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Medical / Industry Expects to Expand Products and Services, Keep a Lid on Costs

OUTLOOK '88: Seventh of a series exploring the outlook for county businesses and the economy this year.

January 02, 1988|LESLIE BERKMAN | Times Staff Writer

Intensifying competition within the medical industry will force Orange County hospitals and health-care companies to expand products and services while keeping a lid on costs in 1988.

In response to the national fear of AIDS, meanwhile, several county-based companies are seeking Food and Drug Administration approval for drugs and other products intended to treat or slow the spread of the deadly disease.

Like their counterparts across the country, hospitals in th county are struggling to adapt to more restrictive reimbursement policies adopted by government and private insurance carriers.

They are also competing to affiliate with group and corporate health plans, in part by expanding--and heavily advertising--services such as maternity wards, outpatient clinics, and alcohol and drug-abuse programs.

At the same time, county manufacturers and distributors of hospital supplies and equipment are adjusting their product lines to aid hospitals in their efforts to reduce operating costs.

Michael Stephens, president of Hoag Memorial Hospital Presbyterian in Newport Beach, said hospitals throughout the country will feel further pinched next year by cost controls fostered by government and private medical insurance plans.

As a result of cost containment and reduced revenues from programs such as Medicare and MediCal, he said, Hoag's profit margin shrank in 1987 and will decline even more in 1988. If the trend continues, he said, hospitals such as Hoag may have to reduce patient care, possibly by cutting nursing staffs.

Restrictive eligibility and reimbursement standards governing indigent medical programs pushed Fountain Valley Regional Hospital and Medical Center's trauma center deeper into the the red in 1987. Peter Szekrenyi, the hospital's chief administrator, said he intends to appeal to county officials for financial aid that he believes is necessary to keep the center in operation through 1988.

In 1988, as in 1987, county hospitals are also expected to continue placing more emphasis on outpatient care and to add and vigorously market a wide variety of services, including mental health, substance-abuse and diet programs.

Hoag's Stephens said hospitals have found they must offer a full range of services to keep up with stiff competition for contracts with health maintenance organizations and preferred provider insurance programs.

Also, more hospitals in 1987 began appealing directly to consumers by placing ads on buses and billboards and in newspapers. "We clearly have seen more marketing from hospitals, and that will continue to grow," Stephens said.

"You've got to offer services that people need and want, and then you have to get the word out that you have them," said Mary Jane Foster, spokeswoman for Saddleback Hospital, which in the spring of 1988 plans to open and heavily advertise a new women's hospital, including a center for high-risk pregnancies.

After several years of flat growth, Beckman Instruments, a Fullerton-based manufacturer of medical diagnostic and research instruments, saw a significant increase in sales in 1987 as it brought to market an array of more cost-effective products for sale to hospitals.

The company expects to reap even more economic benefit from new products in 1988 as they become better known in the industry.

Beckman President Louis T. Rosso said the company's new generation of instruments allow hospitals to keep costs down because they produce results more quickly and are highly computerized, requiring less expertise from operators.

Rosso said the company's blood-testing equipment is more flexible and thus able to accommodate either a large or limited number of tests. He said doctors who once routinely ordered comprehensive blood tests now want the ability to obtain more selective tests to economize.

Also, Rosso said Beckman will start its own cost-containment campaign in 1988 by streamlining its manufacturing process, which will be thoroughly studied to eliminate unnecessary steps and costs.

The national health threat posed by acquired immune deficiency syndrome has turned a spotlight on at least two small county companies, ICU Medical and ICN Pharmaceuticals.

ICU's chief financial officer, Miles Stover, said the company's sales have burgeoned from less than $500,000 to more than $2 million in the last year and its work force has grown from six to 50 employees.

Stover attributed ICU's sales growth primarily to the marketing of a new product designed to prevent health-care workers from accidentally pricking themselves with hypodermic needles, which can transmit the AIDS virus.

Stover said sales of ICU's needle sheathing device are "only beginning to take off," and he expects them to expand greatly in 1988.

Although ICN Pharmaceuticals' quest to obtain approval from the Food and Drug Administration for use of its drug Virazole, known generically as ribavirin, was stalled in 1987, there is a good chance that further progress will be made in 1988.

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