MURRIETA -- The operator of two local hospitals could stand to lose more than 50 percent of its revenue if a federal health agency makes good on a threat to cut Medicare and Medicaid benefits.

However, officials at Southwest Healthcare System, which operates Inland Valley Medical Center in Wildomar and Rancho Springs Medical Center in Murrieta, remain hopeful that the federal body will not decide to halt reimbursement for the treatment of nationally insured patients at the two hospitals.

Spokeswoman Teresa Fleege said Friday the hospital has not yet received notice from the U.S. Center for Medicare and Medicaid Services that the sanction will indeed be imposed Wednesday, which was the deadline previously stated by federal health regulators.

Jack Cheevers, a spokesman for the federal agency, said Friday that the agency is continuing its negotiations with the hospital. Health officials may announce this week whether an extension to the federal termination date will be granted, he added.

If the sanction is imposed, the hospital administrator would not be reimbursed for the cost of treating senior citizens insured by Medicare and low-income residents insured by Medicaid. An estimated 42 percent of residents in the southwest part of Riverside County use Medicare as their primary health care insurance and 15 percent rely on Medicaid.

Riverside County health officials said that if the federal agency decides to halt reimbursement to the two privately owned hospitals, the implications would be "ominous."

"If they lose their funding, that's a lot of people they won't be paid for," said Michael Osur, Riverside County deputy director of public health. "In the short term you can handle anything, but long-term I am very concerned they will be out of business."

Southwest's federal funding is at stake because state health officials have on numerous occasions found operations at the two hospitals to be out of compliance with state and federal policy and procedure requirements. The federal agency has threatened the move twice before in June 2008 and February 2009, but each time Southwest managed to placate health officials by providing a plan to correct the problems that had been noted at the hospitals.

Follow-up inspections conducted by state health officials, however, uncovered additional problems.

The issues the hospitals have been criticized for range from improper infection control procedures, to insufficient staffing of on-call physicians and nurses, to misuse of hospital beds and space, to substandard cleaning of surgical equipment and gear.

Those problems also led to the state denying Southwest the right to open a new building in Murrieta that would more than triple the number of emergency room bays at Rancho Springs and bring the first intensive care unit to Southwest County.

Riverside County is already woefully short of health care services. A Riverside County Department of Public Health survey completed in December found that while California has maintained a ratio of just more than two beds per every 1,000 residents, the county offers only 1.5 beds per 1,000 residents. The figures are even bleaker in Southwest County, where there is just one bed for each 1,000 residents.

The ratio of physicians and nurses is also disproportionately low in Riverside County's 15 hospitals.

Kathleen Billingsley, deputy director for the state's Center for Healthcare Quality, said in a previous interview that many hospitals undergo several surveys before they are deemed to be in compliance. She noted that it's rare that a hospital actually loses its ability to be reimbursed by the government.

"We sincerely support the hospital," Billingsley said in the April interview. "We have extended ourselves to them in terms of dialogue. We want the hospital to be successful and want the hospital to get to a point that they will be able to fully utilize their (new facility)."

That support, however, isn't always enough.

Although it's not common, some hospitals do end up losing their federal funding, which can be a fatal blow to their ability to continue performing as a full-service hospital.

According to published reports, Martin Luther King Jr.-Harbor Hospital in Los Angeles closed its doors for all in-patient services in August 2007 after failing repeated reviews and losing as much as $200 million in federal funding. Today, the hospital offers only out-patient clinic services.

And in 2002, Parkview Community Hospital in Riverside lost not only its Medi-Cal and Medicaid funding but also its accreditation with the Joint Commission on Accreditation of Healthcare Organizations, Osur said. The loss of both the funding and accreditation led the hospital to file for bankruptcy protection a short time later, he added.

County health officials say that if a decision is made to halt federal reimbursements to the two local hospitals, the effects could ripple throughout the county.

Osur said Rancho Springs and Inland Valley's loss of funding for Medicare and Medicaid patients would put an even greater burden on other area hospitals to treat those patients.

"We consider the situation already dire down there," Osur said. "There's not enough physicians, not enough nurses, not enough hospital beds, so this would make it extremely worse."

Call staff writer Nelsy Rodriguez at 951-676-4315, ext. 2626.