Two months after opening, Century City Doctors Hospital may seek additional funding from its physicians and other investors to make up a financial shortfall.
Salus Surgical Group, managing partner of the hospital’s ownership syndicate, called an investors meeting this month after in-patient volumes were barely reaching 50 percent of its average daily census projections. The goal for December was to maintain an average of 60 patients.
Moreover, Salus still has at least 2 & #733; more floors to renovate before the hospital reaches its projected 230 to 240 beds work that has to be paid for by either operating revenue or equity. The renovation already has run $30 million, up from an original cost estimate of just $9 million.
“The expenses of running a state-of-the-art, five-star hospital are enormous (and) we have no intention of compromising our standards,” wrote Scott Rein, president of Salus Surgical in a letter to the hospital’s 175 physician partners. “Several surgeons have suggested we do a capital call. We have resisted that suggestion but if the numbers do not dramatically improve immediately, we will simply have no choice.”
Salus, a Beverly Hills-based surgical center chain, took over the hospital building’s lease in 2004 after previous owner Tenet Healthcare Corp. divested most of its Los Angeles area facilities. Century City is the first hospital Salus has managed, and its progress has been closely watched by the medical community. It has modeled itself as a full-service community hospital, with high-end boutique care.
The hospital has state-of-the-art surgical rooms that Salus reports are bustling. But the average daily inpatient loads are another story, although they were expecting to reach 57 patients in the second week of December an improvement Rein said would put off any cash call if sustained. (Initial partnership shares were $40,000 each, and doctors said they either bought one or more on their own or contributed to a pool at multi-physician practices.)
The 60 partners attending the Dec. 8 meeting were urged by Rein to redouble their efforts to send patients to the hospital and take advantage of its lab and other services, rather than going to Cedars-Sinai Medical Center or other nearby facilities.
But Dr. Howard Mandel said that while it might be convenient for physicians at the hospital’s adjacent medical office building to send their patients next door, he has a longtime relationship with an outside lab.
He also pointed out that it would be unusual for a doctor who already had scheduled an elective surgery at another hospital several weeks ago to switch to Century City at the last minute.
“Doctors will pick and choose the services we use to give our patients the best care,” said Mandel, who was scheduled to perform his first surgery at the hospital late last week. “(But) it’s good to have more competition back in the marketplace, especially for Cedars keeps them on their toes.”
Other physicians who invested in the hospital blamed Salus for a share of the financial difficulties, even as they acknowledged other issues. Among the problems: The hospital’s emergency room, generally a major source of admissions at any hospital, isn’t expected to be inspected and opened until next month.
“Ninety percent of admissions at Cedars are through the emergency room and I don’t know why (Century City) didn’t realize that they needed their ER open at the same time as the rest of the hospital if they didn’t want a low census,” said Dr. Fred Kuyt, a urologist who operates at both hospitals.
There also have been delays with state licensing and insurance reimbursement that Salus had less control over. After several opening dates were pushed forward, the hospital admitted its first surgical patient on Oct. 14. But the facility didn’t become eligible to bill Medicare for patients until Nov. 24, which has started to help push up admission rates.
A larger concern, though, is the hospital’s status with private health insurers. While most major companies, including Aetna, United Healthcare and PacifiCare, have granted provider status, hospital administrators are still negotiating with Blue Cross of California, whose members comprised a significant percentage of patients when Tenet owned the facility.
A Blue Cross spokeswoman declined comment, but Rein said his hospital was being asked to meet a difficult goal of having at least 75 percent of its doctors be Blue Cross providers themselves.
“Everything has taken longer, (been) more complicated than we expected,” said Rein. “But I’m feeling a lot more confident than I was a few weeks ago.”
