60% of Area Hospitals Report Flow of Red Ink : Health care: As the industry struggles with a glut of beds and more competition, it says Medicare cuts will make things worse.

More than half of all hospital beds in Southern California were empty on a typical day in 1992 and nearly 60% of the region’s 219 private hospitals were unprofitable last year, according to an industry report released Wednesday.

Hospitals in Los Angeles, Orange, Riverside, San Bernardino, Ventura and Santa Barbara counties collectively lost nearly $70 million last year, according to the survey by the Hospital Council of Southern California.

“Any time more than half the hospitals in the region lose large amounts of money in their annual operations, we face the potential of severe losses in our health care infrastructure,” said David Langness, a hospital council spokesman. The industry’s problems are likely to lead to a wave of closures, mergers and alliances among hospitals, he said.

Hospitals nationwide are struggling to cope with a glut of beds, increasing competition, Medicare cuts and intense pressure from insurers and employers to slash medical costs.

But Southern California’s hospitals are sicker than most due to the prolonged recession and the large percentage of the population enrolled in managed care insurance programs. The 52% vacancy rate of Southland hospitals compares to a 35% vacancy rate at hospitals nationwide, according to American Hospital Assn. figures.

Occupancy rates--the percentage of beds occupied at midnight--are a traditional yardstick of a hospital’s health, with 65% or higher occupancy usually considered a healthy level. But hospital administrators say occupancy rates are becoming an outdated measurement as hospitals develop new revenue sources.

Hospitals increasingly are setting up outpatient facilities where minor surgeries and other treatment can be given. Also, hospitals are relying on health maintenance organizations and similar medical groups to supply more of their patients. HMOs pay hospitals a set monthly fee per patient, regardless of whether that HMO member is treated.

Even so, the council’s figures showing that 60% of Southern California hospitals are losing money from operations is a sign of serious financial difficulty. Nearly 80% of Southland hospitals were operating in the black in the early 1980s, the council said.

“We have had the suspicion for the last year or two that the financial condition of the health care community was worsening, but we didn’t have the numbers to prove it,” Langness said. “Now these numbers make it clear that that suspicion is true.”

The hospital council prepared its report as part of the industry’s efforts to draw attention to its financial plight. Hospitals have decried recent federal cuts in Medicare reimbursements and hope to stave off insurers’ efforts to further squeeze hospital costs.

The hospital council has estimated that Medicare cuts included in the budget recently signed by President Clinton will cost California hospitals $2.7 billion over the next five years.

“We’re very concerned that further government or insurance cutbacks will damage the system,” Langness said. “There seems to be a perception out there that there is fat that can be liposuctioned out of the health care system. This report shows us that the fat is gone and we’re now cutting into bone.”

The council based its report on data supplied by hospitals to the Office of Statewide Health Planning and Development. The report’s occupancy and profit figures included only privately owned, general acute care hospitals, and excluded hospitals operated by health maintenance organizations, such as Kaiser-Permanente; specialty hospitals, or government-run institutions.

The study also looked at psychiatric hospitals, which are faring even worse than hospitals generally. Of 44 private psychiatric hospitals in the Southland, 73% reported losses from operations in 1992, and occupancy rates dipped to about 36%.

Struggling Hospitals

The Southern California recession and the growth of managed care programs, such as health maintenance organizations that limit their members’ use of hospitals, has caused Southland hospitals’ profits to plunge.

Hospital occupancy

A lower occupancy rate means more hospital beds remain empty at any given time:

Average length of stay

Patient are being discharged from hospitals earlier than before.

Operating profits (in millions)

About 60% of Southern California’s hospitals lost money on operations in 1992.

Figures are for 219 privately owned, general acute-care hospitals in Los Angeles, Orange, Riverside, San Bernardino, Santa Barbara and Ventura counties. Excluded are psychiatric and other specialty hospitals, as well as state, county or city-operated facilities.

Source: Hospital Council of Southern California.