficulty balancing its other priorities against the hospital and healthcare system needs of the County. In addition, the Board's approach to governance has reportedly created a risk adverse environment that suppresses management innovation. • A review of its activity in recent years concerning the County’s hospital and health system reveals that the Board of Supervisors devotes limited time to the complex and multi-faceted $3.5 billion department due to its many other responsibilities. Board actions in key operational areas were found to often be reactive and lacking follow-up, resulting in recurrences of some of the same problems. Creating a Health Authority Board of Directors focused solely on the County’s hospital and health system and statutorily composed of members with healthcare, finance and other business backgrounds would allow for a more pro-active, strategic, problem solving approach to governance of the new organization. • It is important that this governing board not be insulated from consumers. Currently, patients of the County healthcare system have a limited ability to exercise consumer choice and instead utilize the political process for providing input to the Board of Supervisors. The governing structure should therefore be designed in a manner that provides avenues for consumer input into the process. • Because of its unique role, the Health Authority Board of Directors should self-appoint its members after nomination by a combination of the Board of Directors, itself, and external groups, with all nominations subject to confirmation by the Board of Supervisors. By incorporating the best attributes of a business model with one designed to protect consumer interests, the Health Authority Board of Directors will be better able to exercise healthcare system oversight. Consumer interests could be protected by designating some board seats for consumer appointments and establishing a network of regional Healthcare Consumer Advisory Committees. Throughout this study, various individuals interviewed expressed a strong belief that the governing board for the Health Authority should be modeled after private sector boards of directors, to include individuals with expertise in the areas of health system management, finance and other business disciplines necessary to oversee a large public sector health organization. This theme has been put forward periodically since at least 1995, interspersed with alternative recommendations that would create a politically appointed governing body 38 Section 2: Health Authority Governance Structure without any requirements for member expertise. Some of the more significant proposals are described below. • In December 1995, the Health Crisis Manager appointed by the Board of Supervisors recommended that "the Board create a semi-autonomous health authority with . . . (a board) membership composed entirely of health experts." Specifically, it was recommended that the board be "made up of seven individuals who are recognized experts in health policy issues, reflected by their professional backgrounds. The authority as a whole should have health expertise and experiences in such arenas as medicine, public health, finance, business, public policy, and labor." 1 Had it been created in 1995, this board would have been advisory to the Board of Supervisors. • In 2001, a group representing the UCLA School of Public Health, the Los Angeles County Medical Association and the USC School of Medicine "began working for the adoption of a new governance structure for health care and public health in the County of Los Angeles."2 This group recommended an eleven member board that was comprised of political appointees with no requirements regarding professional expertise. The Board would have included: • Five members selected by the Los Angeles County Board of Supervisors; • One member selected by the Governor of California; • One member selected by the Speaker of the California State Assembly; • One member selected by the President of the California State Senate; • One member selected by the Chancellor of UCLA; • One member selected by the President of USC; and, • One member elected by the professional staff of the authority. • In May 2003, a team from the University of Southern California also made recommendations for the formation of a Health Authority, and suggested that the membership of the governing board be similar to the one proposed by the Health Crisis Manager in 1995. However, different than the 1995 proposal, the Health Authority that was proposed in 2003 would be "an independent authority created by the State Legislature in cooperation with the County of Los Angeles to operate personal health services, primarily hospitals and ambulatory care centers." According to the USC team, "the members of the new Authority would be composed of individuals who have expertise and professional experience in health care policy, clinical operations, finance, medicine, and labor."3 1 Burt Margolin, Health Crisis Manager, Governance of the Department of Health Services, memorandum to the Board of Supervisors, December 12, 1995, 2 Dr. Lester Breslow, UCLA School of Public Health, Dr. Brian Johnson, Los Angeles County Medical Association, and Dr. Robert Tranquada, USC School of Medicine, Health Authority for the County of Los Angeles - A Summary, submitted in response to a Board of Supervisors request for the Chief Administrative Officer to study Health Authority governance options, July 2001 3 Division of Community Health, Department of Family Medicine, USC Keck School of Medicine and the USC School of Policy Planning and Development, An Analysis of Alternative Governance for the Los Angeles County Department of Health Services, A Report to the John Randolph 39 Section 2: Health Authority Governance Structure • On January 31, 2005, Assembly Member Mervyn Dymally submitted proposed Assembly Bill No. 201 to create a Los Angeles County Health Authority.4 The original language of the proposed bill read, "The governing board shall consist of 13 members and shall include the following members who shall be appointed by ordinance or resolution of the board: • Five members who shall be designated by the Los Angeles Board of Supervisors. • Three members who shall be nominated by the Governor. • One member who shall be nominated by the Speaker of the Assembly. • One member who shall be nominated by the Senate Committee on Rules. • One member who shall be nominated by the Governor from the University of California. • One member who shall be nominated by the Governor from the University of Southern California • One member who shall be nominated by the Governor from the Charles R. Drew University of Medicine and Science. • One member who shall be appointed by the Health Authority from the Los Angeles County community."5 Like the 2001 recommendations made to the Board of Supervisors by UCLA, USC and LACMA evaluators, the proposed bill did not contain language that would ensure board member expertise in the areas of health care system management, finance or other business disciplines. The recommendations for the Health Authority board composition have clearly differed over the years. In the 1995 and 2003 examples, it was recommended that the board be composed solely of health system and business professionals. In the 2001 and 2005 examples, it was recommended that the board members be appointed by a broad spectrum of elected representatives, with no requirements for member expertise in health system or business professions. The individuals interviewed for this study who also advocated for a professional Health Authority board of directors appear to have formulated their opinions based on perceptions of the Board of Supervisors and the manner with which it conducts business in the County. These individuals voiced concerns that a politically appointed or elected board may adopt many of the attributes of the Board of Supervisors that they find most undesirable. In fact, some stated that the Health Authority would likely fail if the County's political framework was merely replicated in the new board, and many individuals noted that the Health Authority board will need to be insulated from stakeholder groups if it is to be successful. Haynes and Dora Haynes Foundation, May 2003 4 Since this bill was initially introduced, it has been substantially modified by the author and no longer addresses matters concerned with the formation of a health authority in Los Angeles County. A concurrent bill (AB 166 - Ridley-Thomas) would grant the Board of Supervisors with the authority to specify the size, qualifications, terms of office and removal process for the health authority board. Detailed membership equals 14, which is inconsistent with the text which states that the "governing board shall consist of 13 members." 40 Section 2: Health Authority Governance Structure ASSESSMENT OF BOARD OF SUPERVISORS HEALTHCARE RELATED ACTIVITIES Individuals who were interviewed for this study and previous studies on this topic consistently raised the following concerns regarding governance of the County’s hospital and health system by the Board of Supervisors. • The Board of Supervisors does not possess expertise in the field of health care and, therefore, is ill equipped to make many of the more complex decisions that are required. • The Board of Supervisors is responsible for the entire County and must balance resources that are allocated for health care against competing demands from the criminal justice system, social services system and general government. The time they can devote to the hospital and health system is also limited. • Individual members of the Board of Supervisors must balance the health care needs of the County against the healthcare needs expressed by stakeholders within their respective districts. Often these interests conflict and the resulting decisions can adversely impact overall healthcare system cost effectiveness. • Individual members of the Board of Supervisors periodically intervene in DHS operations in response to constituent contacts or complaints. • Individual members of the Board of Supervisors often react harshly to department initiatives or reports in both private and public meetings, creating a risk adverse environment where innovation is avoided by DHS managers. • The complexities of the County system and the requirements imposed by the Board of Supervisors do not permit true leadership to develop in the departments. Despite these criticisms, individuals who work most closely with the Board stated that the board members and their staffs rely heavily on Department management to oversee DHS operations and often allow managers significant flexibility on key decisions. Historical Record of Board Activities As part of this study, we attempted to determine the extent to which the perceptions of the individuals that we interviewed might be substantiated by a review of the Board of Supervisors actions related to health care. This included a review of newspaper coverage of the County health care system over that time, Board meeting minutes and transcripts, and staff reports provided to the Board. First, a review of five Board meeting agendas for dates selected randomly in 2004 confirmed that the Board has many responsibilities beyond overseeing the 41 Section 2: Health Authority Governance Structure County health care system. For the five meeting dates, February 24, May 11, August 17, October 26 and November 3, the Board considered 41 health-related items, including items related to the Department of Health Services and to the Department of Mental Health. This compared to a total of 298 items it considered regarding all departments and topics during the five meetings. Based on the number of items reviewed, health care accounted for 13.8 percent of the total workload considered during the five meetings. Furthermore, only 11 of the health related 41 items decided upon by the Board during the five meetings, or 26.8 percent, received any discussion. The other 30 were handled as consent items without discussion. The 11 health-related items that received some discussion accounted for about 13.1 percent of the 84 items overall in the five meetings that received some discussion. These statistics indicate that the Board of Supervisors, because of its responsibility for all of County government, is far from able to devote its full time and attention to the complex and multi-faceted County health care system. To further assess the Board’s record of involvement in managing the County health care system, we prepared case studies on the Board’s handling of three specific issue areas that have arisen since at least 1992. A summary of the