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Economics Makes Foes of 2 Hospitals : Ventura: County system is growing. But Community Memorial builds a case against what it sees as competition for patients.

TIMES STAFF WRITER

For decades, the two institutions had peacefully coexisted as neighbors in central Ventura--the county hospital ministering to the poor and the community hospital treating the rest.

There were occasional tensions--disputes over how two large hospitals just three blocks apart should divvy up medical services.

But the same doctors worked at both the private Community Memorial Hospital and public Ventura County Medical Center. And disputes were usually resolved.

“The medical community has been generally harmonious, but now there’s a medical Bosnia going on here,” said cardiologist Sigfried Storz, a former department chairman at both hospitals.

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“Your loyalty is sometimes questioned by one side or the other. They say, ‘Well whose side is he really on?’ ”

For more than a year, tensions between the two hospitals have escalated step-by-step as a brave new world of hardball health care economics has replaced the old supportive one.

Ventura County’s public hospital system--once a bumbling giant submerged in red ink--is now seen as a threat in part because it is both efficient and expanding.

New county clinics are open or on the drawing board for Simi Valley, Thousand Oaks and Fillmore. And county officials have approved conceptually a large new hospital wing even as other local hospitals, only half-full, struggle to survive.

The county hospital has also ended part-time contracts with 15 to 20 local physicians, hiring full-time doctors instead and reportedly saving $1 million a year.

Then last fall the county offered to insure its own employees for health care, and nearly 1,000 workers who previously had private doctors and used private hospitals quickly signed up for the cheaper coverage. Officials say that will funnel millions each year back to the county.

Across Loma Vista Road at Community Memorial, administrators first cocked an eyebrow, then paid about $70,000 to five consultants in Sacramento, Orange County and Los Angeles to study the county’s actions. They have now built a case against the hospital expansion and what they see as county competition for private patients.

With its doctors, its new clinics and its hospital--which already treat 38% of all patients in area hospitals and their clinics--Ventura County’s public medical system could be a dominant local force if President Clinton’s universal health care blurs the distinction between poor welfare patients and those privately insured.

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“That hospital is trying to jockey for one-upmanship by invading the private sector,” Community Hospital Executive Director Michael Bakst said. “And they’re using taxpayers’ money to do it. . . .It’s annoying and it’s wrong. Government should not put the private sector out of business to further the needs of government.

“Their clinics are positioned to capitalize on this movement to managed care,” Bakst insisted. “What they’ve created is an integrated health-care system they can sell.”

County officials say they have never sought private patients, do not treat many and have no plan to compete for them against private doctors and hospitals. They say their mission is as provider of last resort for the needy.

And they charge Community Memorial with unethical snooping and with devising its own scheme to skim the most lucrative Medi-Cal contracts from the county--leaving it to support all the poor but without the resources to do it.

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“I would like them to actually walk through this system,” challenged county hospital Administrator Pierre Durand. “This is real life. We have to bathe the homeless. We have to deal with the mentally ill. We could be bureaucrats and go with what we have, but we drive the system and our product is more access for the poor.”

Simmering Dispute

Both sides agree that friction between the two hospitals--existing for years below the surface and ratcheted upward by recent events--has peaked in part because of insecurity spawned by a revolution in medical care.

Payments to private hospitals and doctors are down dramatically because of pressure from health maintenance organizations to cut treatment costs. And both doctors and hospitals, increasingly dependent on referrals from managed-care insurance groups, have lowered their rates to get new patients.

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There is a feeling among doctors, who have run their private practices as small businesses, that they are no longer in control and may eventually have to work for medical groups to make a living. Hospitals are feeling even more strain as patients increasingly are cared for more cheaply in out-patient clinics.

At the same time, California has opened up its Medi-Cal health care for the poor to more competition in hopes of cutting costs. County hospitals that once had near monopolies on poor patients are seeing some patient-starved doctors enroll in the most lucrative parts of the plan--especially care for pregnant women.

Community Memorial, in fact, plans to soon open its first two community clinics to compete with Ventura County for low-income patients.

“The perception out there is that only one of these hospitals is going to survive,” said neurosurgeon Moustapha Abou-Samra, past president of the Ventura County Medical Society. “County wants it to be county, and community wants it to be community.”

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At the bottom of the animosity between the two hospitals is the current uncertainty about national health-care reform, said Phillipp K. Wessels, director of the county Health Care Agency, which oversees the hospital system. “We’re going through a shakeout in this industry.”

Wessels acknowledged that several recent county moves--all made, he said, to save money or improve efficiency--have worsened relations with Community Memorial and some local doctors.

He also said the county will aggressively compete to expand its Medi-Cal market, and is positioned to offer medical services to private patients working for other government agencies if that is where state and federal leaders take health reform.

“That’s certainly not our plan, but if you consider the revolution going on now in health care and speculate where it’s going, certainly that’s a possibility,” he said.

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And over the past year, similar public and private comments by Wessels and other county officials have been seen by Community Memorial and some doctors as proof of the county’s true intention to compete for private patients.

In the Beginning

The first shot in what is now a 14-month hospital war was fired in January, 1993, when the county Health Care Agency enacted changes that required ambulances to deliver patients from lower-income west Ventura to Community Memorial’s emergency room. Ambulance patients in more affluent east Ventura were routed to county hospital.

The change was made to balance the emergency load, previously borne heavily by county hospital, Wessels said. The result, however, was that Community Memorial treated more poor patients for whom it received little or no state reimbursement because it had no Medi-Cal contract.

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“That was done for all the right reasons, but to the wrong effect,” Wessels said.

Community Memorial lost $200,000 last year because of the county action, Bakst said. And those losses came as the hospital’s bed-occupancy rate dropped precariously and its net income continued to dip.

“That was a unilateral move with no consultation,” Bakst said. “So by February or March we had started to crystallize our plan to find out what was going on and how we could protect ourselves.”

In early March, Community Memorial officials were taken aback when Wessels made statements on a local television program that suggested a design for public medicine beyond the county’s legal role as a medical safety net for the poor.

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“We are positioned . . . to deal with the issue of managed care should that be the charge to us by the state or by (the) private sector through insurance companies and so forth,” Wessels said.

By April 13, the proposal for the new $38-million hospital wing and parking garage was before the Board of Supervisors. In Wessels’ letter to the board he said the new wing would be used for out-patient clinic care, not new hospital beds, in keeping with industry trends.

“VCMC needs to be in a position to meet these challenges and respond to the requirements of managed care contracts for VCMC’s continued success,” Wessels wrote. Wessels now says he was referring only to managed care for Medi-Cal patients, not those who are privately insured.

Ten days later, at a retreat of about 20 top county health officials in Santa Barbara, comments by county Chief Administrative Officer Richard Wittenberg also were seen as indicative of possible county pursuit of private patients.

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Pediatrician Robert Ryan, who was chief of the county hospital medical staff, said his notes show that Wittenberg said the county needed to increase revenue by directing “third-party payers into the system.”

“If they are going to start going after private patients, that’s fine, but at least say it,” Ryan said in a recent interview. “To be going after private patients using my tax dollars to support it, is like I’m cutting my own throat without my consent.”

Wittenberg said Ryan misinterpreted his comments. “This is ridiculous. I don’t even know what third-party payers are,” he said. “The only thing we talked about was directing our own employees into our system. And that saves money for the taxpayers.”

Also during the spring, Community Memorial hired a Sacramento lobbying firm, George Steffes Inc., to research the likelihood of state funding for the new hospital wing and contracted with Sacramento government consultant Don Fields.

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In turn, Fields hired a legal research firm to gather county documents. But the firm never disclosed its true employer, a subterfuge that still angers county officials.

Community Memorial also hired a Los Angeles financial analyst to review the county’s plan for a new hospital wing. And by summer Orange County political consultant Harvey Englander and Los Angeles public relations specialist Jim Peterson were working for the hospital, Bakst said.

“This was not something we really relished doing,” Bakst said. “And frankly, $70,000 could have been better spent on a patient monitor or providing several open heart surgeries at no cost. . . . But we saw certain actions unfolding and we just couldn’t put the pieces together.”

Bakst said Community Memorial had to hire specialists because county officials weren’t forthcoming with information, and Community Memorial officials didn’t know what documents to ask for.

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Wessels said he could understand how Bakst could have misinterpreted the county’s intent. “But what I don’t understand,” he said, “is if they were concerned, why we didn’t sit down and talk instead of getting involved in all these cloak-and-dagger activities.”

New Relationships

As a new fiscal year began in July, county hospital continued to change its relationship with Ventura physicians, replacing 10 part-time general surgeons with five who agreed to work three-fifths time. That cut expenses from $820,089 last fiscal year to a maximum of $525,000 this year, Medical Director Samuel Edwards said.

The county also pared its group of contract obstetricians from 10 to six, though the total $1.35-million annual expense--or $225,000 per physician under the new contract--remained about the same.

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Between 15 and 20 doctors who had county contracts a couple of years ago no longer have them, Durand said. That cut $1 million from the county hospital’s $12-million physician payroll in one year, Edwards said.

“That was very hard,” Edwards said, “but we have the same financial problems everybody else does.”

Wessels said full-time staff surgeons also allowed the county to save on operating-room costs, because all non-emergency surgeries could be scheduled during regular working hours.

But hard feelings came with the change.

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Cardiologist George Mitchell said he stopped volunteering at the county hospital, where he had worked for a fraction of his normal pay one week out of every seven, after the county hired a full-time cardiologist.

“Every time they’ve hired a full-time physician to take over, they’ve asked other physicians to leave after years of essentially donating their time,” Mitchell said. “There was an overall sense of not being appreciated for what we had contributed to the county.”

General surgeon Michael Sparkuhl said the county’s changes seem to make economic sense on the surface. But the savings have come at a price. Elective surgeries for indigents with no insurance have been eliminated under the cutbacks, he said.

Sparkuhl said he believes it’s unfair for the county to set up a five-physician surgical group in a suite of offices, pay them $525,000 a year and still let them do private practice.

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“It would be nice if we could all have a sugar daddy giving us a guaranteed income while we were free to pursue private practice,” he said. “It’s not a level playing field.”

Feeling the Heat

By summer, Community Memorial had embraced as fact its thesis that the county wanted to compete for a shrinking health-care dollar. Hospital board member and attorney Ted Muegenburg said county Supervisor Susan Lacey told him as much in an Aug. 25 meeting in her office.

“She made it real clear they were going to compete for private patients,” Muegenburg said.

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Lacey was unavailable for comment, but an aide who also attended the Muegenburg meeting, Steve Offerman, said the supervisor never mentioned private patients.

“She said we were intending to modernize and renovate the hospital and that this could result in competition between the hospitals,” he said. “It was an acknowledgment of the inevitable. It wasn’t an expression of a strategy or plan.”

Either way, Community Memorial hired Englander, a political consultant with a statewide reputation. “We said maybe this is more of a political process,” Bakst said. Bakst hoped that Englander would put together a network of community groups that would notify county supervisors of their opposition to the new hospital wing.

But the project blew up in mid-November when Englander prematurely placed four full-page newspaper ads attacking the hospital as a "$50-million boondoggle,” Bakst and Englander said.

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Englander said he paid $6,000 for the ads himself because they ran without authorization from either Bakst or taxpayer advocate H. Jere Robings, who had agreed jointly to sponsor them.

The ads listed their sponsor as the Ventura County Alliance of Taxpayers, which Robings headed until he declared his candidacy for county supervisor. But county officials speculated that Community Memorial was behind them.

“We were embarrassed, absolutely,” Bakst said. And in an interview with The Times last month he accepted responsibility for not properly tracking the progress of the ad campaign.

Supervisor Maria VanderKolk, who had demanded to know who paid for the ads, recently criticized the private hospital not only for failing to acknowledge its involvement with the ads, but also for its approach to an important public issue.

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“This leads one to believe they are just trying to discredit us, instead of being straight-forward and honest,” she said.

Even as Englander was canvassing Ventura County to find opponents of the hospital expansion, a second consultant paid indirectly by Community Memorial was gathering county records and attending meetings of the county supervisors and its health committee.

Ray Komar, a former Santa Barbara publicist working for Peterson, was paid $30 an hour and put in 30 to 40 hours a week for several months before his contract ended in January, Bakst said.

As the fall progressed, Bakst said, he received clear evidence of county health officials’ goals, a chart outlining possible expanded county services to patients with private insurance, including employees of other governmental agencies.

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“That was the coup de grace ,” Bakst said. “It was just a graphic depiction of where they were heading.”

Wessels said no one in the health care agency had prepared the chart or knew where it came originated. And he suggested that perhaps Community Memorial was responsible for its own best evidence.

“Somebody did it,” Wessels said. “And it just fits too nicely right at the opportune time.”

Bakst said the chart was distributed several months ago at a workshop on public hospital adaptation to managed health care. He said he could prove its origin if necessary.

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Employees Switch

The most indisputable evidence that county change could hurt Community Memorial came in November, Bakst said, when the Board of Supervisors allowed the county’s 6,800 employees to sign up for cheaper county-provided health care instead of private insurance.

“County employees globally came to my hospital,” he said. “We lost big time.”

County officials said about 700 of the nearly 1,000 employees who chose the county plan work at the Health Care Agency and are much more comfortable than most workers with public health care.

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Many who enrolled are young and took the county insurance because they did not expect to be sick and wanted to pocket several hundred dollars a year they would have paid in private insurance premiums, Edwards said.

Officials said Community Memorial also encourages its employees to use its hospital by offering much better reimbursement for care. Some other county hospitals also offer care to their employees, a state official said.

Finally, six weeks ago, a year of resentment and behind-the-scenes maneuvering was revealed in a hearing on the new hospital wing before the county Public Facilities Corp. That agency’s approval is required to sell bond-like certificates to pay for improvement at the aging hospital.

A spokesman for Community Memorial presented his case against the proposed hospital wing, contending it is unnecessary, too costly and designed to capture private patients.

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Wessels argued that the county desperately needed to replace several old, unsafe hospital buildings to prepare for the future--and that 70% funding is available through the state.

But the issue that caught the attention of Norman Blacher, facilities corporation board member, was that county officials had failed to plan their expansion in conjunction with Community Memorial to determine if the county could use available space at the nearby hospital.

“It’s mind-boggling,” Blacher said.

Wessels said the county had discussed its plans with hospital administrators in Santa Paula, Oxnard and Simi Valley. “The only place we don’t have rapport is with our neighbors right across the street,” he said.

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Bakst said the distrust was spawned when the county reneged on a 1980 shared-services agreement by also buying an expensive CAT-scan diagnostic machine and opening up a competing nuclear medicine operation for intravenous tests.

County hospital officials said those added services, though duplicative of their neighbor’s, were necessary for patient care. They said the real issue was Community Memorial’s opening of an emergency room in 1985 to compete with the county’s after agreeing not to.

Bakst said the county forced that issue by prohibiting ambulances from taking patients without severe injuries to a Community Memorial treatment room, a practice that had gone on for 50 years.

Both sides acknowledge a rift at the administrative level. Durand and Bakst, both generally described as astute administrators, acknowledge that they almost never talk.

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“In the past they seemed to be very pleased with us as long as we never stepped out of our place,” Wessels said. “We would take all the patients they didn’t want, and we’d be satisfied with it.”

But tensions have mounted, especially since the Durand-led county hospital and clinic system has become so successful that it is cited statewide as a model of efficiency.

“In the last two years there has been a tremendous amount of anxiety in health care, and most people are looking for someone to fault,” Durand said.

Bakst said his problems with the county are more specific. “We couldn’t find out any information from the county,” he said. “They were not being upfront about life in general.”

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Wessels and Bakst agreed the sides now need to talk. Bakst has even called for a mediator to direct the discussion. But Wessels said his overture for a meeting was rejected last week.

It is this overriding lack of communication that troubles many doctors in the Ventura medical community.

“If you randomly poll people out there in the trenches, there is great skepticism about all of the maneuvering that’s being done,” internist Charles Menz said.

Neurosurgeon Abou-Samra, former chief of staff at both hospitals, said now is the time for compromise.

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“There’s a very significant wisdom in taking a step back and seeing if we can work out the differences between the two hospitals,” he said. “I like to think there is a place for both hospitals, and that they can coexist as they have done for years.”

Dueling Hospitals

Ventura County’s most venerable hospitals, located three blocks apart in Ventura, have maintained friendly relations for decades. But amid revolutionary changes in the health care industry, each now sees the other as a rival. Ventura County Medical Center, the public hospital, plans to build a large $30-million wing and is expanding its clinic system through novel partnerships with private doctors. Community Memorial considers such moves part of a county plan to eventually complete for private patients and not just treat the poor. County officials deny it, and charge that Community has devised its own scheme to skim the most lucrative Medi-Cal contracts from the county.

COMMUNITY MEMORIAL HOSPITAL

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Type: Private

Founded: 1901

Employees: 810

Operating Budget: $61.7 million

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REVENUE SOURCES

Medicare: 36.3%

HMO/PPO: 36.2%

Medicare HMO: 13.8%

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Commercial insurance: 6.4%

Self Pay: 3.1%

Other: 2.3%

Medi-Cal: 2.0%

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TRENDS

Bed Occupancy

for year ending Dec. ’92: 58.7%

for year ending June ’93: 48.8%

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Patient Days

for year ending Dec. ’92: 49,385

for year ending June ’93: 40,944

Net pre-tax income

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for year ending Dec. ’92: $2,519,966

for year ending June ’93: $1,119,352

Outpatient visits

for year ending Dec. ’92: 58,615

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for year ending June ’93: 62,423

VENTURA COUNTY MEDICAL CENTER

Type: Public, nonprofit

Founded: 1887

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Employees: 1,151

Operating Budget: $109.1 million

REVENUE SOURCES

Medi-Cal: 61.59%

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Insurance: 13.16%

Self Pay: 8.55%

Medicare: 8.27%

Indigent: 6.27%

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Other: 2.16%

TRENDS

Bed Occupancy

for year ending Dec. ’92: 67.7%

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for year ending June ’93: 68.7%

Patient Days

for year ending Dec. ’92: 51,514

for year ending June ’93: 52,161

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Net pre-tax income

for year ending Dec. ’92: -$690,106

for year ending June ’93: -$71,294

Outpatient visits

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for year ending Dec. ’92: 263,962

for year ending June ’93: 278,995

Source: Office of Statewide Health Planning and Development

Hospital Economics

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Total Rate Licensed of Bed Patient Patient Outpatient Facility Beds Occupancy Days Discharges Visits Community Memorial Hosp 230 48.8% 40,944 9,705 62,423 Los Robles Regional Medical Center 216 45.3% 35,738 7,363 84,192 Ojai Valley Community Hosp 105 52.0% 19,946 1,688 19,919 Pleasant Valley Hosp 180 66.9% 43,971 3,501 38,980 St. John’s Regional Medical Center 260 59.6% 56,441 9,907 90,250 Santa Paula Memorial Hosp 60 38.0% 8,319 2,069 37,153 Simi Vly Hosp 215 46.4% 36,389 5,517 72,836 Ventura County Medical Ctr* 208 68.7% 52,161 10,461 278,995 Countywide 1,719 52.5% 329,462 53,106 702,788

Net Pretax Income Facility (Millions) Community Memorial Hosp +$1.12 Los Robles Regional Medical Center +$9.66 Ojai Valley Community Hosp -$0.36 Pleasant Valley Hosp -$0.43 St. John’s Regional Medical Center -$6.09 Santa Paula Memorial Hosp +$0.15 Simi Vly Hosp -$4.73 Ventura County Medical Ctr* -$0.71 Countywide -$2.23

Fiscal 1992-93

* VCMC figures include data from mental-health facility.

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Source: Office of Statewide Health Planning and Development


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