Financial woes jeopardize area hospitals
By Daniel Costello and Susannah Rosenblatt, Staff Writers Los Angeles Times September 23, 2007
Nearly two dozen private hospitals in Los Angeles and Orange counties, accounting for up to 15% of beds in the region, are in dire financial straits and in danger of bankruptcy or closure, according to hospital administrators, industry experts and state data.
The troublesome development follows the closure of community clinics and hospitals in recent years that has left the healthcare system seriously overburdened.
If even a few other hospitals close or reduce costly critical-care services, it could mean longer ambulance rides to hospitals, additional delays in emergency rooms and less access to care, especially for poor and uninsured people.
Among the hospitals in poor financial health, according to industry analysts, are Downey Regional Medical Center, Centinela Freeman Health System in Inglewood, Brotman Medical Center in Culver City, Century City Doctors Hospital and four Orange County hospitals owned by Santa Ana-based Integrated Healthcare Holdings Inc. including Chapman Medical Center in Orange and Western Medical Center in Santa Ana, one of three trauma centers in the county.
In interviews, senior executives at Centinela and Downey said they were considering closing their emergency rooms. Downey's chief operating officer, Rob Fuller, added that his hospital could close entirely as early as next year if its financial picture didn't improve soon.
"It's fasten your seat belt it's going to be a bumpy ride time," said James Lott, executive vice president of the Hospital Assn. of Southern California, a trade association.
The financial woes result from a multitude of developments:
* An increasing load of uninsured and low-income patients has resulted from overcrowding and the shutdown of public facilities. The number of uninsured patients visiting private hospitals, particularly in poor areas, has increased by one-third in Los Angeles County since 2002. California's Medi-Cal program for the poor reimburses hospitals at one of the lowest rates in the country.
* The closure of Martin Luther King Jr.-Harbor Hospital in Willowbrook last month left half a dozen nearby hospitals to absorb most of the 47,000 patients who used the public hospital's emergency room last year.
* Smaller community hospitals are drawing fewer patients as a few larger facilities attract a growing share of doctors and insured patients.
* As insurers have consolidated in recent years, they've squeezed many smaller facilities. Private insurance companies generally pay higher rates to larger hospitals with greater bargaining power.
* New, stricter state mandates on nursing ratios have raised labor costs, and a 2013 deadline to retrofit all hospitals to better withstand a major earthquake is estimated to be costing medical facilities $110 billion statewide.
The strains are being felt by patients.
Natalia Sanchez of South Gate took her 86-year-old mother, Emilia, to St. Francis Medical Center this month after the elderly woman suddenly lost feeling in her body. They waited 13 hours in an emergency room corridor before the mother was placed in a room. Even then, Sanchez said, she could never seem to find her mother's doctor. The experience was so frustrating that Sanchez moved her mother to a different hospital.
"It was a very bad experience," Sanchez said.
St. Francis officials said the average wait time for an emergency patient to be placed in a room last month grew to 11 1/2 hours. But they said the hospital had added more emergency room beds and nurses and had adopted a new system for treating emergency patients more efficiently.
The financial crisis coincides with a widening split between the "haves" and the "have nots" in the California hospital industry, experts say.
Although large, well-known facilities, such as Cedars-Sinai Medical Center in Los Angeles and Hoag Memorial Hospital Presbyterian in Newport Beach have seen their profits rise steadily in recent years and are adding beds, smaller hospitals, which are often in less affluent areas, are losing as much as tens of millions of dollars apiece each year.
In addition, because conglomerates such as Tenet Corp. have dramatically scaled back their presence in the area, many local hospitals are now independently owned and don't have deep pockets to fall back on.
Since 1996, more than 70 community hospitals have closed across the state, with a disproportionate share -- more than 50 -- in Southern California. Regionally, 14 emergency rooms have closed in the last five years, including 10 in Los Angeles County.
That's why experts say a new wave of closures would be so destabilizing.
"In many areas, you have had enormous consolidation, and there's very little breathing room left," said Kirby Bosley, director of California healthcare consulting for Watson Wyatt, a company that advises employers on health plans. At some point, she added, "we have to ask if we think it's fair for people to live 15 miles from their nearest hospital. Twenty miles? Thirty?"
Irma Strand of Pasadena has collected more than 2,000 signatures in a petition drive aimed at reopening St. Luke Medical Center in her city. The hospital closed in 2002 and now houses a Caltech research lab.
"Luke's was a very dependable facility, and it's needed here," she said.
Steve Lopez, chief financial officer of East Los Angeles Doctors Hospital, which has operated in the red for the last five years, said: "I think it's only a matter of time before several of the dominoes fall. It's like waiting for that earthquake: It's not easy to predict, but you are pretty sure it's going to happen."
Some experts and government officials are skeptical that the situation is as dire as some hospitals and community activists depict. Others contend that hospitals in financial trouble can improve by cutting unprofitable services such as emergency rooms and obstetric and psychiatric units rather than filing for bankruptcy protection or closing.
"You can't deny there are real challenges, but at least some of these hospitals might do better if they were better managed," said Glenn Melnick, a Rand Corp. economist and USC professor of healthcare finance.
Many agree, however, that it's been years since so many hospitals have been in such dire financial straits at the same time.
For example, the 420-bed Brotman Medical Center lost $14.7 million in 2005, according to state data, up from a loss of $268,000 in 2001. Recently, the Culver City facility has cut services, restricting, for example, the types of emergency room patients it accepts from paramedics.
Brotman executives, who declined to comment, have been seeking funding recently to avoid bankruptcy, according to people familiar with the matter.
In June, Integrated Healthcare Holdings Inc., which owns four Orange County hospitals that account for 12% of the beds in the county, defaulted on its debt, and some industry analysts continue to predict it could go bankrupt in the near future. The company had a net loss of almost $20 million in the 12 months ended March 31, according to a filing with the Securities and Exchange Commission.
Integrated's hospitals include Western Medical Center in Anaheim, Coastal Communities Hospital in Santa Ana, Chapman Medical Center in Orange and Western Medical Center in Santa Ana, which is one of three trauma centers in the county where victims of life-threatening accidents or violence are taken for emergency treatment.
The company said that its outlook has "significantly improved" since then and that the chain is not at risk of bankruptcy. On Friday, Integrated submitted a filing with the U.S. Securities and Exchange Commission saying it had tentatively secured a $140-million line of credit.
Lark Galloway-Gilliam, executive director of Community Health Councils, a Los Angeles-based nonprofit organization, says she worries about where the poor and uninsured will get their care if more emergency rooms and money-losing hospitals fold.
"In a few years' time, it's inevitable our community's already horrendous statistics of heart disease, cancer and diabetes will rise even more," she said.
The most immediate concern is how to best address the fallout from the closure of King-Harbor, which was shut down last month when the federal Medicare and Medicaid agency pulled half the hospital's funding after nearly four years of failed attempts to reform the troubled institution.
The average time it took paramedics to take patients to an emergency room in the immediate area around King-Harbor rose from 13 minutes earlier this year to 21 minutes in August, according to the L.A. County Fire Department.
St. Francis -- three miles from King-Harbor and one of the hospitals most affected by its closing -- has seen a one-third increase in ambulance arrivals in the last month, said Mike O'Dell, the hospital's interim director of emergency services.
At Downey, Fuller said increased emergency room traffic had been overwhelming, citing one day this month when the facility was swamped with 70 trauma patients at once and turned away nearly all ambulances for about 16 hours. He said the hospital was expected to lose $12 million this year and had spent more than $100 million out of a $120-million savings account.
But L.A. County Supervisor Zev Yaroslavsky said some hospitals were overstating the consequences of closing King-Harbor.
"If you added up all of the additional ambulances that all these hospitals claimed they got . . . it was far more ambulances than King gets on an average" weekend, he said at a board meeting last month. "It just didn't add up. It was bull."
The County Department of Health Services has offered to reimburse private hospitals for treating uninsured emergency patients who arrive by ambulance from the immediate area around King-Harbor. The county's contract, which covers only some such patients, offers $1,950 for each day of an inpatient stay, up to six days, or $250 for an emergency room visit.
Gov. Arnold Schwarzenegger has said his healthcare reform proposal could ease the burden on the state's struggling hospitals. The Legislature is debating the proposal in a special session with the aim of putting a measure on the ballot in February.
Under the plan, all Californians would be required to have insurance and the state would give subsidies to those unable to afford coverage.
It would also require hospitals to contribute 4% of their profit to fund the plan.
"Regardless of what everybody's trying to do, there's not enough money," said Carol Meyer, director of governmental affairs for the L.A. County Department of Health Services.
"We're talking about a system that is already in crisis," she said. "I think this is a tipping point for a couple of hospitals in the immediate area."
http://www.latimes.com/news/local/la-fi-hospitals23sep23,0,6085926,full.stor y?coll=la-home-center
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