About 7,700 low income Fresno County residents will miss an opportunity to gain primary medical care due to a dispute between the county and the private hospital that provides care for the county’s medically indigent adults.

The dispute involves a long-term contract between the two to provide low income care, and the unwillingness of either of them to risk incurring more medical costs than they already shoulder.

Fresno became the first county in the state to opt out of the expansion of healthcare to low income adults. The federally funded program would have provided health benefits similar to Medi-Cal for about 7,700 low income adults who do not have medical insurance.

Participating in the program would have involved altering the existing contract, which could shift medical costs for providing health care for the uninsured one way or the other.

The contract currently leaves $60 million of the cost on the hospital, with the county’s share capped at $20 million.

Under the state-federal Bridge to Reform program that Fresno rejected, low-income residents would get a primary care doctor, along with preventive medical care and early detection of potential health problems, instead of relying on sporadic clinic and emergency room visits.

No one disputes the need for low income health care in Fresno County. A quarter of the county’s population is at or below the federal poverty level, and 46,000 adults qualify for the county’s medically indigent health care program, according to Stephen Walter, chief financial officer for Community Health Centers in Fresno.

Community Health Centers operates a hospital and clinics in the county, and provides the county’s medically indigent health program under a long term contract. Just 15,000 of the eligible 46,000 are enrolled in the medically indigent program, Walter said. The program, mandated by the state, does not provide primary care.

Dr. Ed Moreno, the county’s health officer, estimates that 7,700 low income adults could be enrolled in the Bridge to Reform program under a proposal that was voted down by the county board of supervisors on Sept. 20.

Under that proposal, the county would shift $18 million of the $20 million it spends on the medically indigent program to the Bridge to Reform, along with $10 million for a similar program for mental health. Together, the county funds would qualify for $28 million in matching federal money.

But both the county and the hospital are concerned about the financial risk of participating in the program. At the center of the problem is the long term contract the county and hospital entered into 15 years ago.

Under the 30-year contract, Community Health Centers provides the low-income health program and inmate care for the county, for a fixed, $20 million fee.

In the initial years of the contract, the hospital made good money, Walter said. Hospital officials at the time figured they would get the low income patients anyway, through emergency room visits. There was a consumer price index factor in the contract to account for inflation.

“In 1996, it made financial sense,” Walter said. But medical costs rose faster than the consumer price index, Fresno County’s population grew rapidly, and by 2002, the hospital was losing money on the deal.

By 2009, the hospital was spending $40 million to $45 million on the program, and getting $20 million from the county. The situation got dramatically worse last year, when the county loosened eligibility standards to ward off a lawsuit.

The qualifying income level for the program had been set at $500 a month or less, and hadn’t changed since the contract began, Walter said.

San Diego County had a similar arrangement, and was successfully sued because the threshold was too low. Fresno County drew a similar lawsuit, and the county agreed to raise the qualifying income to $1,200 a month.

With the influx of additional patients, the hospital is currently losing $60 million a year on the program, and the number is growing, Walter said.

The county is reluctant to re-open the contract, for fear of getting stuck with a bigger share of that cost.

“We got out of the hospital business 15 years ago, and we capped our cost,” said County Administrator John Navarrette. “We are getting a heck of a deal, we acknowledge that. The hospital made money in the early years,” he said.

Community Health Centers initially went along with the county’s application for the Bridge to Reform program, Walter said, but then realized the risks it posed to the hospital.

The county’s administrator of the program, CalViva Health, would be publicizing the program to develop a client list in anticipation of the 2014 federal health care reform. Those who didn’t qualify for the Bridge to Reform would be referred to the county’s existing low income program. Community Health Centers would have to provide care for more people with what was left of the county’s indigent funds.

“We went to the county and said we want $9 million of the $30 million (the county spends on health and mental health for the poor), and some sort of risk-sharing. We don’t want to lose $240 million.”

That idea was quickly rejected by the county, which has its own budget problems to contend with, Walter said. “The county can’t afford anything, they are closing jails and cutting the sheriff’s department,” he said.

So the board of supervisors voted to opt out of the Bridge to Reform program, causing an outcry from social service agencies that deal with the poor.

Central California Legal Services, Inc. wrote a letter to the board spelling out what it felt were legal problems with the board’s rejection, including an inadequate environmental review, a potential conflict of interest with one supervisor who has a relationship with another medical facility, and discrimination against the rural poor.

“It looks like the members of the board of supervisors voted pretty much in isolation from the rest of the community,” said Chris Schneider, executive director of Central California Legal Services.

“The information from the staff was certainly incomplete if not misleading. I’m not sure the board acted with a full understanding of the implications of what they were doing, what the consequences of rejecting it would be,” Schneider said.

“It impacts the whole county. If my kids are going to school with children who don’t have access to health care, it affects my family. If you go to work with people who don’t have access it impacts your family. It’s a much wider public health issue involved (than just the indigent),” he added.

Community Health Centers, in an effort to revive the program, offered the county an alternative a week after the board of supervisors’ vote.

“We would like to get out of the situation of indigent patients using the ED (emergency department),” Walter said. “You get better quality when you manage patients, it’s a no-brainer, but someone has to take the risk,” he said.

The new proposal would use the county’s federally qualified primary care clinics to provide health care, with the hospital providing admissions and health care specialists and CalViva administering the program. Walters said the clinics are willing to provide the care.

But that plan shifts the risk back to the county and CalViva, Navarrette said.

“The hospital wants to cancel the current contract and put all the risk on the county and the third party administrator,” Navarrette said. “It’s still the board’s decision not to pursue it.”

Community Health Centers can no longer accept the risk either, Walter said.

“We can’t do any more. We are facing federal cuts, state cuts. We think we have done our share,” he said. “There’s a limit to what everyone can do.”

That means the situation is probably headed to court, Schneider said. “I can say we are on a litigation path at this point,” he said.

Schneider is sending another letter to the board of supervisors, urging them to reconsider in the light of the new offer from Community Health Centers.

“To me, it just makes sense for the board of supervisors to take whatever actions they can to assure a healthy community,” Schneider said. “I don’t know if what Community Health Centers offered will be the full answer. But it’s an opportunity to get the right players to the table to explore what can be done to improve the situation.”

If the board doesn’t act soon, Schneider said, Central California Legal Services will file a lawsuit.

Navarrette was unconcerned. “We get threats all the time, from all corners of it. This is not new to us,” he said of the potential lawsuit. “It has been examined by our legal counsel, and they have no standing to overturn our position.”