A Shot in the Arm : Quake Forces Hospitals to Confront the Future Today

When hospital experts speak of an industry shakeout, an earthquake isn’t exactly what they have in mind.

Yet the Northridge temblor--which caused hundreds of millions of dollars in damage to Southland hospitals--has added new urgency to efforts by these institutions to adapt to a rapidly changing health care system.

The disaster has helped, at least temporarily, to reduce the longstanding glut of privately operated hospital beds in the region. It has also forced administrators at some quake-damaged hospitals to rethink their strategies for adapting to anticipated national health reform and the growth in health maintenance organizations and other forms of managed care.

At two hospitals that were longtime rivals, administrators are talking seriously about how they might collaborate instead of simply compete. Some hospitals see an opportunity to replace older, damaged buildings with facilities that are more in keeping with industry trends. For example, some are considering building smaller hospitals with fewer employees.

“If they’ve lost (acute care) beds, then they should consider not replacing them,” said Ronald Spoltore, director of the health care practice at consultant Kenneth Leventhal & Co.

Eighteen area hospitals sustained “major or moderate damage” in the quake, according to the Office of Statewide Health Planning and Development. Industry sources predict that the repair bill could reach a staggering $1 billion. That figure includes an estimated $389 million in damage to County-USC Medical Center, a county-run facility where the pediatric and psychiatric buildings have been closed.

Private hospitals that suffered serious damage include St. John’s Hospital and Health Center, Santa Monica Hospital Medical Center, Northridge Hospital Medical Center, Holy Cross Medical Center and Cedars-Sinai Medical Center. But only St. John’s lost its ability for inpatient admissions.

Although fewer than 1,000 beds were rendered unusable by quake damage to buildings, that loss has temporarily helped to ease the glut of hospital beds. Hospitals that didn’t lose beds are benefiting from the transfer of some patients from the more severely damaged facilities.

For example, with St. John’s temporarily closed to inpatient admissions, doctors have had to send their patients to nearby facilities, such as Cedars-Sinai and UCLA Medical Center, both of which had been struggling to fill beds. Most of St. John’s outpatient operations are open.

The hospital bed glut is a national problem that has been getting worse, particularly in Southern California. Improved medical technology has allowed more surgery to be done outside the hospital. Meanwhile, changes in Medicare reimbursement and the growth of managed care have forced hospitals to discharge patients “sicker and quicker.”

In Los Angeles County, a leader in managed care, 48% of 31,300 acute care hospital beds were empty on any given day in late 1993, according to the Hospital Council of Southern California. The trade group estimates that 15% of the 260 hospitals in Los Angeles, Orange, Riverside, San Bernardino, Ventura and Santa Barbara counties will close or merge in the next five years.

But while nearly all the damaged hospitals have been able to continue operating, financial troubles may mount for some. Most of the damaged hospitals are believed to have earthquake insurance, but they still must pay millions of dollars out of pocket to meet insurance deductibles. Some will seek federal disaster aid. With more than half of Southern California’s hospitals operating at a loss, those expenses could put a strain on financially weak institutions, industry experts said.

The impact of the quake--and the need to change--is perhaps most evident on the Westside, where damage at two Santa Monica hospitals has forced the temporary closure of about 650 acute care beds. The earthquake dealt a crippling blow to St. John’s, a prominent hospital known for celebrity clients such as Elizabeth Taylor and Michael Jackson. Santa Monica Hospital suffered less significant damage.

Industry experts often cite Santa Monica--and the Westside generally--as having redundant health care services: more hospital beds and more medical equipment than the community’s population really needs.

Even officials at Santa Monica Hospital and St. John’s concede there is much overlap. For example, the two hospitals both have departments in obstetrics-gynecology, cardiology and orthopedics.

“Totally replacing two hospitals that were virtually mirrors of one another--unless it can be demonstrated that the community needs that--would not be in the best interest of patients or the community at large,” said William D. Parente, Santa Monica Hospital’s chief executive and president.

Executives of the rival hospitals met last week to discuss possible collaborative efforts. Such talks presumably could lead to anything from a merger to an agreement to rebuild their facilities to complement, rather than compete with, each other. A St. John’s spokeswoman said Wednesday that a merger has not been discussed.

Parente said there is a “certain wariness” in the talks because neither hospital wants to run afoul of federal antitrust rules that govern such ventures.

St. John’s estimates that repairs needed to make buildings safe again will cost up to $20 million, while totally rebuilding the facility could cost about $200 million, said Thomas Herrick, executive vice president.

“This is a golden opportunity for us to rebuild a hospital of the future,” Herrick said. “We would like to build something that will knock everybody’s socks off.”

Though plans are not yet final, Herrick said, such a hospital would be much smaller and have fewer employees than in the past. It would incorporate the latest in technology to transport supplies and people, perhaps including computers that would allow nurses to communicate with patients at home. Experts predict that in the future, hospitals will be smaller, will focus on treating only the sickest patients and will perform an increasing number of surgical procedures at outpatient centers.

Herrick said a rebuilt St. John’s would probably be designed around the concept of “patient-focused care,” an increasingly popular concept in which people are tended by patient care “teams” that provide more personalized care.

“We have to make the person feel special and cared for, but we have to do it with less money,” he said.

Some hospital experts, however, question whether St. John’s can move fast enough.

“Health care is so volatile and the industry is changing so dramatically that a year out of business could be devastating to them,” said consultant Spoltore.

Declining Hospital Occupancy Rates

Hospital occupancy rates have been dropping in California since the mid-1950s, but the trend has accelerated in recent years due to the growth of managed-care insurance, improved technology and other factors. The amount of time that patients spend in the hospital has also been declining.

Occupancy 1983: 66.1% 1984: 64.1 1985: 62.3 1986: 62.3 1987: 64.2 1988: 64.2 1989: 64.1 1990: 64.2 1991: 53.3 1992: 51.3

Source: Office of Statewide Health Planning and Development.