Health Services Committee

providing health care services that are cost-effective and higher in quality of care than would otherwise be Lower physician productivity in teaching possible. than non-teaching settings was cited as a finding in several of the research papers and abstracts One reason for local public agencies to enter we reviewed. The terms in which such findings into medical school affiliations is that it would be very were expressed included reduced productivity difficult -- and might be impossible -- for a county such per physician, increased time spent per patient, as Los Angeles to recruit enough qualified physicians to physician cost as a higher percentage of total provide the wide range of medical care it requires were cost, and increased personnel costs. Only three it not for these affiliations. Specialists in numerous papers reported no significant difference in fields are needed with trauma care imposing a productivity at teaching-affiliated clinics. particularly heavy requirement for physicians in certain specialities. Nonetheless, taken together, the studies seem to show that greater amounts of physician Another important and related benefit of the time are required in teaching settings than non- teaching affiliation is the high quality of care resulting teaching ones. This finding conforms to from the level of competence of both attending common-sense expectations since: physicians and later-year residents. Residents are less experienced than fully The remainder of this section describing Finding qualified physicians No. 1 consists of two parts. The first describes higher cost factors while the second deals with offsetting Attending physicians and residents at savings and revenues. times see patients together Higher Cost Factors A. Attending physicians teach in the classroom as well as see patients In conducting this study we reviewed 22 reports and report abstracts from research that looked into the Some attending physicians conduct cost of teaching-affiliated health care service. Several research 44 2, Number of Tests Ordered 5. & 6. Floor Space and Non-Monetary Benefits to Residents The ordering of more tests by residents than by fully qualified physicians was widely Increased floor space requirements for cited as a potential increased-cost factor by research and teaching add to facility costs. In individuals we interviewed for this study. One addition, student dormitories are provided for possibility mentioned was that of a resident residents. Also, according to the 1990 DHS ordering a broader array of tests in his or her report, residents are provided with meals at attempt to diagnose a condition than would a County expense. more experienced doctor В. Offsetting Savings and Revenues

Offsetting Revenues the County and USC acknowledges that a The County receives Medicare and higher standard relative to equipment is to be Medi-Cal reimbursement for services to followed at LAC/USC. qualified patients. Medicare specifically recognizes teaching-related costs. Basic No comparative data on age or payments are determined for each of a number technological status of equipment is available. groups Sophisticated equipment is needed in medical diagnostic-related of (DRGs) corresponding to various categories of medical school settings so that newer technological approaches can be taught. procedures. Such rates are adjusted for local Accordingly, equipment costs can be expected to be higher at wage rates. Direct and Indirect Medical Education Costs (DRG and IDME) are also teaching hospitals than they would need to be to paid to teaching hospitals. Medicare also pays provide baseline care in a non-teaching facility. 45 additional amounts to hospitals serving necessary to break time spent with patients between the areas with a Disproportionate Share of amount actually spent and the amount a fully qualified low income patients. The 1990 DHS physician would spend in a non-teaching setting. There study reported that IDME costs for is no clear way to determine this. And while it might be fiscal year 1988-89 were about $10 possible to use a factor based on the results of research, million. the research reports we reviewed would be inadequate for application across the broad range of procedures and The State of California pays the County services performed by doctors at the County hospitals. $995 per in-patient day. This is a negotiated rather than a calculated Medi-Cal reimburse- It would be similarly difficult to break out ment rate. That is, rather than building up a rate teaching-related revenues from all other revenues. The based on costs reported by the County, the State Medi-Cal reimbursement rate described above is a good arrived at an amount through discussions in example of this. No one knows what the Medi-Cal rate which cost types and amounts were treated in a would be for the County if the County hospitals were give-and-take manner. The current rate is based not teaching institutions. Comparisons with other non- on an amount negotiated several years ago and teaching hospitals in the County would not produce a adjusted for inflation annually since then. The satisfactory comparison. In the private hospitals, physicians receive reimbursement that is separate from State implicitly recognized teaching costs in the negotiations, and the rate would be lower if the the amount paid to the hospital. County did not operate teaching facilities. The difference between a teaching and non-teaching Finding No. 3 rate, however, cannot be accurately traced to any actual cost basis. The County is making significant progress in achieving greater emphasis on ambulatory services, decentralized access and primary care. It appears that The County also derives some benefit from volunteer work provided by non- USC and the other medical schools with which the compensated physicians. DHS reports that the County is affiliated are cooperating with the County in most recent annual volunteer figures for implementing these changes. LAC/USC are approximately 24,700 hours contributed by 2,500 physicians. Multiplied by At the beginning of fiscal year 1995-96 the average compensation rates paid to County- County was faced with a $655 million deficit in its employed attending physicians, the value of the health care budget. In some respects, this crisis brought hours contributed is approximately $1,500,000. to a head mounting problems associated with the In addition, the medical centers receive research County's delivery model and the approaches by which the federal and state governments have funded their grants. shares of costs through Medi-Cal. Medi-Cal accounts for more than 55% of funding for the County's health Finding No. 2 care system. The County does not attempt to track teaching- related costs separately from non-teaching-related Efforts were already under way to revise costs or to compare teaching-related revenues with approaches to providing care when the FY 1995-96 teaching-related costs. shortfall became apparent. Because the shortfall was imminent and of such great magnitude in terms of its potential impact on the public, the federal, State and It would be virtually impossible to separate teaching-related from non-teaching-related costs with County governments were highly motivated to work out any reasonable degree of accuracy. For example, in the a joint approach to avoiding the crisis. The approach is case of physician time spent per patient, it would be being developed through a project commonly referred 46 to as the "1115 waiver". This five-year demonstration Specialists have historically received better pay project is intended to restructure and stabilize the and higher prestige County's health services programs and the State's Medi-Cal funding approach while taking advantage of Some reported disparagement of primary care a $364 million federal relief plan. by medical school faculty Movement towards ambulatory care and Need for specialists to meet public teaching decentralized access through health centers is an hospitals' trauma care requirements important part of the project. One element of the strategic goals of the project is to achieve 50% increase Some of those we interviewed stated there was in access to ambulatory services, including preventative at least a perception that the medical schools were care. The restructuring will allow the County to reverse "dragging their feet" in shifting towards more primary planned closures of clinics that had been identified care education and post-graduate student positions. because of the projected 1995-96 deficit. Another aspect of the project involves plans to increase On the other hand, there is evidence that the payments for out-patient hospital services and otherwise percentage of primary care resident positions is increasing somewhat and is likely to continue to do so. emphasize decentralized and ambulatory services. This is partially attributable to the University of Among those who stated that the medical California's mandating that 50% of its medical schools' schools are cooperating in this change of approach are post-graduate positions are to be in primary care. the Director of Health Services, the Medical Director of Exhibit 1 shows numbers and projected percentages of DHS, the Executive Director of the North/East primary care residents in all of the County's teaching Network which includes LAC/USC, and the Chief of hospitals except Rancho Los Amigos/UCLA for fiscal Staff of LAC/USC. They cited joint recognition by the years 1995-96, 1996-97, and 1997-98. In the exhibit medical schools and the County of the need to obstetrics/gynecology, pediatrics, internal medicine and restructure. It was also noted that some faculty and family medicine are all categorized as primary care. resident positions have been moved from the Medical Center to comprehensive health centers. It should be noted that USC, while not under State mandate, is projected to increase its percentage of primary care residents from 39.3% currently to 41.9% At the same time, no specific performance targets have been set by DHS for the respective in FY 1997-98. This may reflect the national move numbers of out-patient versus in-patient visits at medical towards more primary care. Several officials indicated centers or the numbers of visits to decentralized centers that the shift is to the long-term benefit of the medical and clinics as opposed to medical centers. schools. We were also told, however, that some resistance remains among senior faculty members. Finding No. Greater emphasis on primary care is also partially a result of DHS's efforts to effect such a The County and the medical schools are making change. Increased primary care is included as an progress in improving the availability of primary care in the County system. element in the 1115 waiver project. Achieving greater emphasis on primary care in While DHS is achieving progress in this area, it medical schools has met with some resistance. Among has not established performance measures specifying the reasons for this are: annual targets for primary care are in the plan, in its contracts with the medical centers, or elsewhere. Research grants are more frequently awarded for specialty-related projects 47 Finding No. 5 help the County understand and quantify the value of services rendered. The existing professional services agreement between the County and USC is very broad in setting Other important indicators that would be useful forth the obligations of USC, especially in terms of to the county in tracking hospital performance were attending physicians' hours spent on teaching and with pointed out by the Auditor-Controller and the Chief patients. The County-USC contract also differs in Administrative Officer in the "Comprehensive Review significant ways from the contracts with UCLA and of the Department of Health Services, Phase 1" dated Drew. April 1995. They include admissions, average daily census, average length of stay and others. We understand that LAC/USC is now providing some of The County-USC contract is scheduled to be re- negotiated prior to June 30, 1997. At this critical time these figures and is cooperating in tracking and for the County in terms of ensuring the continuation of reporting a range of important statistics. It would be helpful if reporting requirements were detailed in the sound health services through its affiliation with medical schools, contracts with the schools should be clear in agreement. terms of obligations and as straightforward as possible to administer. Because of the transition to University-employed instead of County-employed attending physicians, the contract between the County and USC differs We recognize that there is good reason for some of the lack of specificity in the County-USC agreement, considerably from those with other major County It documents a change from pre-1988 arrangements hospitals. This is understandable. However, contract with USC and away from the model used with UCLA administration would be simpler and less expensive if all and Drew by reassigning attending physicians from hospitals had similar agreements with the County. County to University employment. In setting forth this arrangement, the contract uses a privatization approach.

Length of Patient Stays and Visits

survey reported in the 1990 DHS study One individual we interviewed cited the indicated that residents worked an average of 71 hours per week. Even assuming 71 hours per possibility that medical schools request and sometimes receive payment from the County for week, the average salary-plus-employee benefit per-hour cost to the County for residents is less newer, more sophisticated, and therefore more expensive medical equipment than would be than $12. provided were medical services being provided by a non-teaching cadre of physicians. The 1988 professional services agreement between

Floor space It appears clear, based on previous County studies and on research conducted throughout the Non-monetary benefits to residents

nation, that affiliations with medical schools give local government such as Los Angeles County a way of Physician Productivity