By paying each of several community hospitals (both for-profit and non-profit) an annual fixed indigent care allocation, Orange County now buys just the hospital bed days it needs from a total of 28 local contracting hospitals. This program is called Medical Services for Indigents (MSI), and it has saved Orange County both time and money on its health care services.

The Healthcare Association of Southern California appoints a committee each year to negotiate with the County. All hospitals desiring to qualify for county payments sign a single "Master Medical Services Agreement." The physicians sign a similar Master Agreement. The single contract simplifies administration, and the County also reduces paperwork by contracting with a fiscal intermediary to process claims.

The MSI program cuts costs because the county can protect itself through a fixed allocation of dollars to the Master Agreement. All the hospitals and physicians split the capped allocation at the end of the year (although the county makes provisional cash payments quarterly) in proportion to the units of service they actually delivered to indigents. Additionally, every hospital with a 24-hour emergency room must treat anyone who shows up in critical condition, or the hospital will lose its license.

The MSI program includes 28 contracting hospitals; 28,758 inpatient days; 16,853 emergency room visits; 2,100 participating physicians; 187,587 visits; and 26,000 unduplicated clients. Orange County runs the entire program with a staff of seven employees.

Orange County’s payment for each day of inpatient service for indigents in 1993-1994 was $816. This payment covers an average of all five acuity levels, including all nursing, administration, hotel, and ancillary services. The only item excluded is physician charges. This rate compares favorably with the $1,300 per day paid to county operated hospitals in Los Angeles.

When the Amarillo Hospital District sold its community hospital to Universal Health Services, the sale yielded the following benefits:

• Created a $200 million trust fund;
  
  
• Paid off $13 million in bonded indebtedness;
  
  
• Eliminated Amarillo residents’ ad valorem tax burden of $8.5 million;
  
  
• Paid property and other local taxes of $3 million annually, producing a net gain to the community of over $11 million; and
  
  
• Paid ongoing hospital related costs to indigents at both the hospital and primary care clinic.

Board members interviewed by the Amarillo News Globe said the sale of the public hospital gave them the best of all worlds: lower taxes and better services. "Without Universal’s help, the Northwest Texas Healthcare System faced a difficult time due to increased competition. The results would have been an increase in taxes, cut in services to indigents, or both."

Burdened by an ever-growing indigent population, Conroe, a 200,000-population community north of Houston, Texas, was faced with two choices:

• Keep fighting for market share against the private hospital, a course which would require a significant increase in taxes; or
  
  
• Sell the public hospital to the highest outside bidder willing to treat indigents. The county decided to exit the business of operating a hospital and focus instead on meeting the needs of the disadvantaged.

The winning bidder to purchase the hospital was Healthtrust, Inc., the owner of the largest private hospital in the area (Healthtrust later was acquired by Columbia/HCA, the nation’s largest hospital company.)

The final sale price was $104 million, $20 million more than the estimated fair market value. The community realized a net "profit" of $30 million after $58.6 million in bond debt was paid off. The "profit" was used to establish a non-profit Community Foundation to meet the ongoing health needs of the community.

Healthtrust closed its own private hospital (instead of the public hospital), in order to solve the overbedding problem in the area and transferred its staff to the public hospital, which was renamed Columbia Conroe Regional Medical Center. Columbia/HCA has since added $35 million in improvements to the hospital.

Through the privatization, the community is realizing increased revenue through new property and other tax payments by the hospital, which totaled $2 million in 1995. As a result, the tax rate has declined 42 percent.

Indigents have fared best of all. The number of indigents served has gone up substantially — enrollees increased 11.7 percent from 1995 to 1996. Indigent outpatient services increased 36 percent. Columbia is paying $10 million for indigent care, despite receiving only $6 million in payments from the district.