Clinics’ Closure Raising Questions

For more than four years, Los Angeles County paid millions of dollars to a private network of community clinics run by a doctor who was supposed to be working at a public hospital while earning his six-figure county salary, according to health department officials.

Not only did the county’s lawyers approve the arrangement, but its health department then struck what officials now say was an illegal deal to help the five clinics stay afloat by allowing them discounted purchases of drugs earmarked by the federal government for public health facilities.

Health officials waited more than a year before billing the clinics--run by Metro South Provider Network--for more than $700,000 worth of those drugs. As the bills piled up, the clinics’ operator declared bankruptcy and closed, leaving uninsured patients scrambling to find care and taxpayers holding the bag.

The resulting scandal has already brought down the county’s top medical officer, a tough-talking administrator whose lawyer alleges that he was made the scapegoat for the incident because he is black. It also has shone a light on the cozy and informal way the $15-billion county bureaucracy sometimes does business.

Supervisors were outraged to find that health officials had no contractual agreement to supply drugs to the Metro South network, and relied instead on an informal arrangement with their own doctor. But the network affair is far from the only instance of a county agency making a financial transaction without an approved contract.

In the last two weeks alone, the Board of Supervisors has been confronted with three instances of county departments running programs without contracts, and has approved retroactive deals worth more than $8 million to legalize the arrangements.

“It’s something that’s getting out of hand,” said Supervisor Gloria Molina, who chastised the Sheriff’s Department for bringing a $4-million retroactive deal to the board Tuesday. She said the informal deal with the Metro South network “is an example of the cavalier attitude” county bureaucrats have toward such transactions.

But the health department officials who allegedly made that deal said through their attorney that it was done in response to prodding by one supervisor’s office, and they contend the arrangement was perfectly legal.

“This is almost a perfect example of scapegoating,” said attorney Godfrey Isaac, who represents Dr. Donald Thomas, the county’s former medical director, and Dr. Janet Aiso, the health official who arranged the pharmaceutical deal with the network. “Everybody was hip on this until [the network] went bankrupt.”

There is little unanimity about the details of the tangled affair, but some basic facts are clear.

In 1995, the county was trying to launch a network of private outpatient clinics where it could send the uninsured patients who were overwhelming its public hospitals. One of the dozens of organizations the county contracted with was the Metro South network, which operated five clinics in Central and South Los Angeles.

The network was tightly linked with the county’s own Martin Luther King Jr./Drew Medical Center in Willowbrook. The clinics’ chief executive officer, Dr. Jeffrie Miller, was director of managed care at the hospital and held another position at its affiliated Drew University. He was encouraged by his superiors to start the network, according to Bradley E. Brook, the network’s bankruptcy attorney. Another King/Drew doctor sat on the company’s board of directors.

Brook said Miller--who officials say earns $140,000 for his county work and an additional $24,000 for his position at Drew--poured his own money into the network to treat the poor and vulnerable. “This man did a mind-bogglingly efficient and effective job,” Brook said, “and he is one of the most dedicated people I have met in a long time.”

Brook said Miller, who did not return a call seeking comment, worked full-time on his county job and only spent his off hours working for the network.

But Thomas, for one, said he was always skeptical of Miller and his clinics. In November 1998, he said, he wrote a letter to the health department’s auditors asking them to investigate Miller’s employment at the network. He said he received no reply.

Sachi Hamai, the health department’s top auditor, said Wednesday that she had sent Thomas a copy of an opinion by county lawyers stating that as long as Miller was not involved in influencing county contracts, his network job was legal.

Hamai declined to comment further on Miller’s employment, citing a pending investigation. But internal county documents reviewed by The Times state that Miller “apparently devoted the majority of his time to [network] duties.”

Buying Drugs at a Discount

It is the pharmaceutical program, though, that has drawn the most outrage from county officials--and that is the murkiest aspect of the entire incident.

County officials say the network is one of two organizations that benefited from an informal deal to buy drugs from the county at less than market rates. The other entity, the John Wesley Harding Clinic in Central Los Angeles, received $22,000 worth of drugs after pharmaceutical director Aiso proposed the arrangement in February 1998, said auditor Hamai. The clinic paid its bills.

Later in 1998, Hamai said, the network terminated its existing agreement to buy drugs and was looking for a cheaper supply. Thomas and Aiso allegedly recommended that the clinic avail itself of the county’s so-called 340b program, in which it gets drugs from the federal government at a cheaper rate. And the deal was struck--illegally, county officials say, because under federal law only the county can utilize the 340b discount.

Still, county officials say, Aiso did not begin billing the network until a year later, and it was inexplicably charged at lower rates than John Wesley Harding Clinic. When the company filed for bankruptcy in May, health officials say, it still owed about $779,000.

Attorney Isaac and former medical director Thomas tell a different story. They say that since 1996--before Thomas arrived at the county--the health department has given clinics pharmaceuticals that were not part of the 340b program with the Board of Supervisors’ approval. Isaac also said Aiso was not responsible for billing the network.

County officials contend that it was Aiso’s duty to bill for pharmaceuticals and said that the 1996 program Thomas cites was discontinued that year and is not applicable.

Isaac said that the network deal was cut at the urging of the office of Supervisor Yvonne Brathwaite Burke, who represents South Los Angeles. Another health official told Aiso that Burke’s office wanted to help the network stay afloat, which led to extending the pharmaceutical deal already enjoyed by the John Wesley Harding Clinic to the network.

In an interview Wednesday, Burke said she was unaware of her office ever making that request. She did say that she has long been concerned about the network’s performance and its arrangements with King/Drew, which also is in her district.

“There were a number of issues that were going back and forth,” Burke said.

Concern grew this spring as the county struggled to persuade the federal government to continue to fund clinics like the Metro South network through a $1-billion bailout. Word of the drug deal with the network reached supervisors, and the health department quietly launched an internal probe.

The network declared bankruptcy in May, about three weeks after supervisors met with health officials about the drugs, county sources said. But tensions peaked this month when Thomas and Aiso were removed from duty. Thomas has been given notice of the county’s intent to terminate him, his attorney Isaac said.

“This is not about this program,” Thomas said from his attorney’s office Wednesday afternoon. “This is about removing me from the department.”

Isaac said that one possible reason is racism, rattling off names of health officials who have been forced out over the years and, like Thomas and Aiso, are members of minority groups.

Citing pending investigations and possible litigation, county officials have been hesitant to discuss the network case or respond to allegations of racism, though Mark Finucane, the county’s director of health services, called them “utter nonsense.”