Changes, Cutbacks Allow San Pedro Hospital to Cut Its Deficit : Medicine: ‘Turnaround has come,’ president asserts. Critics say the worst of the fiscal crisis may be over.


The financially ailing San Pedro Peninsula Hospital appears to be well on the way to healing itself.

The community hospital was saddled with accumulated losses of $9 million earlier in the year, but is expected to end 1989 having cut that deficit to no more than $1.5 million. The year’s budget was $95 million.

The change in the financial picture has come about through a number of efforts: Employees were laid off. Some costly or money-losing programs--such as inpatient psychiatry and the residence training of family-practice physicians--were cut. Services that are likely to bring in more business--such as a cardiovascular surgery center and a state-of-the-art obstetrics unit--are being created or expanded.

Although the precise end-of-year deficit won’t be known until an official audit is done in March, “the turnaround has come,” hospital President John Wilson said.


Dr. Larry Orosz, board chairman and hospital emergency room chief, agreed. “We’ve come a long way in the last seven or eight months,” he said. He said he is unhappy that the hospital is ending the year still in the red, “but you can’t do things overnight.”

Two staff physicians once critical of the hospital’s management, Dr. Philip Geller and Dr. Phillip Schoenwetter, said they believe--if somewhat guardedly--that the hospital is putting its past behind it.

“We’re a long way from being out of the woods, but we’re doing better,” Geller said.

“They’re doing the best they can,” Schoenwetter observed.

Pointing to changes that include placing staff physicians on board committees and improving communications with the public, hospital leaders say a feeling of teamwork and openness has come to the facility, which earlier this year was alive with discontent.

After recording the first financial losses in its history, the 64-year-old hospital in January replaced its president with Wilson and brought in the national accounting firm of Ernst & Whinney (now Ernst & Young) to develop a plan to get the hospital out of the red.

Some staff physicians and other employees faulted the board for not recognizing and solving the financial and operational problems as they developed, questioning whether the board was capable of running the hospital.

“We were concerned that if the board could not see the facts of life, what else were they missing,” Schoenwetter said.


The hospital’s well-publicized troubles became San Pedro’s equivalent of a TV soap opera during the first few months of the year. Critics charged that a few entrenched physicians with lucrative service contracts controlled the hospital, asserting that it could be facing bankruptcy or a takeover by a for-profit chain.

Although the hospital leadership contended it already was acting to solve the financial problems, dissident members of the community corporation that owns the hospital and elects the board succeeded in forcing a special corporate meeting in March.

Although the dissidents failed to replace the 15-member hospital board, Geller and Schoenwetter believe they were a catalyst the hospital needed. Geller said putting a public spotlight on the board made it “move faster than it might have ordinarily.”

So far, the financial turnaround has come largely through personnel and service cuts recommended by Ernst & Whinney, which concluded that the hospital was mismanaged, overstaffed and lacked strong services that would attract patients and allow it to fend off competition from other hospitals. Several departments were consolidated, 129 people were laid off and a flexible staffing system was established to allow the hospital to maintain a daily staff level based on patient volume.


With public and private insurers tightening up on reimbursements and demanding less hospitalization and more outpatient care, “a smaller, mobile force is the way you have to do it,” Schoenwetter said.

In addition to calling for cuts, Ernst & Whinney also said that San Pedro had to strengthen itself as a community hospital by upgrading key services and moving toward specialties such as cardiac surgery.

Dr. Bruce Goldreyer, who is chief of staff, said the way to get more physicians to use a hospital is to “provide them with the facilities that they need.”

The hospital will spend $2.5 million to upgrade maternity care with what Wilson called a “state-of-the-art” obstetrics center. It will be financed through the sale of excess hospital property.


In a $1.5-million program, the hospital will open a cardiovascular surgery center in October. Ernst & Whinney concluded that this service could add $1 million a year to hospital profits, according to officials.

Responding to the trend toward outpatient care, San Pedro Hospital in January will open a 15-bed ambulatory center for short-stay surgical procedures. The hospital has been providing this outpatient service, but it will be able to accommodate nearly twice as many patients in a more comfortable setting, Goldreyer said.

A 24-hour industrial accident center has been opened next to the emergency room. Orosz said it should appeal to employers “because they can be assured care always will be available.”

Newspaper advertising and direct mail--concentrated on San Pedro, the Palos Verdes Peninsula, Harbor City and Lomita--are being used to attract more patients.


In April, the hospital will present a one-year progress report to community corporation members.

Although hospital leaders say they have parted the sea of red ink without reducing quality, Geller and Schoenwetter contend that recovery has had a price, including morale problems stemming from the loss of staff.

“It’s a transition time,” Schoenwetter said. “There are insecurities on the part of the staff and physical disruptions as new facilities are being put in and renovations are going on.”

For his part, Wilson said he believes the success of this year’s hospital fund-raising drive amounts to a vote of confidence. More than $3 million, including a single $1-million gift from an anonymous benefactor, was raised by the hospital foundation. Last year, the total was $863,000. He said months of adverse publicity might have been expected to dampen the drive. Instead, he said, the hospital had “its biggest year ever.”