South Bay Hospital, which has been suffering financially in recent years, is losing its single biggest managed-care contract to a Torrance competitor, a move that could cost the Redondo Beach hospital as many as 20% of its patients.
But the small 203-bed hospital is now negotiating with other managed-care companies in hopes of bolstering the number of patients it treats.
Cigna Health Care of Southern California has decided to contract with Torrance Memorial Medical Center starting in March, 1994. The more than 40,000 South Bay residents covered by the Cigna plan will now be treated at Torrance Memorial.
The move underscores the importance such contracts hold for competing community hospitals as they brace for the onset of President Clinton's health-care reform proposal, which is expected to rely heavily on providing care through large networks of insurers and physicians. Gearing up, hospitals nationwide are lobbying hard to become part of such networks through managed-care firms such as Cigna.
Most hospitals without such ties are not expected to survive, experts say.
South Bay Hospital's chief financial officer, Steve Balalian, expressed optimism that his hospital will forge new relationships.
"It will be painful, but we're confident we can replace that business," Balalian said. He said South Bay Hospital is now negotiating with a number of plans and has obtained a state contract to bring in more Medi-Cal patients.
Pete Senoff, director of communications at Cigna Health Care of California, said the firm is switching to Torrance Memorial because it provides more services. The move will affect South Bay patients in Cigna's "staff model" plan, he said.
Cigna currently accounts for an estimated 15 out of 90 patients daily at South Bay Hospital, which is operated by a for-profit chain, American Medical International.
Cigna will rank as the second largest managed-care contract at Torrance Memorial, a 340-bed nonprofit medical center. Its largest contract is with Bay Shores Medical Group, which moved to Torrance from South Bay Hospital in 1989.
Ironically, Cigna's move comes at a time when South Bay Hospital has been working with the Beach Cities Health District in an attempt to strengthen the hospital's ties to managed-care networks.
The health district is a public agency that owns the South Bay Hospital property and leased it in 1984 to American Medical International for 30 years.
Officials from American Medical and the district have been discussing jointly hiring a consultant, at a fee of $130,000 to $150,000, to study how the hospital could bolster its network connections.