An Intruder in Irvine : As City’s First Hospital Nears Reality, Competitors Fight to Maintain Their Share of Lucrative Market

Dr. Marc Richmond practices what some of his colleagues in Irvine call “freeway medicine.” He belongs to the staffs of five geographically scattered hospitals and spends a lot of time on the road.

On a recent weekday, it took Richmond more than two hours to visit a patient with a heart condition at Western Medical Center in Santa Ana and a newborn at St. Joseph Hospital in Orange because “there was an accident on the Santa Ana Freeway.”

Looking Forward to Opening

Richmond is looking forward to April, 1989, the target date for the opening of Irvine Medical Center. It will be the first hospital built in Irvine, the biggest city in California without a hospital. And it will be just a five-minute drive from Richmond’s family practice in the Irvine community of Woodbridge. He may even leave his car behind to make hospital rounds. “I could jog there at lunchtime,” he said.

Richmond predicts that many Irvine physicians will send their patients to Irvine Medical Center for convenience and because American Medical International, the Beverly Hills health-care company building the 177-bed community hospital, has promised it will be one of the flagships of AMI’s international chain of more than 100 hospitals.

This kind of prediction may send chills through the administrators of some existing hospitals that now provide services to the Irvine community.

The $93-million Irvine Medical Center under construction at Alton Parkway and Sand Canyon Avenue will be an intruder upsetting the balance of hospital care that has been delivered to Irvine primarily by a group of out-of-town facilities: Hoag Hospital in Newport Beach, Western Medical Center, St. Joseph Hospital, Healthcare Medical Center of Tustin and UCI Medical Center in Orange.

Since Irvine was founded in 1971, its residents have been obliged to travel to outlying hospitals. Also, in the past there were few physicians’ offices in Irvine, although that number has grown dramatically in recent years. And those doctors, like Richmond, also have been forced to travel to hospitals.

Diane Laird, vice president for planning and marketing at Hoag, said she believes the Irvine Medical Center, by further dividing up the already fragmented Irvine medical pie, “will significantly affect other hospitals in a damaging way.”

‘Everybody Is Interested’

“Everybody is interested in Irvine in terms of keeping and defending their part of the population down there,” said Don Hicks, vice president of marketing and development for St. Joseph Hospital.

The Irvine market is prized by hospitals because it is a growing community of 100,000 residents--estimated to expand to 230,000 by the year 2020. Also the Irvine population is exceptionally affluent, health conscious and well insured--and thus willing and able to pay for top-notch medical treatment. This is especially attractive to hospitals, many of which are swallowing deficits from government reimbursement programs for indigent and Medicare patients.

A barometer of the competition for the Irvine market is the proliferation of outpatient services that has occurred over the past four years, including a cluster of walk-in-clinics, a surgical center, diagnostic-imaging centers and doctors’ offices on Barranca Parkway in the Irvine community of Woodbridge.

- In 1985 Western Medical Center opened the Village Medi-Center in Irvine, a 16,000-square-foot building that now houses an outpatient surgical center, a family practice and a newly formed orthopedic group practice. A diagnostic-imaging center is under construction there.

- Just across a parking lot from the Western Medical Center structure, Hoag Hospital last September opened the Hoag Health Center-Irvine, a three-story brick building that contains a women’s health center, another diagnostic-imaging center and offices occupied by 28 physicians.

- And up the road, St. Joseph Hospital plans next January to open its own building with physicians’ offices and ancillary services, including an imaging center, clinical laboratory, pharmacy and physical rehabilitation service.

- Beyond Woodbridge, UCI Medical Center plans to open in May a 55,000-square-foot facility on the UC Irvine campus that will offer outpatient ophthalmologic surgery, diagnostic imaging, laboratory and pharmacy services as well as doctors’ offices.

The threat of new competition from the AMI hospital is only one of the reasons that hospital officials give for so recently putting medical services of their own in Irvine. They also say they are following the southerly flow of the Orange County population.

Hospitals in central Orange County--and even South Coast Medical Center in South Laguna--also are reaching out to Irvine patients with increased local advertising. And that advertising may grow even more intense to counter a promotional blitz that Irvine Medical Center is planning as its opening nears.

Medical Ads Increase

Tobey Anglin, advertising director of Irvine World News, said he has been astounded by the amount of medical advertising in that publication, which he said has increased 30% to 35% over the past two years.

“I think you are seeing the entirety of medicine becoming more competitive because of an oversupply of physicians and hospital beds, but Irvine is a unique situation,” said Dennis Wolin, president of Cooperative Health Care, a management consultant to outpatient medical facilities. “Those you see competing in Irvine are trying to maintain their patient share in the community before the (AMI) hospital opens.”

The amount of effort that individual hospitals are expending in Irvine generally is proportionate to the amount of business that they risk losing if they rest on their laurels. According to figures that a consultant to Hoag extrapolated from data gathered by the state Office of Statewide Health Planning and Development, of the 6,458 Irvine residents who were hospitalized in California in 1985--the last full year for which figures are available--22% went to Hoag, 14% to Western Medical Center, 14% to St. Joseph Hospital, 9% to Healthcare Medical Center of Tustin, 4% to UCI Medical Center and 4% to Fountain Valley Regional Hospital.

“Our approach is that we want to continue the contact with our existing patient population,” said Hicks at St. Joseph Hospital. For that reason, he said, St. Joseph is putting a medical office building in Irvine and will staff it with doctors whose “primary allegiance” is to St. Joseph.

Similarly, Hoag has filled its Irvine medical building with physicians who refer the vast majority of their patients to Hoag. Most of these doctors previously had, and still maintain, other offices closer to Hoag in Newport Beach.

Hospitals Tailor Services

In the competition, hospitals are tailoring services to meet Irvine’s particular health needs. Recognizing that Irvine is a community of growing families, for instance, the new outpatient facilities in Irvine are stressing maternity and other women’s services.

While Healthcare Medical Center of Tustin does not have a satellite in Irvine, Margo Sanchez, the hospital’s marketing director, said it was with Irvine in mind that the hospital started a cosmetic surgery program and is considering developing a sports medicine program.

Also, to develop a bond with Irvine residents, several of the hospitals are offering them health education classes geared to the community’s needs and interests. Hoag offers eight to 12 education programs a month, most of them free, on topics ranging from how to prevent back problems to ski conditioning and weight loss. In January, Hoag started publishing a newsletter with a calendar of events it sends to all 36,000 Irvine households.

Healthcare Medical Center of Tustin similarly sends monthly informational mailings on hospital sponsored events to households in its “primary market area,” which includes the portion of Irvine north of the San Diego Freeway. Sanchez said the Tustin facility will fight to maintain its presence in north Irvine when the new hospital opens.

Hicks of St. Joseph Hospital said a study done for the hospital--and also based on data gathered by the state--shows that 27.8% of the time that Irvine patients spent in hospitals in 1985 was for obstetrical or perinatal care. He said that was about double the percentage of maternity hospitalization countywide.

Hicks said the study showed that another 13% of the hospitalization days accumulated by Irvine patients was for gynecological problems, 25% for psychiatric problems, 11.6% for drug and alcohol abuse, and 18.8% for orthopedic complaints--apparently stemming from the community’s obsession with jogging and other sports.

Because of the preponderance of young families in Irvine, Hicks said, only about 4% of the population is hospitalized for a broad range of ailments, from cancer to gall bladder problems, that constitute the “bread and butter” of most general service hospitals.

On that same note, a study done by the consulting firm of Ernst & Whinney shows that Irvine’s demand for health services is only three-quarters of the demand of the general population.

Young, Healthy Families

That Irvine is dominated by young, healthy families is one reason why officials for Hoag and Western Medical Center, both of which considered building a hospital in Irvine, say the AMI venture will probably fail.

After heated competition, Hoag won approval from the state in 1983 to participate in the building of a community hospital in Irvine. But in 1984 Hoag withdrew from the project, after which AMI was chosen in 1985 by a community organization to take Hoag’s place.

Dramatic cuts in insurance reimbursements to hospitals and declining hospitalization had made Hoag’s initial plan to build a community hospital in Irvine too risky, according to Steven Valentine, a principal in the accounting firm of Ernst & Whinney that has been advising Hoag.

Valentine said his firm also advised Hoag that because of the healthiness of the Irvine community, the development of outpatient facilities would be a wiser approach to serving the Irvine market.

Hoag officials, who figure that Irvine contributes from 10% to 12% of that hospital’s patient admissions, say they expect to hold onto their market share in Irvine because Hoag, as a more mature, 471-bed hospital, can offer a wider variety of specialized services, such as heart transplants and a cancer center, than AMI’s smaller, newcomer hospital.

Wayne Schroeder, president of Western Medical Center, said he also decided from market studies that it was more appropriate to build outpatient facilities in Irvine than to build a hospital. And he said he does not believe the new hospital will pose any significant competitive threat to his facility.

Irvine Medical Center president John C. Gaffney, however, insists that not only will the 177-bed hospital be a financial success, but it will eventually expand to 500 beds because of the population growth in the south county.

“Nothing can compare with having a full-fledged hospital in the community and there is no question that the physicians in Irvine would prefer a more convenient hospital location,” he said.

Also, Gaffney points out that in time the Irvine community inevitably will age and thus boost the hospital’s business. “Within 10 to 15 years there will be a significant increase in demand (in Irvine) for health care,” he said.

Meanwhile, the new hospital is being planned to serve the current needs of the Irvine community. Gaffney said it will have a complete outpatient and diagnostic center and will emphasize women’s services, plastic and reconstructive surgery and orthopedics.

Planners of the new hospital have enlisted the advice and support of many of the community’s physicians, on whom the hospital will depend for patient referrals and to fill a neighboring 120,000-square-foot medical office building.

As evidence of physician interest, Irvine Medical Center officials said that already 214 doctors, mostly from Newport Beach, Irvine and Tustin, have applied to join the staff of the new hospital. So far, 100 physicians have been formally accepted, while the rest of the applications are still being processed.

Marshall Grossman, an endocrinologist in Irvine who holds executive positions on two hospital staffs and is involved in the development of the Irvine Medical Center, is one physician who says there is room for everyone because of Irvine’s growing population.

“My personal opinion is everyone will do fine,” he said.

But he said when the new hospital opens a mile and a half from his Irvine office, he plans to send most of his patients there so he can spend less time on the road. “As freeway traffic worsens, freeway medicine becomes harder and harder.”

HOSPITALS IN IRVINE AREA 1. Hoag Memorial Hospital Presbyterian, 301 N. Newport Blvd., Newport Beach 2. Western Medical Center, 1001 N. Tustin Ave., Sana Ana. 3. St. Joseph Hospital, 1100 W. Stewart Dr., Orange. 4. Healthcare Medical Center, 14662 Newport Ave., Tustin. 5. UCI Medical Center, 101 The City Dr., Orange. 6. Irvine Medical Center (under construction), Alton Parkway and Sand Canyon Ave., Irvine. Where Irvine residents who were hospitalized in 1985 received care.*

Hospital Percentage Hoag 22 Western 14 St. Joseph 14 Healthcare 9 UCI Medical 4 Others 37

*Most recent year for which complete figures were available Source: Office of Statewide Health Planning and Development