FOUNTAIN VALLEY — The decision took doctors and administrators by surprise.

For weeks, they had warned Medi-Cal patients that their large, community hospital was quitting the state health insurance program for the poor.

But three days before their hospital's Medi-Cal contract expired, the state revamped the rules.

In a new procedure which began on Nov. 17, Medi-Cal patients could seek treatment at any hospital in Fountain Valley, Westminster or Huntington Beach--not just those with a contract for indigent care.

Overnight, hospitals whose leaders had never wanted to treat Medi-Cal patients were informed by the California Medical Assistance Commission that their facilities were now "participating" in the Medi-Cal network.

And ironically, the hospital that precipitated this action--293-bed Fountain Valley Regional Hospital and Medical Center, Orange County's second largest Medi-Cal provider--found itself back in the indigent-care system on the very same day that its contract ran out.

Though the commission's decision was a narrow one--affecting just five hospitals in west-central Orange County--it marked the first time since 1983 that state officials had restructured the local Medi-Cal system.

And with another three of Orange County's 12 remaining contract hospitals vowing to quit Medi-Cal by early January, the ruling signaled that Sacramento had finally noticed that the local indigent-care network here was in trouble.

"Orange County appears to have a problem in certain communities with insufficient licensed obstetrics beds to meet the needs of the community," Michael Murray, executive director of the state commission, conceded.

Because Fountain Valley's withdrawal from the program would have left the west-central area of the county with too few beds for Medi-Cal patients, the commission created an "open area" that allows hospitals without contracts to serve Medi-Cal patients. (South County has always designated an "open area," where every hospital can be reimbursed for treating Medi-Cal patients.)

"We wanted to be part of the solution," Murray said, explaining the commission's decision to bend its rules.

Commissioners are hoping that the new "open area" will ease crowding at Fountain Valley and encourage more doctors to accept Medi-Cal patients now that their hospitals can accept them. "One reason doctors have said they don't take Medi-Cal is that their hospital doesn't have a contract," Murray said. "They no longer have that obstruction."