Hospitals Face a Struggle for Survival : Treatment: Challenged by rising costs and empty beds, some area medical centers are in critical condition.

Infant deaths are below the statewide norm. There are fewer fatal heart attacks. And a lower rate of death by cancer.

Across the board, the medical statistics for Ventura County place it above the rest of California.

But if this county has been blessed by the best health-care system its rapid growth and relative wealth can buy, that system is feeling the strain of a prolonged recession and of reforms aimed at slowing the steep rise in medical costs.

The national health-care crisis--a crisis of cost and access that was the focus of the recent presidential campaign--has come to Ventura County. And signs of change are everywhere:

* Patients, who once had their choice of doctors and could count on referrals to specialists, now commonly see those privileges restricted or denied by their insurers. And when hospitalized, patients are admitted sicker and released quicker than ever before.

* Nurses, whom local hospitals wooed desperately in the 1980s, now work fewer hours for lower pay than they have in years. And on the job, nurses say that understaffing often leaves them exhausted and more apt to make mistakes that endanger patients.

* Doctors, though blessed with a patient ratio far better than the statewide average, are now scrambling to keep their waiting rooms full by offering bargain rates to insurance companies for referrals. And because of stiff competition, longtime physicians say new doctors are no longer welcomed with open arms.

* Hospitals, after decades of growth and profitability, are struggling to stay in business. Bed occupancy rates are down 5% in a year, five of seven private general hospitals are losing money, and analysts say several small general hospitals could close if they don’t drastically redefine their roles.

“These are such hard times now,” said Samuel Edwards, medical director at Ventura County Medical Center. “Everybody’s income is way down and the hospitals are on the ropes.”

Every local hospital has cut employees and trimmed the hours of remaining workers over the last year.

Monty Clark, spokesman for the Hospital Council of Southern California, said that if current trends continue, Ventura County has “three or four hospitals that are going to be in trouble, and I mean real trouble, in the next three to five years.”

Several are already bleeding badly. And supporters worry that their beloved community hospitals--among the largest employers in their cities--may not survive through 1994.

Only Los Robles Regional Medical Center in Thousand Oaks, which benefits from a wealthy clientele, a low number of Medi-Cal patients and a lucrative heart-surgery unit, projects a sizable profit this year. Community Memorial Medical Center in Ventura projects a small one.

And even Los Robles and Community have cut their full-time staffs by 35 and 19 positions, respectively, during the last few months. Nurses’ shifts are also sometimes canceled because of too few patients.

At the other end of the financial spectrum is Ojai Valley Community Hospital, which is reorganizing under bankruptcy protection and changing ownership for the third time since 1988.

Santa Paula Community Hospital, which has the lowest occupancy rate and shortest patient stay in the county, was awash in losses for the first half of the year.

A third small hospital is merging with a larger neighbor to save money. Together, Pleasant Valley Community Hospital in Camarillo and St. John’s Regional Medical Center in Oxnard figure they can cut administrative overhead and lure more patients from health plans.

Tiny Westlake Medical Center, just across the Los Angeles County line in Westlake Village, is also losing money. And officials at its larger rival, the Los Robles center, say there are too few patients to keep both hospitals in business.

“Somebody’s not going to make it,” Los Robles Administrator Robert L. Quist said. “And we fully intend to be the survivor here . . . . It’s just tough being a small hospital today.”

Decline in Patients

Even as fewer patients arrive at hospitals, insurance companies, health management organizations, Medi-Cal and Medicare government insurance plans are all demanding better rates or they will send their patients elsewhere.

“Everybody out there wants a deal,” Clark said. “And they don’t care what your services are.

“When you start talking quality with these people,” Clark added, “they want to talk about the bottom line. They’re not talking quality. That’s up to the hospital to provide. Push has come to shove.”

Indeed, analysts say that economic Darwinism increasingly dominates the health-care industry here and throughout the nation.

More patients, mostly the working poor or the unemployed, have no insurance. The statewide figure was about 10% a decade ago but is nearly 20% today. If the same is true for Ventura County, that means that 130,000 county residents have neither private nor public health insurance.

More doctors, increasingly dependent on referrals from managed-care insurance groups that tightly monitor costs, have lowered their rates to get new patients. About two-thirds of all local physicians now contract with health management groups, according to the Ventura County Medical Society.

More hospitals, overbuilt in boom decades, have more empty beds than ever. Just over half were filled on average last year. Things have gotten even worse this year. And Ventura County had among the steepest declines in patients in Southern California over the summer, the hospital association reported.

“I didn’t think people could be ill depending on a recession or depression, but it seems they can,” said Dr. Richard S. Loft, chairman of the Department of Family Practice at Pleasant Valley Hospital. “These times have just been unbelievable. Nobody would ever anticipate we’d be at this (patient) level.”

Pleasant Valley reached an all-time low one day in August with just 16 patients in its 81 acute-care beds, Loft said. On the same day, Pleasant Valley administrators said they called other local hospitals and found just a few patients at Ojai, Santa Paula and Westlake.

“I would wager,” Loft said, “that the community hospitals have never had so few people in bed before.”

Only the large hospitals, administrators say, have the reserves or corporate support to weather these bad times and to continue to buy the high-tech equipment needed to stay competitive in the future.

“The smaller hospitals can’t be out there trying to compete with the big boys, no way,” Clark said.

In these times of tighter credit, the small hospitals can’t borrow money to buy the newest $2-million super X-ray machine, he said. They can’t lure the surgeons who perform the lucrative specialties such as eye, brain and open-heart surgery.

And they don’t fit well into a key trend for the future: the transition of hospitals into regional “centers of excellence” for select patient-drawing specialties, Clark said.

“What’s going to encourage the doctors to send their patients to these small hospitals?” Clark said. “It’s a Catch-22 situation. If you don’t have the money, you can’t offer the services the doctors need. And If you don’t have the doctors, you don’t have the patients.”

Sense of Crisis

Just three decades ago, it would have been hard to imagine the sense of crisis that has now overtaken medical care throughout the country.

In 1960, the United States reported spending just 5.3% of its gross national product on health care, about the same as many other Western nations. There was even some concern that the country was spending too little on health care, not too much.

Ventura County was small with only 200,000 people, most of them spread across the Oxnard Plain and Ventura coast. The county had about 250 doctors, mostly general practitioners, two tiny community hospitals and three general hospitals--St. John’s, Community and the old county hospital.

“When I’d deliver babies at St. John’s or Community, I remember there were no traffic signals between home and the hospitals.” recalled Charles M. Hair, 72, a Santa Paula family doctor for four decades. “The specialists started to come in gradually in the mid-1950s. There was some early resentment by family practitioners, but that died away.”

Family doctors were jacks-of-all-trades: they not only treated broken bones and bad colds, many also delivered babies, administered anesthesia and performed general surgery.

They also had to keep their fees reasonable or the patients--whose office visits usually were not covered by insurance--would not be able to afford them, Hair said.

But in the 1950s and 1960s, the United States implemented two reforms that caused too many hospitals to be built and allowed hospital and doctor fees to rise untethered by the old constraints of supply and demand.

First, low-interest government loans and grants encouraged construction of new hospitals and expansions of old ones. Then in 1965, Congress created the Medicare health insurance system for the elderly and the disabled.

Instead of standardizing fees, Medicare regulations allowed doctors to bill the government their “usual and customary” rates, which they were free to raise.

Medicare also gave administrators permission to pass along hospital construction costs to the government through their bills to Medicare.

In Ventura County, the results were major expansions of the three existing general hospitals and construction of five new general hospitals between 1960 and 1974--in Ojai, Santa Paula, Simi Valley, Thousand Oaks and Camarillo.

“Each area wanted a community hospital. That was sort of the fad,” said Hair, ex-president of the California Medical Assn. “They wanted the proximity. And the physicians wanted to have a hospital and emergency facilities closer to them.”

More large employers bought medical insurance for more workers, and the insurance increasingly covered not only hospital bills but doctor fees as well.

Private insurance companies often followed Medicare’s lead by allowing doctors to charge their full fees.

And since they no longer had to pay the bills out of their own pockets, patients sought doctors’ care more frequently.

At the same time, a series of surgical and technological breakthroughs--from organ transplants to million-dollar diagnostic imaging machines--began to force hospitals to buy costly new equipment to stay competitive.

Every local hospital bought CAT scanning machines, then several paid up to $2.6 million for Magnetic Resonance Imaging equipment that allowed even more detailed analysis of what was going on within a patient. Even Ojai Valley and Santa Paula now have mobile MRIs.

Los Robles, St. John’s and Memorial also invested heavily to equip and staff cardiac centers.

And the cost of malpractice insurance soared.

As a result, between 1960 and 1985, medical costs nearly doubled as a percentage of the country’s gross national product, surpassing 10% for the first time.

Those costs were about 12% of the nation’s economic output in 1990 and are expected to be nearly 14% this year after increasing from $666 billion to $809 billion in two years, according to the U.S. Health Care Financing Administration.

Because of the escalating costs, which are 20 times higher than in 1965, many small employers have cut or eliminated health coverage for their workers.

About 37 million Americans now have no health insurance, including 6 million Californians and more than 100,000 Ventura County residents. About 16,000 uninsured patients were treated at the county hospital’s emergency room alone in 1991.

“It’s high noon, and this society is going to have to start facing these issues” of cost and access, said neurosurgeon Moustapha Abou-Samra, president of the county medical society and a partner in a five-person Ventura neurosurgical group that performs all of the brain surgeries in the west county.

While blaming skyrocketing health costs mostly on other groups, Abou-Samra cautioned in a recent newsletter that “physicians can greatly contribute to real cost containment.”

First, doctors must increase their awareness of the costs of supplies they use, he said.

Admitting his own ignorance, the neurosurgeon said he didn’t know the cost of supplies such as antibiotics, anti-inflammatory drugs or even common sutures until another doctor, who was his patient, recently raised the issue.

The patient was charged $240 for sutures alone. Abou-Samra opened two packages of eight sutures each, used 10 and threw away the remaining six, worth $90. “That borders on obscene,” he said.

So he now uses each suture twice.

Piecemeal Reforms

In Ventura County and elsewhere, the principal element of piecemeal cost reforms has been “managed care.”

The plan relies on general physicians acting as “gatekeepers” to health-care networks that include other physicians, clinics and hospitals.

These gatekeepers--family practitioners, pediatricians and internists--have financial incentives to keep the patients healthy and to eliminate unnecessary tests, doctors’ visits, referrals and hospitalization.

Researchers say such waste costs tens of billions of dollars a year.

For example, the Rand Corp. think tank in Santa Monica studied 5,000 cases of three common surgical and diagnostic procedures done on heart vessels, carotid arteries and digestive organs and found that between 17% and 32% were inappropriate.

But critics say there is sometimes another price to pay for care under health maintenance organizations, or HMOs, and for tight caps on Medicare and Medi-Cal payments enacted over the last decade.

Managed care can compromise medical treatment, some physicians say, by limiting patients’ access to top specialists outside their physician network.

George H. Hubert, director of cardiology at Los Robles hospital, cites the case of 67-year-old Orville Johnson, a retired deputy sheriff whose heart problems required double-bypass and value-replacement surgery last month--but whose HMO would not order the procedure.

“Without it, he was going to have heart failure and the potential for a fatal heart attack,” Hubert said. Even if he lived, Johnson would likely have been an invalid, the doctor said.

Patient Johnson said he finally quit his HMO and used a backup insurance plan that partially covered his heart surgery because he could not get his old doctor to treat him with anything other than pills.

“I was getting worse and worse, and he’d give me two minutes, say ‘Take your pills and come back in a month,’ ” Johnson said.

“It’s a wonderful outfit if there’s nothing wrong with you,” he said. “But if you’re going to be a costly patient, they treat you nasty so you’ll go somewhere else.”

HMO representatives said that doctors make decisions on referrals and surgeries based on what is best for patients, not on cost considerations. Otherwise they would open themselves to lawsuits and lose business because of patients’ complaints.

“HMOs are competing with each other and they have to keep their patients happy,” said Deborah Reidy Kelch, spokeswoman for the California Assn. of HMOs Inc.

Kelch also noted that a 1991 Gallup Poll found HMO members were as satisfied with their health plans as workers with traditional insurance.

Despite some complaints about the lower-cost, no-frill health plans, many doctors and hospital administrators say cost-cutting is necessary and that the time has passed when patients can insist on the best treatment insurance companies can buy.

Joseph Harrington, administrator at Pleasant Valley Hospital, said patients have unrealistic expectations of care.

“They want first-class health care,” he said. “And they think they, not the doctor, should determine whether they should be in the hospital. But something has to be done or we’re going to bankrupt ourselves.”

President-elect Bill Clinton, in fact, has promised to propose a national health-care system with basic coverage for every American. And his plan relies on the concept of managed care.

Clinton hopes to curtail costs through regulations controlling doctor and hospital fees and insurance premiums.

Managed care apparently does save money. The average premium employers paid per worker covered by a health maintenance organization was $2,683 last year, compared to $3,161 for traditional insurance plans, one study found.

HMOs already cover 15% of all Americans, and one-third of all California and Ventura County residents. Other less restrictive managed care plans cover millions more in California.

Yet, for all the current talk about the need for belt-tightening, there is widespread criticism of caps on costs in the Medicare program for the elderly and in Medi-Cal coverage for the poor.

Long the hospitals’ bread-and-butter, Medicare began to set specific capped fees for hospital treatments in 1983. Under these diagnostic related groups, or DRGs, a hospital is generally paid a set amount for a hysterectomy, for example, regardless of most complications.

The DRGs--”Da Revenue is Gone” in hospital slang--were originally large enough that hospitals could still fill their beds with elderly patients and cover their overhead, industry spokesmen said. But DRG payments for the average patient have fallen below the break-even point, hospital administrators say, and are still declining.

Medicare caps produce the paradoxical situation where more business is not necessarily good for business.

“January was the busiest month we’ve ever had here, and it was also the month we lost the most money,” Pleasant Valley’s Harrington said.

Medicare has also imposed ever stricter standards for admitting patients to hospitals. And managed care plans have followed suit, hospital administrators say.

As a result, hospitals now admit sicker patients and release them quicker than ever before, doctors and administrators said.

“It really is a concern,” said Jim Bennett, associate executive director of the Ojai hospital. “Patients have to be sicker and sicker to be admitted, and yet you’re expected to treat them in shorter periods of time and with less resources.”

In Ventura County, the practical result of the sicker-and-quicker phenomenon is not only lower hospital revenue, but increased stress on nurses, several nurses said.

“What we see are hospitals being turned into big critical-care units,” said county hospital nurse Judith Overmyer, who teaches nursing at several other hospitals.

Some patients who 10 years ago would have been in intensive care are today relegated to regular hospital beds, she said. The nurse-to-patient ratio in intensive care is 1 to 2, while it is 1 to 10 for healthier patients, she said.

“I see the different hospitals from a teaching viewpoint,” Overmyer said. “And there’s a lot of anxiety and anger in nursing right now because of what is perceived as poor staffing and cutbacks.”

Barbara Thorpe, a Cal State Dominguez Hills public health professor who lives in Ojai, said she increasingly senses “fatigue and burnout” among local nurses.

At St. John’s, which recently opened a new $120-million facility, nurses said they are feeling the strain of a 51-employee cutback last summer.

“The patients are sicker these days, and they require more care,” said one nurse who requested anonymity.

Nurses run from the time they arrive until the time they leave, often foregoing breaks and meals, she said. “Some nurses leave in tears because they’re so frustrated.”

But general surgeon Phillip Cardan, while acknowledging that St. John’s nurses “are working twice as hard,” said he had not seen a difference in quality of care for his patients.

St. John’s President Daniel R. Herlinger dismissed the complaints as part of the increased stress caused by the October move from the old hospital to the new one.

Even with the cutbacks, all nursing shifts are staffed according to industry standards, he said.

Marginal Profits

Another result of reduced reimbursement from government programs--and of the bargain rates hospitals offer managed-care groups to get their business--are precarious profit margins.

California hospitals, so fat they averaged a 22% return on expenses in 1980, barely broke even in 1991.

About 58% of the state’s hospitals lost money last year, while the 42% that were in the black showed operating margins that averaged less than 1%, according to the Hospital Council of Southern California.

Since 1985, about 50 of the region’s 300 hospitals have closed, said hospital council spokesman David Langness in Los Angeles.

And almost all of them have been small.

“It used to be that hospitals closed in the very poor urban areas and very isolated rural areas, but now it’s spreading to the suburbs,” Langness said.

Administrators in Ventura County say they have already charted a new course toward solvency for their small community hospitals.

They say they expect to stay in business by cutting operating overhead and by expanding services where there is still money to be made.

Ojai Valley Community Hospital, which lost $220,000 on operating revenue of $6.5 million for the first half of the year, is emphasizing out-of-hospital treatment such as physical and respiratory therapy and laboratory services.

After filling just a third of its 71 acute-care beds on average last year, Ojai plans to open a new out-patient clinic soon.

“The trend in the marketplace is toward out-patient reimbursement,” said Ojai’s Bennett.

Simi Valley Hospital, which expects to lose as much as $2.9 million on operating revenue of $50 million in 1992, is moving in the same direction. The hospital has cut its total staffed beds from 215 to 159 in two years.

“We’re very definitely an industry in major transition,” said Alan Rice, the hospital’s chief executive officer. “You can use an analogy of a car manufacturing plant. Our job is to deliver things with less cost and in more efficient ways.”

Rice said Simi Valley is cutting costs by cutting employee hours, buying less-expensive drugs, keeping fewer supplies in storage and expanding its contracts with health insurance companies.

Both Bennett and Rice said they see trends that will allow them to eventually make money. In Ojai, out-patient visits were up 24% in the third quarter, and the increase was 27% for Simi Valley, state records show.

The trends are not as promising at 60-bed Santa Paula Community Hospital. The county’s smallest hospital lost $800,000 on operating revenue of $7 million during the first six months of the year.

And its total patient days were down by 10% in the second quarter compared to the same period in 1991, for the largest drop of any local hospital.

Bruce Donaldson, chief financial officer at Santa Paula, would not comment on how long the hospital can stay open with such losses. But he said the losses will persist unless the hospital--which historically has received large charitable contributions--gets more donations from the community.

Santa Paula, though not in merger talks, is “open to relationships” with larger hospitals if that means greater efficiency, Donaldson said. Meanwhile, he added, Santa Paula should weigh the possible loss of 300 jobs and greater health risks to residents if the hospital closes.

“The difference in travel time between here and Ventura can be the difference between life and death,” Donaldson said. “We frequently see patients who would not have been here at all, if we hadn’t been here.”

Gaps in Care

Despite the financial crisis now facing the county’s health-care system, most officials say the quality of care has remained high.

There are gaps, however.

Ventura County residents still have to drive to Los Angeles for some care that can be provided only by super-specialists.

But many of the holes that once pocked county medical care have been filled, and the reputation of some hospital programs has been solidly established.

Nearly all of the county’s eight general hospitals fare well on state inspections. Says one state health official: “We don’t see any major problems in Ventura County.”

Health Care at a Glance

BIRTHS Low-weight babies: 4.6% county; 5.8% state Teen-age mothers: 10.4% county; 11.6% state Mothers examined (1st trimester): 79.8% county; 71.7% state Cesarean section: 22.9% county; 21.5% state Birth rate per 1,000 people: County - 16.3; State - 19.1

DEATHS Deaths per 100,000 people: 677 county; 739 state Heart Disease: 180 county; 238 state Cancers: 144 county; 166 state Strokes: 44 county; 54 state AIDS: 3.9 county; 11.5 state Infant deaths per 1,000 live births: County - 7.6; State - 7.9

DOCTORS Family practice: 14.3% county; 9.1% state Medical specialties: 19.2% county; 19.5% state Surgical specialties: 19.0% county; 17.0% state Other specialties: 17.4% county; 16.8% state Hospital-based: 12.2% county; 17.6% state People per doctor: County - 504; State - 397

HOSPITALS Bed occupancy rate: 54.6% county; 50.7% state Average stay in days: 5.1 county; 5.1 state Surgeries per 1,000 people: 51.4 county; 62.2 state In-patients per 1,000 people: 67.3 county; 97.0 state Critical emergency patients: 6.5% county; 11.0% state Beds per 1,000 residents: County - 1.7; State - 2.7

1. Financial Health of County Hospitals

First half of 1992; In millions

Total Net Other Net Operating Patient Operating Operating Hospitals Expense Revenue Revenue Revenue Los Robles Regional $31.5 $36.21 $0.16 +$4.87 Medical Center Community Memorial $30.85 $31.67 $0.72 +$1.54 Hospital Ventura County $37.69 $33.13 $4.64 +$0.08* Medical Center St. John’s Regional $41.83 $41.08 $0.65 -$0.10 Medical Center Ojai Valley $6.74 $6.45 $0.07 -$0.22 Community Hospital Pleasant Valley $17.67 $16.91 $0.17 -$0.59 Hospital Santa Paula $7.83 $6.96 $0.07 -$0.80 Memorial Hospital Simi Valley $26.37 $23.95 $0.75 -$1.67 Hospital

* Hospital’s revenue includes $3 million from the county general fund to pay for indigent patient care. Source: Office of Statewide Health Planning and Development

2. Growth in population and the number of physicians Ventura County’s population increased only half as did the number of physicians 1970-92.

PHYSICIANS: +163% 1970: 513 1992: 1,362

POPULATION: +82.7% 1970: 376,430 1992: 686,868

Source: American Medical Association

3. Health care coverage in California

How the state’s 31 million residents are insured (In millions of people) Health Maintenance Organizations: -10.1; 32.6% Other managed-care organizations & private insurance: -7.6; 24.5% Uninsured: -6.0; 19.4% MediCal: -4.0; 12.9% Medicare: -3.4; 11.0% Source: Private insurance groups; U.S. Health Care Financing Administration.

Slicing the U.S. Health Care Dollar

Total (1990): $666 billion Hospital charges: 39% Physicians, dentists and other professional health services: 29% Research, administration and construction: 12% Drugs and medical supplies: 10% Nursing home care: 8% Other personal health care: 2% Source: U.S. Health Care Financing Administration