Health of HCA, Scripps Benefits From Marriage

The opening next month of Scripps Clinic and Research Foundation’s new $6-million Sports and Health Center on the north end of its Torrey Pines campus is apparently further evidence that a somewhat unlikely marriage between medical and corporate partners is working out quite well.

The marriage of Scripps with Hospital Corp. of America, a Nashville-based health-care management giant that owns or manages 400 hospitals nationwide, was announced in 1984 when Scripps contracted with HCA to manage its 173-bed Green Hospital.

The deal, from Scripps’ point of view, was good because it relieved the foundation of the burden of operating a hospital in an increasingly difficult economic environment in which the government and other health-care insurers are trying to cut health-care reimbursements to providers.

Aligned With Important Center

And HCA benefited because the deal gave the company an affiliation with a prestigious health-care center that is also at the forefront of basic biomedical research, said Richard Bracken, whom HCA brought in as executive director to manage Green Hospital.

Several other research and university clinics, including those at University of Southern California, University of Louisville, Creighton University and University of Colorado, are run by professional management firms, so Scripps’ deal with HCA is not unusual in that respect, Scripps president Dr. Charles Edwards said last week.

But the contract is unusual in that HCA has been called on to make a huge capital investment in the Scripps plant, an investment so far totaling $60 million, without actually taking title to the property. HCA simply leases the hospital from Scripps and is “totally at risk” on whether Green Hospital makes a profit or not, Edwards said.

The sports and health center, which is built on land leased from the city, is only the latest HCA investment. The company also footed the bill for the $38-million Heart, Lung and Vascular Center that opened in March at Green Hospital as well as for a multimillion dollar magnetic resonance imaging (MRI) facility.

HCA’s lease agreement can be terminated by either party on 90 days notice as long as Scripps reimburses HCA for the book value of its investment at Scripps.

Without offering specific figures, Bracken said the management arrangement is a “profitable” one for HCA, which was a publicly owned company until it was bought by a management-led group earlier this year.

Edwards said Scripps made the decision to look for an outside operator for Green Hospital after determining that the foundation would have to make $200 million in capital improvements over a 10-year period if the hospital were to remain competitive.

Scripps, a not-for-profit entity, was having difficulty enough raising funds for its research programs, funds which this year will total about $75 million, Edwards said.

Days of Independence Numbered

Scripps was also finding the operation of a hospital difficult in an age in which clinics were increasingly run in large chains for maximum buying power and economies of scale. “We saw that the days of the stand-alone hospital were coming to an end,” said Edwards, who has been Scripps chief executive since 1977.

Giving up management of the hospital was not as traumatic as it might seem, Edwards said, because Scripps sees its mission as a research and out-patient facility first and a provider of in-patient clinical services second. Scripps Clinic received more than 700,000 out-patient visits last year compared with 15,000 in-patient visits at Green Hospital.

“The business we knew least about was the operation of the hospital,” Edwards said.

Scripps’ 30,000-square-foot sports and health center will be operated somewhat like a membership health spa and will be managed in conjunction with Scripps’ preventive medicine and fitness programs, Edwards said.

Built between Scripps and the Sheraton Hotel now under construction on North Torrey Pines Road, the health center will also be open to hotel guests, Bracken said, although details between Scripps and Sheraton have not been completed.