Financial Woes Jeopardize Area Hospitals

Daniel Costello and Susannah Rosenblatt, 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.

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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.

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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.

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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.

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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.

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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.

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