There was a time when the lines of patients at the New City Health Center stretched around the lobby and out the door. As strange as it sounds, staffers remember those lines with pride. The lines meant the residents of New City, a poor, mostly black south-side community, were being treated for their illnesses.

Now the lobby of the clinic, at 5500 S. Damen, is empty. People didn’t stop coming because they are healthier; the surrounding area has some of the highest rates of drug abuse, infant mortality, and heart disease in the city. They stopped coming because the center no longer has the staff to attend to them.

“I don’t know where people go if they don’t come here for health services,” says Saundra Heath, executive director of the center. “The sad fact is that most likely they don’t get treatment at all.”

In an effort to save money, the center’s 15 staff members had their hours cut in half last August. Its staff of doctors was cut from four to two. The Robert Woods Johnson Foundation and the Chicago Community Trust–two prominent Chicago philanthropies–have donated bailout grants. But the clinic still owes vendors roughly $130,000 for patient gowns, surgical gloves, and other supplies. “These are hard times for the economy in general,” says Heath. “But they’re even harder for the poor.”

Her woeful tale is echoed by workers in not-for-profit inner-city clinics all over the country. Health costs are rising faster than state and federal funders can keep pace. With more federal money earmarked for the military, there’s less for people who can’t afford private insurance. The only solution is higher taxes–a proposition few politicians, even liberal ones, will champion.

“We have to understand that new monies won’t be coming,” says Heath. “That’s just a fact of life.”

Her despair contrasts sharply with the jubilation that greeted the center’s opening in 1986. One local group, the Organization of New City, had lobbied long and hard for the clinic, noting that the area (roughly bounded by 39th and 75th streets on the north and south and State Street and Western Avenue on the east and west) was drastically underserved.

Within these boundaries live more than 200,000 residents, about one-third of them in families that earn less than $10,000 a year. There are only two nearby hospitals.

“The Organization of New City had to really organize hard to get the federal government to commit to building the clinic here,” says Heath. “They had to demonstrate there was a need. It wasn’t easy when you consider that the clinic opened at a time when the federal government was cutting back on social programs.”

The government operates six such clinics in Chicago, Heath says, most of which are staffed by doctors who are part of the National Health Service Corps. The program was cut by Ronald Reagan in the early 1980s.

“The Health Service Corps is a program that pays for medical school and gives you a stipend for every year you are in school,” says Dave Freedman, a family doctor who used to work at New City but was not a member of the NHSC. “In return, you have to give them a year in a hospital or clinic with a manpower shortage when you graduate. The hope is that you will become attached to the clinic and stay even after your year is up. The reality is that most people move on to higher-paying jobs.”

At such clinics, balancing the budget is usually a juggling act. In the case of New City, about $708,000 of its annual $1.3 million budget comes from federal funds. It receives some foundation support. But the bulk of its remaining budget comes from Medicaid, the program funded by both the state and federal governments that pays medical bills for the poor.

“Medicaid patients can walk into any clinic and pay $5 and get a full examination–Pap smear, shots, you name it,” says Heath. “Of course, those services cost the clinic much more than $5. For reimbursement, the clinic turns to the state.”

That’s where the biggest problems begin. The Medicaid payment is usually less than what the clinic expects. A typical start-of-school checkup (that includes measles and mumps shots) costs about $77, Heath estimates. The state, however, pays only $63.

And not only that, Heath says, but it can take months to be reimbursed. “The backlog is unbelievable,” she says. “The money comes from the state Department of Public Aid. If you call them up in Springfield, they’ll tell you they don’t know when they can send you the money. In the meantime, you just wait, and your bills keep piling up.

“They have their formulas, and I have to do a ton of cost reports to justify our rates,” says Heath. “I think they’re trying to guard against fraud and abuse.”

There’s a reason for the delay, says Dean Schott, a spokesperson for the Department of Public Aid. The state doesn’t have enough money in its checking account to pay its bills on time. “All state programs–not just Medicaid–feel the effects,” he says.

The state seeks a cushion of $200 million in its checking account, state officials say. Last September that amount dropped to $100 million, after the state didn’t collect as much in taxes as it anticipated. With the growing recession, the situation will probably be worse this year.

“We spent about $2.3 billion on Medicaid in 1990, and we plan to spend about $2.5 billion this year,” says Schott. “Sometimes we have to ask for a supplemental appropriation to meet our expenses. The situation ebbs and flows. We do expect we will not have sufficient funds to pay our Medicaid [bills].” The state doesn’t know when it will run out of money, but the projection is bad news for the New City center, which is still reeling from last summer’s budget cuts.

“I had to call everyone in and cut them to half time,” says Heath. “The alternative was to fire them completely.”

Suddenly the clinic, which started with one part-time and four full-time doctors, was down to two. Sometimes there were no doctors at all.

“One day the doctor [on duty] was sick, so we called all the patients who had appointments and told them not to come in,” says Heath. “We couldn’t reach some of them. So we had people walking in the door only to be told they had to go home. It saddened me to see them trooping out. You don’t know if they will ever be treated.”

For a while, Heath considered applying for a bank loan to meet expenses. But no bank would accept as collateral the amount of money Medicaid owed her center. In the end, Heath realized that a bank loan would only add to the center’s debt, since the state and federal governments refuse to pay the interest on bailout loans.

The fiscal crisis only heightened tensions between the clinic and its doctors. Doctors at New City make as much as $58,000 a year, according to Heath. That sounds like a lot of money to the center’s clerks, who make no more than $6 an hour. But it’s small change compared to the hundreds of thousands of dollars many private doctors make.

“We were hoping to get some [National Health Service] Corps doctors, but there’s a lot of competition for them, and Chicago loses out to the warmer-weather cities,” says Heath. “We had an ob-gyn working here at $28 an hour. After his year of medical corps service he wanted to negotiate his salary to $150 an hour. We can’t afford that.”

The rapid rise in medical liability insurance is another reason many doctors think twice about working for an inner-city clinic.

“The main issue working against a lot of these clinics is something we call tail insurance,” Freedman explains. “That’s the money an insurance company wants in case a patient sues you after you leave the job. Tail insurance is calculated according to the number of years you have been in practice and whether you have been sued. For me, a family practitioner who has never been sued, my tail insurance was $25,000. For an obstetrician it can be $100,000. That’s a lump sum you have to pay just to change jobs; how many doctors from inner-city clinics can afford that?”

Some clinics, like the Claretian Medical Center at 9119 S. Exchange, where Freedman now works, pay the tail insurance for doctors who have been there for at least a year.

“It takes incredible planning and great management for a clinic to get to the point where it can pay the tail,” says Freedman. “Claretian is fortunate to be connected with an HMO that pays them a monthly check for all the member patients. What you’re hoping is that the monthly expenses for taking care of those patients does not exceed what you get from the HMO. It’s a gamble, and the HMOs have epidemiological charts that measure the risks of insuring different people. Obviously you want a healthy 25-year-old as opposed to a 65-year-old with high blood pressure. It’s all a numbers game controlled by the insurance companies–that’s what medicine has come down to. Of course, a clinic like New City is going to lose, because the numbers are stacked against them.”

At the moment, Heath cannot predict when, or if, the numbers will turn her way.

“I guess I could lay off more staff,” she says. “But what’s the point of having a medical center without staff? It’s so absurd you want to laugh. You have to laugh to keep from crying.”

Art accompanying story in printed newspaper (not available in this archive): photo/Lloyd DeGrane.