Psychiatric Hospitals in State of Depression : Health care: Strapped medical facilities open mental wings to try to stay in business. But all four private psychiatric hospitals in South County believe at least one of their competitors will fold.

Since Buena Park Community Hospital shut down its money-losing medical surgical business three years ago and converted to a psychiatric hospital, it has managed to stop its losses and even eke out a small profit most of the time. But it’s not exactly thriving.

“In today’s health-care market, if you are breaking even or making a small profit, you are doing all right,” said Earl Bernard, administrator of the facility that is doing extensive national advertising and offering discounted rates. “At least we aren’t closing.”

Buena Park is only one of many hospitals in Orange County and throughout the United States that have turned to psychiatric care to fill unused medical beds and reduce expenses.

While mental health beds produce slightly less revenue than medical beds, they are far less expensive to operate and thus are considered potentially more profitable.

But instead of finding an easy solution to their financial woes, hospitals that dive into psychiatric care are landing in the middle of yet another medical industry in turmoil.

Medical insurers, who several years ago began a push for more efficient use of general hospitals, are now turning their attention to the fast-rising costs of psychiatric care.

And that push for cost controls is having a similar effect on mental health care as it has had on general medicine: encouragement of more outpatient treatment and shorter hospital stays.

Greater use of outpatient treatment and the influx of new psychiatric beds are hurting long-established psychiatric hospital programs in Orange County. Some have watched their patient count drop by as much as half.

“We are barely eking out an existence,” said Dr. Thomas Swanson, medical director of the 15-year-old psychiatric program at South Coast Medical Center in Laguna Beach. Even as business has become tougher, the number of mental health beds in the county has grown sharply. Not only are existing medical beds being converted, but some national psychiatric hospital chains are building large new facilities.

The biggest surplus of psychiatric beds has emerged in such states as California, Utah, Texas, New Mexico and Colorado, which in recent years have lifted restrictions on new beds and opened the market to all comers.

Since California lifted its restrictions in 1987, Orange County has become a prime target for expansion of national hospital chains such as Community Psychiatric Centers, Charter Medical and Psychiatric Institutes of America, part of National Medical Enterprises.

The major chains--hoping to outdo the existing competition and gain a foothold in a comparatively wealthy and fast-growing area--have largely ignored state planners’ reports that show the county has more psychiatric beds than necessary.

In Orange County, the number of psychiatric beds increased from 889 in 1985 to 1,473 today, while the average bed occupancy rate has declined, according to local hospitals and the Office of Statewide Health Planning and Development.

Nationwide, the number of psychiatric beds in general hospitals has risen from 1,259 in 1984 to 1,858, according to the National Assn. of Private Psychiatric Hospitals.

In the last three years, four Orange County hospitals--Buena Park Community, Yorba Hills Hospital and Medical Center, Midwood Community Hospital and College Hospital Costa Mesa--have converted 318 beds to psychiatric uses.

Community Psychiatric Centers opened a 78-bed hospital in Laguna Hills in 1988, and two months ago it bought a rebuilt psychiatric hospital in Brea with 151 beds, only 35 of which are currently occupied.

The biggest shock to the local industry, however, came in April when Charter Medical of Macon, Ga., entered the county by opening two new facilities totaling 200 beds in Fountain Valley and Mission Viejo.

Most people in the industry expect a “shakeout” of hospitals in Orange County, with some psychiatric units shutting down or converting to yet another use, such as skilled nursing.

Officials at all four psychiatric facilities in South Orange County, where bed occupancy ranges between 25% and 50%, predict that ultimately at least one of their competitors will fold.

“Everybody is doing less business than they thought they would,” said Bud Brown, marketing director for the new Charter Hospital of Mission Viejo.

To shore up profits, the county’s psychiatric facilities are trimming their staffs to reduce costs. They also are developing a variety of outpatient and partial hospitalization programs designed to satisfy the demands of medical insurers and managed care companies.

Moreover, they are trying to distinguish themselves from the competition by creating specialized programs in such areas as depression, phobias, eating disorders, children’s counseling and Christian-oriented psychiatry.

“Five years ago, we didn’t have marketing directors. Marketing was a bad word,” said Ken Barry Dyches, senior vice president of operations for Community Psychiatric Centers based in Laguna Hills. “But in today’s environment, marketing is a means of survival,”

Specialization has worked wonders for Western Medical Center Anaheim.

A year ago, Western Medical contracted with New Life Treatment Centers in Laguna Beach to introduce a mental health program that includes prayer sessions, Bible study and counseling by clergy. The result: Occupancy rates at its 82-bed adult and adolescent units have nearly doubled to 59%, up from about 30% in previous years.

Orange County’s psychiatric facilities also are marketing their services to health maintenance organizations, insurance companies and mental health professionals, who have the ability to provide hospitals with their lifeblood--patient referrals.

Dr. Irwin Rosenfeld, past president of the Orange County Psychiatric Society, said psychiatric hospitals are hiring more psychiatrists as part-time administrators to bring in new business, starting with their own patients.

Taking this strategy one step further, Midwood Community Hospital in Stanton, a 101-bed facility converting to all-psychiatric care, is selling ownership shares in the hospital to psychiatrists, psychologists, family counselors and other mental health professionals.

Stuart Bruck, a consultant to Midwood on the private offering, said the facility hopes to have 40 or 50 mental health professionals as owners by the end of September.

While hundreds of psychiatric beds are empty in Orange County, the 165 beds in county mental health facilities designated for indigent patients are full, and only the most severely disturbed who require a secure environment are receiving hospital treatment.

David Langness, vice president of communications for the Hospital Council of Southern California, said the contrast between the surplus of beds in the private sector and the shortage in the public “suggests there is a marriage waiting to happen.”

But county officials say public agencies don’t have the money to lease the private beds.

If all those requiring psychiatric treatment had the insurance to pay for it, Langness said, “there wouldn’t be an empty bed in all of California.”

PSYCHIATRIC BED CENSUS

The number of psychiatric beds in Orange County increased from 889 in 1985 to 1,473 today, local hospitals report. Meanwhile average occupancy rate has declined, causing financial problems for some institutions.

Licensed Average Psychiatric 1990 Institution/Location Beds Occupancy Charter Hospital Fountain Valley 120 30% Charter Hospital Mission Viejo 80 27 CPC Brea Canyon Hospital 151 23 Midwood Community Hospital, Stanton *36 69 Care Unit Hospital of Orange 104 40 College Hospital Costa Mesa 85 68 Newport Harbor-An Adolescent Hospital 64 90 Alpha Care Limited, Laguna Hills 6 66 Capistrano By the Sea Hospital, Dana Point 98 49 CPC Laguna Hills Hospital 78 50 CPC Santa Ana Psychiatric Hospital 100 50 Western Medical Center, Anaheim 82 59 Los Alamitos Medical Center 25 90 Humana Hospital Huntington Beach 14 57 Friendly Hills Regional Medical Center 36 33 St. Jude Hospital and Rehabilitation Center- Fullerton 24 75 St. Joseph Hospital-Orange 36 70 University of California Irvine Medical Center 93 80 South Coast Medical Center, Laguna Beach 30 25 Buena Park Community Hospital 66 59 Yorba Hills Hospital and Mental Health Center 80 50

*The hospital is converting another 65 medical beds to psychiatric use.

Source: Individual hospitals.