Although it's too early to tell how proposed cuts to the California state budget may affect UC Davis Medical Center, administrators are continuing to prepare for reductions in revenue that may result from his proposals.

In his budget plan released Jan. 9, Gov. Schwarzenegger proposed cutting billions of dollars from public health and welfare programs, including close to $900 million from the state's Medi-Cal program. In the last fiscal year, the medical center received $110.9 million in patient revenue from the Medi-Cal program, or about 14.5 percent of its total patient revenue.

"We won't know how the governor's proposed cuts will affect us until the Legislature determines how the cuts will be applied," said William McGowan, chief financial officer of the UC Davis Health System. "It's pretty early to know what the specific effects will be, but we have been preparing for this for some time."

McGowan said he expects it will be several weeks until the Legislature decides on program reductions.

The proposed budget would take $1.3 billion in property taxes from local governments to pay state expenses. Reduced money for California counties will decrease the amount of money they have for indigent care and other clinical services. That could lead to increased numbers of patients who come to the medical center's emergency room and require charity care, McGowan said.

The governor's budget also includes some mid-year spending reduction proposals, among them an additional 10-percent cut on Medi-Cal physician provider rates. This proposal, first made by the governor in December, is on top of a 5 percent rate reduction approved by the Legislature last summer. The California Medical Association has sued the state over the current-year rate reduction, with the issue now being litigated in the courts.

Another 10-percent cut in physician reimbursements could lead to many physicians dropping out of the Medi-Cal program. According to the Medi-Cal Policy Institute, 80 percent of the state's Medi-Cal caseload is handled by 20 percent of the practicing physicians. Medi-Cal recipients who no longer have access to a physician may turn to hospital emergency departments for their health-care needs, producing another financial hit on hospitals.

Schwarzenegger's budget proposal also included $372 million in cuts for the UC system. Because the proposed program cuts are offset by some funding increases for UC, the university's net state-funded operating budget in 2004-05 would be $2.67 billion, or 8 percent below this year's level of $2.9 billion.

• Updates on the budget situation are available at the UC Davis budget page at http://www.news. ucdavis.edu/budget/.