The financially troubled Doctors Medical Center stopped receiving emergency ambulance service from West Contra Costa Healthcare District this month

SAN FRANCISCO — The financial problems of a troubled safety net hospital in Contra Costa County, Calif., could have broader negative implications for the county, according to a report from Moody's Investors Service.

Recent increase in attrition among doctors and nurses is threatening to force the insolvent Doctors Medical Center to close, or to significantly downsize, sooner than expected.

The hospital, owned and operated by the West Contra Costa Healthcare District, also stopped receiving emergency ambulance service Aug. 6.

"The instability of DMC is a modest credit negative for the county since a permanent loss of DMC would disrupt medical services to more than 250,000 residents, many of whom are underinsured or uninsured," Moody's analysts said in a report, released Friday.

The affected residents represent almost 25% of the county's total population. More than 24% of the center's emergency department patients do not have insurance and the burden of caring for these patients will likely fall partially on the county, Moody's said.

A lawsuit was filed in federal court Tuesday, seeking a restraining order to stop the ambulance diversions and possible closure of DMC, claiming the county has a "legal and moral obligation" to assume operation of DMC.

The motion was denied, but a court hearing was granted for late August.

In California, counties are legally obligated to care for indigent patients. Contra Costa County, rated Aa2 by Moody's, has its own budget challenges and has been working to reduce support for its own hospital. Moody's said the county has little capacity to subsidize additional health services.

"Extraordinary financial support for DMC from the county or other entities is unlikely, but a 'stakeholder' group is working to establish a transition plan," analysts said. "The group has proposed that DMC dramatically downsize operations and direct patients to other local hospitals, shifting the majority of costs onto the county and other local providers."

Another proposed option would have DMC function as a stand-alone emergency room. This option is not currently authorized in the state and would require enabling legislation.

The latest financial troubles are nothing new for the hospital. DMC filed for bankruptcy protection in 2006, and emerged from it in 2008, thanks in part to cash infusions from the state.

Since 2008, the center has continued to suffer large recurring losses due to declining patient volumes and overall reimbursement reductions.

"The hospital has recently kept operating with deficit financings and one-time cash infusions from the county and local hospitals, but the additional time has not been sufficient for management to stem the losses," Moody's said.

Currently, DMC has an $18 million structural budget gap — about 13% of its total budget — and its fiscal 2012 and 2013 audit letters expressed doubts over its ability to continue as a going concern.

A parcel tax measure that would have closed this gap by providing an estimated $20 million in additional, annual revenue failed in a special election in May.

Moody's said for now, an orderly wind-down of the hospital into a smaller or closed facility would likely be manageable for the county, which has capacity to treat a portion of the displaced DMC patients.

Patients could also be absorbed by other local health systems, such as John Muir Health, Kaiser, and Sutter Health.

"There is risk that an abrupt, uncoordinated closure would force the county to take expensive "stopgap" actions or assume much greater responsibility than would be the case in an orderly transition involving other parties," Moody's said.

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