Tustin Rehab Lays off 31 to Curb Costs

In yet another sign of the economic upheaval rocking Orange County’s hospital industry, Tustin Rehabilitation Hospital has laid off 31 employees as part of an effort to boost efficiency and curb operating costs.

Tustin Rehab’s situation is not unusual, though that is of little comfort to the workers who lost their jobs. Health care industry observers say that most hospitals in Orange County have had layoffs in the past year.

At St. Joseph Hospital in Orange, for instance, a February restructuring lopped 23 management positions from the payroll. That followed a November layoff of 47 staff positions at St. Joseph and the elimination of 31 other positions that were vacant at the time.

“People are just not coming in for medical care the way they used to,” spokeswoman Gail Love said.

David Morgan, chief executive of Western Medical Center-Santa Ana, said: “Health care is caught up by the same economic forces as everyone else. . . . As people are laid off from their jobs, they lose their health insurance. Or they move away looking for jobs in other areas, and there are fewer people coming into the hospitals.”

There are changes specific to the medical industry as well, as insurance companies, health maintenance organizations and preferred provider networks negotiate with hospitals and care facilities for reduced rates.

“They move patients around, people’s medical insurance changes, the technologies change, and people spend less time in the hospital,” Morgan said. “It all affects our finances.”

Western Medical recently laid off 25 of its 2,000 employees, a spokeswoman said.

At Tustin Rehab, the decision to cut the payroll by 10% came “because we believe that business as usual just cannot continue in our industry,” said Rebecca Lee, chief executive of the 117-bed facility. The hospital devotes 60 of its beds to rehabilitation services for stroke victims, patients with brain, head or spinal cord injuries, and people with orthopedic problems.

“We are looking at more efficiencies and cost effectiveness,” Lee said. “About half the people who were laid off came from our middle management. The rest came from all the different departments.”

Lee is a bit more sanguine about the future than some in the industry, however. She said she thinks rehabilitation centers will benefit as the health care system changes, especially under the health care reforms proposed by the Clinton Administration.

The reforms will most likely be contained in a so-called managed competition system, in which health care providers’ pricing and policies will be controlled by a national health board. Under managed competition, health care experts say, private doctors and hospitals eventually will be squeezed out by the growing health maintenance organization industry.

The winners under a managed competition scenario would include specialized institutions like Lee’s, which can provide outpatient services as well as care for bedridden patients at far less cost than a general service hospital. Other members of the so-called alternative health care industry, including home health care companies and outpatient surgery centers, also are expected to benefit.

Morgan, the Western Medical Center chief executive, said he thinks that the changes proposed by the Clinton Administration “will continue to cause the industry to be in a state of flux for a number of years. But while traumatic for our industry,” he said, “it will be a good thing if it really can increase health care coverage for a great part of our population.”

Times staff writer James M. Gomez contributed to this report.