Health care providers teeter amid California budget impasse

Sacramento Bee
Tuesday, Sept. 2, 2008

By Aurelio Rojas

As California careens toward a record for the longest-ever state budget impasse, health care providers like Jeff Bailey are on the brink of going out of business.

Bailey operates two six-bed group homes in South Los Angeles for developmentally disabled Medi-Cal patients who suffer from severe mental retardation to blindness.

He hasn't been paid by the state since the new fiscal year began July 1 without a budget. Bailey is struggling to pay his 16 hourly employees. He has stopped paying his contractors and making his mortgage payments.

"When I read in the papers that (legislators) are joking, 'Hey, we'll hold out until Thanksgiving if we have to,' well, our businesses will collapse in another month," Bailey said. "I can't imagine providers having enough cash on hand to keep their businesses alive."

Betsy Hite, a spokeswoman for the California Association of Health Facilities, which represents the nursing home industry, said there are about 7,200 developmentally disabled patients in the state in homes with 12 or fewer beds.

Hite said most of these providers "have pretty much leveraged whatever they can to the max."

"I've got two companies that liquidated their retirement funds," she said. "Both tell me that they can make payroll Friday, Sept. 5, and then they're done."

Deadlocks are as common in the Capitol as the summer heat. But this year's stalemate is almost certain to smash the record for a late budget set in 2002, when then-Gov. Gray Davis signed a spending plan on Sept. 5.

The impasse is especially squeezing programs dependent on Medi-Cal, the state-federal health care program for the needy.

When there is no state budget, payments stop flowing to homes that care for the developmentally disabled, and community clinics like the Women's Health Specialists in Sacramento.

The clinic is one of eight in Northern California run by Women's Health Specialists, established 35 years ago with women as a focus but which now treats men as well.

Eileen Schnitger, the clinics' development director, said they depend on Medi-Cal for about 90 percent of their revenue.

Because of the budget impasse, the nonprofit has had to take out a $400,000 emergency loan.

"So far, we haven't had to turn away anyone," Schnitger said. "But the longer we go without a budget, the longer that becomes a very real possibility."

Even before the stalemate, Medi-Cal providers were laboring under a 10 percent rate cut approved by the Legislature because of the state's $15.2 billion budget deficit.

A federal court recently blocked the rate cut, but the outcome of the legal battle is uncertain. Meanwhile, many of the community clinics that provide the foundation of the state's care for the poor are operating with borrowed money.

Schnitger said although the clinics will receive their Medi-Cal payments when a budget deal is finally reached, they won't be reimbursed for their interest payments.

Chris Patterson, a spokesman for the California Primary Care Association, which represents 650 clinics, said these facilities serve 4 million patients annually.

Many clinics rely on Medi-Cal for more than 50 percent of their revenue.

Since a state emergency fund to keep the clinics going ran out July 24, many clinics have taken out emergency loans provided by a consortium of hospitals and foundations.

"Without these loans, some of these clinics would have had to close down," Patterson said.

Bailey said these loans are not available to him as a new provider who has not built a lot of equity in his 2-year-old business.

The people he cares for cannot care for themselves. Many are in wheelchairs and are entirely dependent on his staff members for their meals, hygiene and other needs.

"While the state has decreed that (it) won't pay me, the problem is these individuals have to be cared for," he said.

The people he serves, he said, "are the most needy people in society, but unfortunately, they're also the ones with the least amount of voice."

Bailey wishes he could reach the ears of the bickering lawmakers who are standing in the way of a budget resolution.

"I would ask them to take a real hard look at how this is affecting real people," he said. "It doesn't seem that anybody really cares about that."