Tiny Hospital Tries to Rise From Its Sickbed


Amid pledges that it will not be allowed to die, Santa Paula’s Memorial Hospital celebrated its 40th anniversary last month by holding the first meeting of a committee formed to save it.

The hospital--one of just three in California built solely from community gifts--continues to lose $6,000 a day as backers scramble to staunch the flow of red ink that threatens Ventura County’s smallest general hospital.

“Our environment is Darwinian; we have to adapt,” hospital board Chairman Phil Romney said. “And that’s what we’re doing.”


In the world of managed care, it’s survival of the fittest. And Santa Paula hospital has seen its operating losses mount from just $93,000 in 1990 to about $2.77 million in the last fiscal year.

Without effective reform, the little hospital perched on a hill above the orchards of the Santa Clara Valley has no future. With reserves of about $4 million, it cannot continue to lose almost $3 million a year for long. And if the facility shut down, Santa Paula would lose its second-largest employer and a safety net that has saved countless lives during emergencies.

The former 60-bed community hospital has shrunk to just 39 staffed beds, and only 14 are filled on a typical day. That’s down from 18 daily patients in 1999, a fact that reflects the little hospital’s struggle in a battle against big rivals and long odds.

Staggering changes in the health-care industry have created a harsh reality for small hospitals such as Santa Paula’s. Dozens have closed statewide as larger hospitals have siphoned off patients by reshaping themselves as specialty centers and by cutting their rates to the bone to grab health maintenance organization contracts.

Many of the larger hospitals are also in trouble. State officials reported last spring that nearly two-thirds of all California hospitals are losing money on operations, and half are still in the red even when gifts and investment income is included to pump up the bottom line.

“This hospital has no intention of closing or selling to an outside organization,” Romney said. “It intends to remain locally governed and independent.”

Bold goals, but are they realistic?

Several industry experts say they are. With the right moves right now, Santa Paula hospital directors can save the institution they built from scratch in 1960 without grants or loans or a mortgage.

“It is not written that Santa Paula hospital must close: It can survive,” said Jim Lott, executive director of the hospital industry’s Southern California Health Care Assn. “It just depends on whether or not that community can get behind it.”

He points to Long Beach Community Hospital, which closed earlier this year but will soon reopen after the City Council and community groups rose up to support it.


Santa Paula hospital officials say they have already begun their own turnaround.

Over the last few months, the hospital has imposed changes to draw more patients to the hospital, especially senior citizens covered by Medicare and poor pregnant women covered by Medi-Cal. Because miserly HMOs are now the dominant private insurance provider, once-laggard government health programs have become the preferred source of payment for hospitals. They usually pay more and faster than private insurers.

The recent moves helped push the number of patients at Santa Paula hospital on a typical day from 14 to 17 during October, officials said.

But the crux of the hospital’s recovery plan is to rally the community on its behalf by:

* Informing the 45,000 residents of the bucolic Santa Clara Valley that they can save their hospital--not through one more fund-raiser, but by using it when they need an operation or are delivering their babies.

* Working closer with staff physicians to make sure they refer every possible patient to the local hospital, instead of treating them at the private Community Memorial Hospital or the public Ventura County Medical Center, both 15 to 20 minutes away in Ventura.

* Persuading major employer and employee groups in Santa Paula and Fillmore to insist that Santa Paula Memorial--and the physician groups that serve it--are included as options in their company health insurance plans.

“Volume will save us,” said Sharron Tiedjens, a Tennessee-based consultant who has been helping Santa Paula this year. “And that comes from educating the community about our services and being diligent about our relationship with our medical staff.”

Doctors and administrators at Santa Paula hospital acknowledge that they took each other for granted for a long time. And that hurt the hospital.

“There was a communications gap between the hospital and the doctors,” Romney said. “Doctors, for example, were referring patients to other hospitals that could have been referred to Santa Paula.”

Now, while emphasizing the urgency of more patient referrals, hospital officials are also helping doctors by filing electronically on their behalf for small Medi-Cal payments the doctors would otherwise waive because of paperwork.

There have also been discussions about using the doctors more at the hospital’s rural health clinics, which would qualify them for higher Medi-Cal payments.

“The idea is that everyone wins,” Romney said.

Lack of Support From Regional Groups Seen

Dr. Gary Deutsch, a family doctor in Santa Paula since 1980, said he has been working to buttress the local hospital for years. He helped found the 40-doctor Valley Care physicians group in 1993, he said, because patients were being channeled out of the Santa Clara Valley by large regional physician groups to hospitals in Ventura and Oxnard.

“We encourage physicians to use the hospital and tell our patients if they do not use Santa Paula hospital, it will not exist in a few years,” he said.

The Valley Care group treats about 7,000 local patients, but doctors say thousands more rely on the Oxnard-based Seaview Medical Group for family physicians, specialists and hospital services. Seaview no longer has contracts with surgeons who work at Santa Paula hospital in areas of general surgery, urology, orthopedics and obstetrics. Such contracts have ended over the last 14 months, hospital officials said.

“The lost revenue is in excess of a half-million dollars a year, and that’s conservative. It could be double that,” said Bill Greene, who ran the hospital from 1996 until he was replaced as chief administrator by C. Mark Gregson recently.

General surgeon Gosta Iwasiuk, the hospital’s chief of surgery, said Santa Paula hospital surgeons have not been able to reach agreement with Seaview because that group’s payments are so low.

“They either refuse to deal with us, or they make the reimbursement so ridiculously low you can’t deal with them,” Iwasiuk said. “The consequence is that a large number of patients are channeled elsewhere.”

Iwasiuk said Santa Paula hospital hired an obstetrician-gynecologist to get some of that business back, but the new doctor can’t get Seaview to deal with him.

Santa Paula hospital loyalists said they think Seaview is steering surgical patients to Community Memorial because of that group’s close ties with the Ventura hospital, which is also struggling to make a profit.

“One of the difficulties is that Seaview will not contract with any of the specialists over here,” Romney said. “So the hospital gets shut out, and frankly it’s unfair to patients in this area. They have to go elsewhere to be treated.”

Santa Paula doctors say Community Memorial has wanted to take over Santa Paula hospital for years and is using Seaview to help force the small hospital to cut a deal.

“I think Santa Paula’s competitors have been real good at passing out the word that Santa Paula is at death’s door, and to downgrade it,” said Jeffery Alexander, a Boston attorney and health-care consultant for Santa Paula.

Seaview officials would not discuss the Santa Paula situation.

But Dr. John Keats, medical director at Buenaventura Medical Group, which has the same owner as Seaview and negotiates contracts jointly with it, said Seaview is not giving Community Memorial any special treatment.

“That’s not the case at all,” he said, adding that Seaview has contracts with surgical groups in Ventura and Oxnard because most of its patients are located in those areas.

Michael Bakst, executive director at Community Memorial, said he has applied no pressure on Seaview and has no exclusive contract with the group.

“I have no control over Seaview at all,” he said. “It is a free-market position.”

It is true, Bakst said, that Community Memorial has tried three times in recent years to align itself with Santa Paula hospital.

In 1994 before Santa Paula hired a national management firm, Quorum Health Group, to run the hospital, trustees met with Bakst. Community Memorial offered to pay the hospital’s cost of administration plus $200,000 a year to work jointly with the Ventura facility, Bakst said.

Then a couple of months ago, longtime Santa Paula trustee Dr. Ernest Carlson called to talk about merger again, Bakst said. But nothing came of it. “They decided they really didn’t want to talk to us,” he said.

Consultant Tiedjens said she met with Bakst and came away feeling that he was waiting for the Santa Paula hospital to fold.

“Well, poor old Michael Bakst had just better get over it,” she said, “because we’re not going to go under.”

A Long History of Community Generosity

Santa Paula hospital has reason to remain independent. Trustees consider that obligation born of the hospital’s history.

Founders say it is one of three hospitals in California built by a community without any outside help and paid for in cash.

All the money came from the pockets of families who wanted their children born near home, or who knew that lives would be saved if they could build an emergency room close by.

The people of Santa Paula, Fillmore, Piru and Saticoy ponied up $1 million in 1959 and 1960, and by October of 1961 patients were filling the new hospital’s 50 rooms featuring spectacular views of the Topatopa Mountains and one of the prettiest farming valleys in the country.

Pioneer farm families got the ball rolling--brother and sister Albert and Mary Thille gave $350,000. And Milton Teague’s ranch donated the hospital site, 11 acres up a hill at the end of 10th Street. The Thille family--including Grace, the first female physician in Ventura County--gave another 15 acres right next door a few years later.

The rest of the money was dropped in donations by farmers and merchants, teachers and principals, doctors and nurses, tractor drivers and trash haulers. Now, on the door of almost every hospital room is a plaque bearing the name of a local donor.

Over the years--as more hospital rooms were added, an administration building completed, an intensive care unit built--the donations never stopped.

Artist and banker Douglas Shively gave the hospital landscape paintings that now brighten corridor walls. Recluse Jeanette Kellogg, who lived up a nearby canyon, turned over a $300,000 estate. Sisters Marguerita and Maria Geier, retired from teaching school in L.A., donated a house worth $110,000.

Actor Kirk Douglas, bruised and battered in a 1991 helicopter crash at the local airport, gave thousands of dollars. So did the chopper’s seriously injured pilot, Noel Blanc, son of legendary cartoon voice actor Mel Blanc.

On a nursery wall, retired nurse Claudette York painted a bright “tree of life,” the limbs of which are covered with snapshots of hundreds of babies born there. A Boy Scout earned his Explorer’s badge by building a heliport for the hospital.

In 1998, the estate of longtime Saticoy rancher Ord Toomey gave $650,000, and Fillmore seamstress Dorothy M. Duncan left $300,000 from her estate.

Just recently, the trust of John Stroh, the original architect of the hospital, and his wife, Mary, notified Santa Paula trustees of a gift of at least $500,000 and perhaps much more that will arrive within eight months.

How long it can count on such goodwill to balance its books is another question. Romney, whose lawyer father drew up the incorporation papers for the hospital in 1959, said old-timers like himself will never forget the hospital’s importance.

Like many Santa Paula residents, Romney, the city attorney, has had an operation at the hospital. And his two grown sons made regular trips there with cuts and broken bones when they were boys.

But sometimes the long memories of those who run the community hospital work against them.

“We go back 40 years, and we have a tendency to assume that other people know what we do up here,” Romney said. “But a lot of people were not here 40 years ago or 20 years ago. So we’ve got to do a better job of letting them know we’re here, and that we need to survive.”