COUNTY PROFESSIONAL SERVICES AGREEMENT
TABLE OF CONTENTS
CPSA - Definition
History
Cost-reductions
"Switching-over"
The Money and the Delivery
of Health Care
Contract Performance Measures
Changes in Health-care delivery
USC Response
The Federal "Waiver"
The Replacement
Facility for the LAC-USC Medical Center
This document prepared by Peter Heseltine, Professor of Medicine, MFA
Elected Representative to the LAC+USC CPSA negotiations, Former Associate
Chairman of Medicine for County Affairs. E-mail to:
heseltin@hsc.usc.edu
Posted April 9, 1997
Return to CPSA Table of Contents
The County Professional Services Agreement (CPSA) is the contractual
agreement between the County of Los Angeles and the University of Southern
California that describes how the County pays USC to provide physician
services at the Los Angeles County - USC (LAC+USC) Medical Center. The
contract year runs from July 1 to June 30. Including an initial trial period,
during which physicians-in-training (house-officers) were also included
in the contract, the agreement has been in place for 10 years. In the absence
of a new agreement, the contract ends on June 30, 1997.
In the early 1960's, apart from physicians-in-training, there were very
few full-time, LA County employed physician faculty at the County General
Hospital. The passage of Medicare and subsequently MedicAid (MediCal in
California) made available funds for the County to pay full-time faculty.
In 1987, the majority of the USC full-time clinical faculty -- including
tenured, tenure-track, and special or non-tenure-track faculty (approximately
350) -- working at LAC+USC Medical Center were employees of the County
of Los Angeles. Many of these faculty received "supplements"
to their salary from USC, derived from University monies and funded research
projects. These supplements entitled these faculty to many of the fringe
benefits available to other faculty, including tuition remission for their
children.
In 1987, the County, in an attempt to reduce its costs offered USC an
exclusive contract to deliver all physician services at the LAC+USC Medical
Center for a fixed annual sum. The purpose of the agreement was to allow
USC faculty to transfer to the USC payroll and become full-time paid USC
faculty. The County found this financially attractive because it believed
the agreement would reduce it's fringe-benefit overhead. USC considered
the agreement attractive because it hoped that paying faculty for a product
- medical care - rather than hours, would promote more efficient use of
faculty time. Additionally, as the County pays USC in June for the whole
succeeding year, USC derives interest benefit. All clinical faculty hired
after the CPSA began (1987) became employees of USC, and not the County.
USC faculty who were County employees prior to 1987 were allowed several
years to "switch over" from the County to USC, with salary guarantees
during that period. However, a small number (~80 out of ~350) did not,
largely for financial reasons related to retirement benefits. These were
people vested in the County retirement programs. The switch-over program
was entirely voluntary and clauses in the contract protected those who
chose to become full-time USC employees, as well as those who wished to
remain County employees and part-time USC employees. Faculty have continued
to switch-over throughout the ten years, though permission to do so for
the past five years has been granted by USC for some, but not for others.
Both the County and USC have always maintained that all physicians covered
by the contract are actually USC employees, even though they are paid by
the County, because the University reimburses the County for these physicians'
salaries from the CPSA funds. Until recently, faculty who receive County
paychecks received the same cost-of-living increases on the County portion
of their salaries (approximately 10% over the ten years) as did other physicians
working elsewhere in the County system (but not employed by USC). Because
the original agreement did not provide specific increase in payments to
USC to pay for cost-of-living increases for these faculty, USC has maintained
that the cost-of-living increases were not adequately accounted for in
the contract. Some departments have started to subtract any County paycheck
increases from the USC supplemental check. A few senior faculty, eligible
for retirement from the County, did so and switched over to USC. By doing
so, they are able to draw both their Count retirement and a salary from
USC.
The Money and the Delivery of Health Care
The CPSA payment to USC by the County was for an amount both parties
considered sufficient to staff the County Hospital, even though it represents
less than 12% of the budget of the total facility. Subsequent to the original
agreement, supplementary budgets were added by the County to the CPSA as
specifically ear-marked line items to enable USC to deliver new or enhanced
programs. Examples of such new or expanded programs are those in cardiovascular
surgery, trauma services, and outpatient services for AIDS patients. The
supplementary funds in these and other added line items to the CPSA grew
from $3 million in 1989-90 to nearly $12 million in 1996-7.
Precise performance standards for the contract were to have been negotiated,
but new standards were never agreed. Thus, the only work-product measures
that remain in force for the bulk of the contract funds are the numbers
of inpatient days on clinical services and a fraction of the outpatient
visits. Performance standards for the supplemental programs have usually
been based on work product. Various attempts have been made to provide
additional measures of physician performance. USC constructed a system
to collect these data (HelpNet). Additionally, many physicians are required
to complete a record for two weeks each quarter of their patient and other
CPSA activities. This information is used by the County to certify the
physician activity component to State and Federal agencies that pay the
County.
Changes in Health-care delivery
Federal, State and County governments have become alarmed by the overall rising costs of medical care for the indigent and have felt pressure from voters regarding a rising tax burden. Many of these voters are themselves without adequate health insurance (one in three workers in LA has no health benefits). Government agencies have become determined to change the way medical care is delivered and are actively considering the possible contracting of care for the indigent to other Managed Care entities. Previously, the County was paid by the State and Federal government primarily for in-hospital days for eligible patients. Now there is a desire to encourage the health-care system to provide lower-cost managed care, (usually) outpatient care. Starting in the 1990's, the number of inpatient days recorded at the LAC+USC Medical Center began to decline even as outpatient work increased. Nonetheless, the County, acting within the terms of the contract, and as its own revenues declined, informed USC that the County was entitled to lower its payments to USC. As a result, the peak of CPSA funding (including funding for supplementary programs) to USC occurred in the 1994-95 year, and amounted to $76 million. In 1995-96 USC received $71.5 million and in 1996-97 USC received $66.9 million.
USC reacted to the cuts in payments from the County with a series of
actions involving the Faculty of the School of Medicine. Click
here for a chronicle of recent events.
In 1995, the County, reacting to a fiscal crisis and the voters' concern over indigent care, decided that the Department of Health Services must share significantly in the budget cuts. An initial plan to close the LAC+USC Medical Center, among other facilities, and lay off 10,000 County healthcare workers received national attention. Eventually, about 5,000 county workers (including some USC faculty) were discharged or transferred to lower paying jobs. The President, Bill Clinton, intervened and offered the County $360 million to effect a transition from in-hospital care to outpatient based (managed) care. Federal/State Rules which usually do not pay much for outpatient care were to be "waived" during the County's restructuring of the Department of Personal Health (the other branch in DHS is Public Health). A new director of DHS was appointed by the County Board of Supervisors and he has negotiated with the Federal government the terms of the "waiver". These terms allow the County to receive approximately the same amount of money annually over the next four years as it did in the past, whether patients are treated in or out of the hospital setting.
The Replacement Facility for the LAC-USC Medical Center
Further complicating the future of the USC-LAC relationship is the issue of the County Hospital structure itself. Damaged in the 1994 Northridge earthquake, the Medical Center's main building of 18 stories and (originally) 2000 beds, constructed in 1929, no longer meets current licensing or structural codes for hospitals. Within the main structure, however, are many valuable facilities constructed during the last ten years, including two new, state-of-the-art, intensive care units, invasive cardiology suites and an AIDS ward. Two other County hospitals on the Medical Center campus, the Psychiatric Hospital and the Pediatric/Communicable Diseases Hospital, were condemned and closed because of earthquake damage, displacing many faculty and altering patient services. The County, long in need of a replacement facility, now has Federal and other disaster funds available to build one. To remain eligible for these funds, the project must "break ground" within three years.