South Bay Hospital Studies Its Options : Medicine: Redondo Beach facility hopes management changes and new health-care contracts will offset impact of Cigna’s departure.

Battered by the impending loss of its largest health-care contract, South Bay Hospital in Redondo Beach is pondering how to keep its doors open amid financial losses and stiff competition for patients.

One option could be turning over management of part or all of the facility to another medical center. Discussions have been held with nearby Little Company of Mary Hospital in Torrance, but officials at both hospitals said no decisions have been made.

The hospital is also pursuing more health-care contracts to replace the business it will lose in March when Cigna Health Care of California moves its patients to another hospital.

The uncertainty is stirring concern in the beach cities. Not only does the 203-bed hospital provide residents with easily accessible care, but its 1960 building on Prospect Avenue is owned by a public agency, the Beach Cities Health District.

“In the next two or three months, the story will unfold,” said Robert Riley, executive director of the district, which leases the hospital to American Medical International, a for-profit national hospital chain. The 30-year lease is due to expire in 2014.

Riley said his question is not whether the hospital will close but whether it will have to reduce or close some departments. He said he is expecting a report from the hospital within the next few weeks on the impact of the Cigna withdrawal.

The most daunting problem facing South Bay Hospital is the loss of its managed-care contract with Cigna, which accounts for as much as 22% of its net revenue, said executive director Dennis Bruns.

The facility, Bruns said, has also been hurt by the recession and competition with its two larger Torrance rivals: Little Company, which has 374 beds, and Torrance Memorial Medical Center, with 340.

With the growing emphasis nationwide on outpatient care as a cheaper alternative to hospitalization, some local health officials have questioned if the area can support all its existing hospitals. Three hospitals are located in Torrance and Redondo Beach alone.

“I don’t think it really takes a genius to say we’re really over-bedded in the South Bay,” Bruns said.

South Bay Hospital is operated by American Medical International. The hospital has struggled financially in recent years, losing $4.5 million to $4.8 million in operating income in the fiscal year ending in August, 1992, and slightly more than $2 million in the last fiscal year, Bruns said.

Now it is losing not only the Cigna contract, but its association to the South Bay Family Medical Group, a 10-physician primary care group that beginning in March will be managed by Little Company of Mary Hospital.

Bruns said his hospital is working hard to build up its ties to other medical groups and health maintenance organizations. It recently signed a Medi-Cal contract with the state and is strengthening its own network of independent physicians to replace some of its lost business.

“We don’t think we’re going to be able to replace all of it” by March 1, Bruns said, “but if we can replace a substantial amount of it, it certainly helps the hospital.”

On another front, South Bay Hospital contacted its two Torrance rivals--Little Company and Torrance Memorial--about six months ago to explore partnerships and joint efforts, Bruns said.

While the talks did not progress at that time, according to Bruns, Little Company officials are currently evaluating if the hospital has any interest in South Bay operations.