Local Hospitals Go Under the Knife : Health care: In the wake of recent mergers, executives say consolidation and cost cutting will continue, driven by empty beds and insurance pressures.

As powerful economic forces continue to squeeze area hospitals, health care providers are bracing for another round of mergers and financial setbacks.

*

As many as five or six hospitals could close in the next five years in the San Fernando, Santa Clarita and Antelope valleys and in Ventura County, said David Langness, vice president of the Healthcare Assn. of Southern California.

The dire prediction comes as the San Fernando Valley is still smarting from last month’s merger of Valley Hospital Medical Center and Northridge Hospital Medical Center, both owned by the not-for-profit Unihealth.

The union of the two hospitals brings the number of acute-care facilities in the San Fernando Valley down to 20, from 27 a decade ago. In the three-valley region, the number of hospitals has shrunk from 34 in 1984 to 27.

“Fewer and fewer [people] have health insurance anymore,” said Langness, who estimates that 15% of Southern California hospitals will close in the next several years if current trends continue. “We have fairly large pockets of urban poor who are underinsured or uninsured. Hospitals have had to adjust.”

Hospitals boomed here during the go-go years when aerospace and other sectors of the defense industry created a wealth of well-compensated professionals. Now those businesses are diminishing.

As is the case throughout Southern California--where 37 hospitals have closed since 1991--employers have turned increasingly to managed care and other cost-saving measures. Some have even eliminated health care benefits altogether.

“The Valley has traditionally been an enclave of insured people, working professionals who had good health insurance,” Langness said. “Now that’s not so true anymore.”

Over the past year, for example, the largest hospital in the region, St. Joseph Medical Center in Burbank, has eliminated 54 beds and closed a 47,000-square-foot building. St. Joseph lost $239,000 last year.

The merger between Valley Hospital Medical Center and Northridge Hospital Medical Center, which became final on June 30, has resulted in the loss of about 15 middle-management positions. Both facilities will remain open and no beds have been eliminated, said Unihealth President Terry Hartshorn.

*

The merger was born of managed care. Previously, although the two facilities were owned by Unihealth, many managed care contracts only allowed patients to go to Northridge. Now, the contracts cover both hospitals.

“It’s a way to lower costs and improve services,” Hartshorn said.

Similar departments at the two hospitals would be analyzed to see which performed better, Hartshorn said, though he declined to say whether duplicative services would be eliminated.

Triad Healthcare Inc. emerged from bankruptcy in April after shutting down West Valley Hospital in Canoga Park in January. Sherman Oaks Hospital and Health Center, with 156 beds, operates the area’s only burn center and is promoting that facility and its AIDS unit as part of an overall effort to ensure its survival, said CEO David Levinsohn.

Antelope Valley Hospital Medical Center entered into a joint-powers arrangement with Tehachapi District Hospital and Southern Inyo Hospital in Lone Pine to share accounting and pharmaceutical services.

*

Westlake Medical Center is being acquired by Columbia/HCA Healthcare Corp., the giant chain that owns West Hills Hospital and Los Robles Regional Medical Center in Thousand Oaks. The takeover was approved by the Federal Trade Commission last week, despite protests from physicians who complained that the merger would create a medical monopoly in the Conejo Valley.

The merger will shift all obstetrical services to Thousand Oaks and add a rehabilitation center to the Westlake Village facility.

Hospitals in this region are in trouble in part because there are just too many beds.

During the first three quarters of 1994, occupancy rates at private Los Angeles County hospitals fluctuated between 46% and 48%. In Santa Barbara and Ventura counties, just over half were occupied during that period.

It’s not that Southern Californians are healthier than they were. But managed care--an approach to health insurance designed to reduce the cost of care by discouraging unnecessary treatment--has vastly reduced the time patients spend in hospitals. Eighty-five percent of all privately insured people in the region use health maintenance organizations and preferred provider networks, which pay less to hospitals and doctors, exacerbating the financial crunch caused by the reduction in use.

In addition, medical advances have made it possible to treat people in settings that are cheaper than acute-care hospitals.

With so many beds empty and the prospect of further cuts in Medicare looming, executives like Hartshorn say that health care operations must continue to downsize.

“A lot of us are bringing baggage from the past,” said Hartshorn, referring to a point of view stemming from a time when doctors and hospitals could charge more.

To make it in the new environment, hospitals need to compete with each other in new ways--not only by lowering prices but by increasing emphasis on certain kinds of care, such as maternity services.

Those competitive pressures were evident in the decision to merge Unihealth’s Valley Hospital and Northridge Hospital.

Under the consolidation, the management staffs were blended and departments such as patient accounting and some lab services were combined, said Jeffery Flocken, chief executive officer of both facilities.

*

Equally important, though, is that managed care contracts will apply to both hospitals. The population near Valley is less affluent and older than that near Northridge. Northridge Hospital Medical Center, now known as Northridge Hospital Medical Center, Roscoe Boulevard Campus, turned a profit of $1.4 million last year. By contrast, Valley, now known as Northridge Hospital Medical Center, Sherman Way Campus, lost $3.8 million, according to preliminary figures from the Office of Statewide Health Planning and Development, which may not include some revenue from Medicare patients.

Levinsohn of Triad is aggressively planning what he hopes will be a glittering re-emergence for Sherman Oaks Hospital and Health Center, starting with some fresh paint but including a new wellness center and community seminars.

The Sherman Oaks facility also plans to reach out more to AIDS patients in the Valley. Promoting its strengths in tending to burns and AIDS is part of the plan to make the hospital viable.

“We have two important niches,” Levinsohn said. “We intend to use that to our advantage.”

Besides niche playing, hospitals will probably continue to network and merge to survive in the market, Langness said.

He views the trials of hospitals as akin to those of the auto industry in the 1920s. Where there were once hundreds of car makers, the Great Depression and the move to economies of scale cut that number back to a handful.

“The same thing is happening in the health field,” Langness said.