A LOOK AHEAD / Its private operators have given up on South Bay Medical Center, which has struggled with a declining patient count. Now, as the agency overseeing the public facility weighs proposals for its future . . . : A Hospital’s Life Is Hanging in the Balance

From its perch on a hilltop off busy Prospect Avenue in Redondo Beach, South Bay Medical Center certainly doesn’t look like a hospital that time has left in the dust.

On a typical weekday, the parking lots are full. The imposing five-story main building, sparkling white with blue trim in the morning sun, looks as fresh and new as the day it opened its doors in 1960. Just inside, a busy workout room is crowded with senior citizens and firefighters on exercise bicycles and weight machines.

But behind the fresh look and the beehive of activity is a hospital that hardly anyone checks into anymore. Most of the cars belong to people at the adjacent medical office buildings. And the workout program is maintained by the Beach Cities Health District, the public agency that owns the taxpayer-built hospital and that shifted its emphasis from patient care to community health programs more than a decade ago.

The occupancy rate for the 203-bed facility has averaged 18% over the last year--just 37 patients a night. When the health district board leased the hospital to private operators in 1984 in hopes that they could turn around the struggling facility, its occupancy rate had hovered around 50%.

Although the private operators poured millions of dollars into the hospital--including reopening its long-closed obstetrics service--the slide continued. Its main competitors in neighboring Torrance--Little Company of Mary and Torrance Memorial--sewed up the area’s managed-care contracts, with most of the physicians and patients following in the bargain.

Unable to compete for patients during a period of rapid, massive changes in the health care system, South Bay was being used less and less.

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So it came as no great surprise when, last June, the hospital’s operator, Tenet Healthcare Corp., announced that it was throwing in the towel. Tenet, the nation’s second-largest commercial hospital chain, said it will stop operating the hospital at the end of May, even though it will be obligated to pay the Beach Cities Health District $3 million a year in rent through 2014, when its 30-year lease expires.

District officials have been trying to find a new operator--or, more likely, a new use--for the hospital since October, when it hired the San Francisco-based Cain Brothers investment banking firm to seek proposals. The district will have four offers, and possibly five, for its board of directors to review at its regularly scheduled meeting Thursday evening. Officials expect the board to make a decision on the hospital’s future next month.

Only one of the proposals--from a coalition of local physicians and other medical professionals--calls for keeping the hospital an acute care facility. The others envision turning it into an outpatient and diagnostic center, an institute specializing in cardiovascular services or an “assisted living” facility for the elderly.

“We have a unique opportunity here to assess what the community needs in terms of health services and to make a decision based on those needs,” said Robert L. Riley, the district’s executive director. “I’m extremely pleased that the board has four viable options.”

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One of the proposals comes from Little Company of Mary Health Services, which runs one of South Bay’s rival hospitals. Little Company of Mary would like to house its outpatient and diagnostic services on the medical center’s first two floors and team up with the Beach Cities Health District to run community health programs on the remaining three floors. Its proposal promises a wide range of services, including outpatient surgery, urgent care with 24-hour ambulance service, laboratory, pharmacy, cardiac and pulmonary rehabilitation, diagnostic imaging, physical and occupational therapy, health education and wellness classes and home hospice services.

Little Company of Mary’s proposal calls for a 10-year lease, with an option to renegotiate the terms if it incurs substantial operating losses. It also wants the district to pick up the tab for bringing the hospital building up to earthquake safety standards. A district-commissioned study last year estimated the cost to be $39 million.

The offer from South Bay IPA-Pacific Health Coalition, which includes the South Bay Independent Physicians Medical Group, envisions continuing South Bay as an acute care hospital. The coalition wants a 12-to 15-month lease, with an option to enter into a longer-term agreement later. But it wants the health district to pay it an as-yet-unspecified “guaranteed management fee” and to pick up some or all of the initial working capital cost of the operation, which Riley estimates at between $8 million and $15 million. (The district has an annual budget of $6 million, most of which is spent on 67 community health and wellness programs.)

Other coalition members are Dr. Kenneth Tokita, Pacific Health Corp. and South Coast Area Traditional Practice Assn.

The two remaining proposals come from Comstock Crosser & Associates/Parsons Home in Manhattan Beach and from Irvine-based Lincoln Properties. Both firms want to demolish the hospital and build an assisted living facility that would provide elderly residents with a full range of living and medical support services.

Cain Brothers also told district officials last week that Good Samaritan Hospital in Los Angeles was considering submitting a plan to develop a cardiac center on the site. The firm expects to be able to provide board members with additional details on all the proposals at Thursday’s meeting.

“The issue for the board will be: What does the community need from this facility?” Riley said.

Noting that only 9% of district residents last year used South Bay for their hospitalizations, Riley added, “The key will be finding the best way to open up access to the system that district taxpayers built and paid for. Our residents own the hospital, but they don’t have access to it.”

The board’s deliberations on the hospital’s future represent an important crossroads for the district and residents of Hermosa Beach, Manhattan Beach and Redondo Beach.

Formed in 1955 by voters in those cities, the South Bay Hospital District, headed by an elected, five-member board, built and ran the acute care facility until 1984. Periodic political upheavals wracked the board while the hospital fell behind in the race to keep up with changes in the health care field and the increasing competition for fewer patients.

When private operators took over the hospital, the district changed course, renaming itself the Beach Cities Health District and turning its energies to running or supporting a host of community health programs. Since then it has pumped some $32 million into such programs as Meals on Wheels, fitness and prevention, mental health, immunizations, school nurses and day care for Alzheimer’s patients.

Thursday’s meeting is scheduled for 6:30 p.m. in the medical center auditorium, 514 N. Prospect Ave.