Financial, Marketing Problems Plague First U.S. AIDS Hospital

Just 10 months after it opened its doors in Houston, the nation’s first hospital devoted exclusively to the treatment of AIDS is facing big financial losses and marketing problems and may be forced to close, according to a former hospital official.

The former development director of the Institute for Immunological Disorders placed some of the blame for the problems on private physicians in Houston and on American Medical International, the Los Angeles hospital chain that owns the AIDS facility.

For its part, AMI acknowledged that the problems may have reached a critical point at the Texas hospital, which has been losing about $800,000 a month.

But officials would not say whether they would increase their marketing efforts or seek to change an agreement with the University of Texas that may discourage private physicians from referring patients to the institute.

“It’s a facility that we need to do something about,” acknowledged Peter Dowd, a vice president at American Medical. “But we haven’t made any decision to close down the hospital.”

But Daniel G. Moreschi, a career nurse at AMI who was the institute’s development director until he resigned in May to become a health-care consultant, was more trenchant about the institute’s problems.

“I was optimistic that doctors would refer patients to the institute, but they didn’t because they couldn’t follow their patients through and make money,” Moreschi said. “I was tired of waiting for the institute to address its financial troubles and market itself aggressively.”

When the institute opened last September, American Medical had hoped to transform the remote, financially beleaguered hospital into a showcase AIDS treatment facility with the help of doctors and researchers from the University of Texas. Initially, the optimism didn’t seem unfounded. In the first two months, more than 400 AIDS sufferers from around the world sought treatment at the hospital, situated about 20 miles from downtown Houston.

But today the institute says it is trying to halt the massive losses caused by patients unable to pay for the expensive care, which can cost $1,200 per day for those who are hospitalized and $400 per day for those treated as outpatients.

Moreschi, 35, who first proposed that AMI establish an AIDS hospital while still working for the company in 1983, said the problems stem from private physicians who are unwilling to refer patients to the facility because they would lose fees. Thus, only poor patients seek treatment at the facility.

Contributes $250,000

Under its agreement with the University of Texas, AMI contributes $250,000 each year to the institute for research by faculty members. In addition, American Medical provides a fully equipped hospital support staff and hospital management. But since the university provides the medical staff, a private physician would have to become a faculty member to treat his patient at the AIDS institute.

Ann Wheeler, a spokesman for the institute in Houston, said she did not know whether the four-year agreement can be changed. But, she added: “The concern about the financial condition of the hospital is real. I don’t know that we are going to close. We are looking at a lot of options.”

In March, the institute announced that it was laying off 26 people and that it would not accept any more indigent patients. But the losses continued. Currently, there are only a dozen patients hospitalized at the institute, prompting pessimism among some AIDS experts in Houston.

“With them losing so much money, I don’t see how they can continue to stay open,” said Ron Stark, director of social services for the AIDS Foundation, a private, nonprofit AIDS counseling group. “The situation doesn’t seem to be improving.”

Marketing Efforts

Moreschi also said AMI has been unwilling to mount an extensive marketing effort to overcome the stiff competition the institute faces.

There are 46 acute-care hospitals in greater Houston, including 11 AMI hospitals. The city has 1,251 AIDS cases--more than any city except New York, Los Angeles and San Francisco.

An AMI official would not comment on whether the hospital chain has provided sufficient marketing support for the institute, saying, “we don’t want to get in a sparring match with a former employee.”

The institute’s unpaid treatment bills will total about $5 million this year, AMI says. The company had originally set aside $250,000 for uncompensated care.

Despite the size of the projected losses, AMI--one of the nation’s largest investor-owned hospital chains--has the financial wherewithal to continue operating the hospital, analysts say.

“If they were to lose $4 million this year, that would be about $2 million after tax--they would hardly notice it,” said Kenneth S. Abramowitz, a health-care analyst for Sanford C. Bernstein & Co. Still, Abramowitz said, the long-term prospects for the facility turning a profit “are not good.”