This week, supervisors learned their health plans are in deep financial trouble - and that they may have been for several years. The county will now be forced to dig into its General Fund and could spend more than $100 million to bail out Maricopa Integrated Health System.

Officials have laid much of the blame on former hospital administrators. The top two managers resigned in February. But fingers have also been pointed at county supervisors and administrators for not recognizing the problems sooner and putting a stop to them.

Financial experts said years of accounting misjudgments, computer fiascoes and general health care challenges have led to the huge losses. The estimated $100 million will go to shoring up the system's health plans, and that's already on top of a $12 million county subsidy for the health system's general operating costs.

The health system operates Maricopa Medical Center in Phoenix, nearly a dozen Valley clinics and three health plans.

The plans include Maricopa Health Plan, which contracts with Arizona Health Care Cost Containment System, the state's Medicaid program; Maricopa Long Term Care Plan, which serves mostly indigent people in nursing homes; and Maricopa Senior Select Plan, a Medicare program.

This winter, the health system transferred to the county the operation of HealthSelect, which included more than 6,500 employees and dependents.

"We always thought the delivery system was not making money and the plans were," Deputy County Administrator Sandra Wilson said. "We were borrowing money from the health plans."

"We were transferring profits that were not existing."

Concerns about the plans popped up as early as July 2002 when administrators realized their net income trends weren't making sense.

Administrators had put forth health plan cost projections, referred to as "Incurred But Not Reported " liabilities. But for years, administrators had not calculated enough expenses to cover the cost of managing the health plans, so it looked like they were making more profits than they actually were, County Administrator David Smith said.

Officials had early warning signs they were headed for trouble, and the subject was hotly debated. But Smith said state auditor general reports came back clean, and hospital administrators told them time after time that the cash outlook wasn't that bad.

"I trusted the department heads the way I trust them in my own business," Supervisor Max Wilson said.

By the time an outside consulting firm looked at the books, the losses were enormous. Experts estimate former administrators may have underestimated expenses by as much as $84 million.

On top of the financial miscalculations, the plans themselves are actually losing money.

County officials estimated their health plans lost about $15 million in fiscal 2004, a huge turnaround from the $13 million profit the plans posted in fiscal 2004.

This is the first year the county will subsidize the health plans.

The health system will face $37.5 million in unanticipated health plan expenses this year. And to prepare for the worst next year, the county will set aside an additional $45 million to cover any additional snafus.

Computer system fails

Additional problems

County officials have eight months to clean up finances before turning the system over to a new health care district board. In November, Maricopa County voters approved the new district, which will raise up to $40 million a year in property taxes for the health system and oversee its operation.

Supervisors have pledged a "clean handover." But the fallout could mean delaying plans to install a new financial system and build a $43 million administration building.

Some residents have expressed outrage at supervisors and county management.

"The situation is totally out of hand, and we don't have enough competence at the county supervisor level to get this thing under control," said John Chloupek, 61, of Phoenix. "They spend the money, and then they gather the facts."

Others complained that they were misled during the health care district campaign. The county has hired a new consulting team to handle the transition and manage the system.

Former Chief Executive Officer Mark Hillard and former Chief Financial Officer Pat Walz resigned in February. Neither returned phone calls Friday seeking comment.

"Hospitals are very large, very complex businesses," said John Rivers, president and chief executive officer of the Arizona Hospital and Healthcare Association. "The fact is, people are paid to manage them and are paid to manage them as effectively as humanly as possible. As soon as anything goes amiss or awry, the CEO will pay for that with his job."

"Every CEO in health care and outside health care understands that risk is inherent in that job responsibility."