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VALLEY BUSINESS | The Health of Valley Hospitals

Some Hospitals Declare Independence as Their Business Credo

Management: Going it alone has worked for several Valley facilities dedicated to the surrounding communities.

July 27, 1999|TOM GRAY | SPECIAL TO THE TIMES

This is the "era of consolidation" in hospitals, says attorney David Fleming, chairman of the board at Valley Presbyterian Hospital in Van Nuys--and he's glad his hospital has not been a part of it.

"I realize we're a fish swimming upstream against a strong current," Fleming said. But Valley Presbyterian has decided, for the foreseeable future at least, to reject any suitors.

As Fleming and Valley Presbyterian administrators see it, the merits of merging are far from proven, and the hospital is not in the kind of trouble that would drive it into the arms of a multi-hospital system.

In fact, it consistently runs in the black. It proudly points to a nine-year streak of positive operating results--a feat it says can be matched by few if any of its neighbor hospitals. If doing fine on their own, they reason, why give up control to outsiders?

Hal Wurtzel, the vice president for corporate development at the 354-bed hospital, said consolidation "might be right for hospitals that are in desperate financial straits, but then again, when you've reached that point, you may not be worth much to the company acquiring you."

To drive its point home, the hospital put out a press release last week with the headline "Valley Presbyterian Hospital Declares Independence," announcing that its board had unanimously agreed "to remain an independent, not-for-profit community medical center."

Valley Presbyterian is one of several stand-alone hospitals remaining in and around the San Fernando Valley. Some, like Valley Presbyterian, are also publicly committed to staying independent as long as they can.

"Our mission is in supporting a community, not in supporting the stockholders," said Tom Wallace, president and CEO of Granada Hills Community Hospital.

Granada Hills has been losing money, but Wallace expects it to run in the black this year.

Bernard Glossy, the CEO of independent Verdugo Hills Hospital in Glendale, said his hospital dropped out of a five-member purchasing and bargaining alliance last year because it felt the group's priorities didn't fit the needs of the population the hospital serves.

"The one thing we can't lose is the focus on the local community and serving its needs," Glossy said.

Not every independent wants to stay that way, though. Henry Mayo Newhall Memorial Hospital in Valencia has been openly seeking merger partners. Spokeswoman Janice Newbold said the hospital has solicited requests for proposals to various systems, for-profit and not-for-profit.

Newhall Memorial had been in merger talks with Catholic Healthcare West, she said, but talks broke off in May. Newbold said the hospital is looking, most of all, for capital, so it can expand to serve the fast-growing population of the Santa Clarita Valley.

It has just enough funds to meet the estimated $30-million cost in repairs from the 1994 Northridge earthquake and upgrades to meet state seismic safety standards. After that, she said, it will have nothing for expansion "to meet the growing needs of the community."

Valley Presbyterian's community--the middle of the San Fernando Valley--isn't growing as it once did. But it has changed over the years, from middle-class suburbia to what Fleming calls "lower-income folks, primarily" with two distinct groups in need of hospital care, the old and the very young.

The hospital's services reflect these demographics. It has the largest neonatal intensive care unit in the Valley, Fleming said, and a large pediatric unit.

It also has "strong outreach programs" aimed at caring for the elderly.

"We know our trade area best," he said--a lot better, he suggested, than chains whose "governance is miles and miles away."

Fleming's comments have a similar ring to supporters of San Fernando Valley secession from the city of Los Angeles. That's probably not a coincidence: Fleming has contributed heavily to the campaign seeking a study of Valley independence.

Valley Presbyterian does have one alliance--with Cedars-Sinai Medical Center--but not on a management level. Through a medical staff-sharing agreement, Fleming said, Cedars-Sinai doctors work at Valley Presbyterian in the intensive care unit and elsewhere.

In general, though, Fleming said Valley Presbyterian "has been very slow to take on new things unless they're needed by the community and they make sense economically."

Why has Valley Presbyterian stayed in the black when so many other hospitals have struggled?

Fleming, who has been on the hospital board since 1974 and has been chairman since 1989, said the hospital has learned over the years to run smarter and leaner and focus on what the local population really needs.

He said it's also good at attracting local gifts (he gave $1 million). Once staffed at about 1,500 positions, he said, it's now down to less than 1,000 without having to resort to large-scale layoffs. It has tried to be "smart in a lot of little things," he said, like keeping information systems up-to-date.

Fleming offers no guarantees about the future: "You can never say never in this field. The dynamics change so quickly that you always have to keep options open." But he added: "There would have to be a substantial change in the financial picture to force us to say we can't go it alone."

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