Specialty clinics put squeeze on regular hospitals

After more than two decades as an orthopedic surgeon, Dr. Allen Gustafson has seen his fair share of hospitals.

The Loma Linda physician concluded they are too big, too slow and too inefficient -- mainly, he says, because they try to do too much.

“You don’t need a 747 to fly from Los Angeles to San Diego,” he said. “Hospitals try to be everything to everybody and that’s almost impossible.”

So Gustafson and a group of local physicians are going small. They are building the California Heart and Surgical Hospital in Loma Linda -- a compact, 28-bed facility that will focus on a dozen or so specialties, including urology, heart and orthopedics. It is scheduled to be completed this fall.

To Gustafson and his partners, it’s good business sense. But to administrators at Loma Linda University Medical Center two miles away, it’s another example of doctors cherry-picking the most profitable patients.

“We don’t mind competition,” said Mel Sauder, vice president of business development for Loma Linda University Medical Center. “But it is not a level playing field.”

Doctor-owned facilities have increasingly offered medical services once provided almost exclusively under the roof of a general hospital, such as radiology and outpatient surgery.

Now, doctors such as Gustafson are venturing deeper into the hospitals’ turf, offering specialty care such as heart and orthopedics and inpatient surgical procedures.

That’s the bread and butter of treatment at most full-service hospitals.

Hospitals say the trend toward more specialization threatens the viability of full-service facilities and jeopardizes the care of the uninsured and those with chronic conditions who require several specialists.

“We need to move toward more integrated care, not more fragmentation,” said Caroline Steinberg, a trend analyst for the American Hospital Assn., which opposes physician-owned specialty surgery hospitals.

But Gustafson says traditional hospitals are overblowing the threat, and that competition will improve the quality of healthcare overall.

“Every industry specializes,” said Gustafson, who also holds a business degree from Tulane University. “We didn’t send a man to the moon with generalization, we did it by specialization.”

Estimates vary, but the American Hospital Assn. says physician-owned specialty hospitals such as Gustafson’s number about 200 nationwide, with a dozen in California.

Nearly a quarter of them opened in the last year, and some experts predicted the trend would accelerate. That’s because the federal government last year eased restrictions on physician-owned surgery hospitals.

Meanwhile, the gradual exodus of medical services from general hospitals to specialty clinics is combining with shorter in-patient stays and growing cost-cutting pressures to push revenue down in full-service hospitals, which have dwindled in number from nearly 6,000 nationwide in the early 1980s to about 5,000 today.

Hospitals get about 31% of the nation’s healthcare expenditures, down from nearly 40% in 1980, according to the California Healthcare Foundation.

The competition is inherently unfair, the traditional hospitals argue, because doctors who own their facilities can simply offer the most profitable procedures while federal law requires general hospitals to treat everybody who walks in through their emergency rooms.

Well-insured patients who undergo high-paying surgeries such as heart bypasses or joint replacements help subsidize care for the uninsured as well as those in poorly funded government programs, such as the state’s Medi-Cal program for the poor, said Sauder of Loma Linda Medical Center.

Loma Linda and other regional hospitals banded together and urged the Loma Linda City Council to deny approval for the project. The council approved it anyway in September 2005, saying the development was in keeping with the medical-use zoning for the area.

Gustafson, who also practices at the medical center, said his relationship with the administration had been cordial, but “I am sure they are not thrilled to have me there.”

Gustafson and other doctors complain that the administration of traditional hospitals are too slow to respond to their needs. One pet peeve of many surgeons, he said, was turnover time in operating rooms.

“Sometimes it takes more time between surgeries than it takes to actually do the procedure,” Gustafson said.

But suggestions on improvements fall on deaf years, he said. “They simply don’t work with us,” Gustafson said. “In all my years, I’ve never had one hospital manager ask me, ‘How can we improve?’ Never.”

The 70,000-square-foot California Heart and Surgical Hospital will cost an estimated $46 million to build.

Gustafson and 35 other physicians will own the hospital, which will be managed by Cirrus Health, a Dallas-based developer and manager of physician-owned specialty hospitals. The company has five facilities in California, including Thousand Oaks Surgical Hospital and Linden Crest in Beverly Hills.

Cirrus Health provides administrative services and nursing staff, while the doctors provide general guidelines through a board of directors.

“Because of improvements in medical science, big hospitals are not needed for most treatments,” said Cirrus Health President James T. Thomas. “You still need them for transplants, high-end oncology and very complex cardio thoracic operations, but that’s less than 10 to 15% of what is provided by hospitals. The rest of it can be provided by short-stay or outpatient facilities. We can do things a whole lot cheaper because we have fewer expenses and because we are a lot more efficient.”

Sauder said he understands the frustrations some doctors feel, and his hospital has begun a handful of ventures in partnership with physicians, including a new outpatient facility scheduled to open in Banning next year.

“Running a hospital is very complex compared to a doctor’s office where decisions can be made very quickly and physicians can often feel like hospitals are quagmires of bureaucratic entanglements,” Sauder said.

But full-service hospitals are still vital to the country’s healthcare system, he said, and parceling out lucrative specialties to smaller clinics could mean there will be nobody left to treat patients with little means to pay or complex diseases that require more resources.

“We respect doctor Gustafson and all the other doctors at CHSH,” Sauder said. “But our concerns are still very real.”

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daniel.yi@latimes.com