Inner-City Hospital Succeeds Where Others Have Failed

Staff Reporter

When City of Angels Medical Center opened two years ago, hospitals up and down the state were complaining about losing money, especially those in poor urban neighborhoods.

But here was a hospital in the Echo Park neighborhood of Los Angeles reopening its doors seven years after being shut down by its previous leaseholder, Cigna Corp., which had decided to get out of the hospital business.

Now, after a shaky start, the well-kept 152-bed hospital, along with its older Ingleside psychiatric campus in Rosemead, expects to report a pre-tax profit for 2001 of $8 million, compared with a loss of $1.1 million the year before.

"When I walked in the door here, there were 10 people (being treated as in-patients)," said John Fenton, who became the medical center's chief executive in September 2000. "Yesterday we had 84."

The medical center is an object lesson on what works, and what doesn't, in urban health care.

City of Angels is owned by Robert Bourseau and his partner, Dr. Rudra Sabaratnam. The pair had a business of managing psychiatric units in hospitals, but by the mid-1990s wanted their own facility.

So in 1996 they bought the Ingleside hospital, which had been closed and in bankruptcy, for $4.5 million. But they also needed a regular acute care general hospital to operate along with it. (Government rules make it unprofitable to run private psychiatric facilities alone, but if they are operated along with a general hospital, the funding mechanism improves.) The partners only had enough money to operate the psychiatric facility independently for a few years.

"We knew we had three or four years to get (a general hospital), and that was it," said Bourseau.

The pair found the Echo Park hospital at the corner of Temple Street and Union Avenue, and bought it for $14.5 million.

Key hire

They reopened the hospital in January, 2000 as City of Angels, but it barely attracted patients. They then brought in Fenton, a seasoned hospital executive who had previously run Queen of Angels/Hollywood Presbyterian Medical Center after it was bought by Tenet Healthcare Corp.

Fenton, who was given a 10 percent equity stake in the hospital operating company, made the jump because he had tired of large corporations.

"With bigger companies, there are all kinds of steps you need to take to get things done," said Fenton, who traces City of Angels' success to two factors: meeting neighborhood needs and heavily recruiting doctors and nurses, who are then given a greater-than-normal say in how the hospital operates.

The owners also spent $11 million renovating the hospital by replacing carpeting and modernizing drab 1970s era rooms in an effort to make the surroundings attractive to doctors, nurses and patients.

Dr. Louis Acosta, the hospital's chief of staff, said that City of Angels is a throwback to before managed care, when doctors, not administrators, ran things. He said he has direct access to Fenton and the owners, and that his ideas are listened to and acted upon.

"I haven't felt that in years," he said.

Among the hospital's key services is an urgent care clinic, which gets heavy use because many Echo Park residents don't have primary care physicians or insurance. The clinic is open 24 hours a day and the prices are cut rate. Patients can see a doctor for as little as $35. "We also don't charge for parking," Fenton said. "We try to make it easy."

The clinic is viewed as a break-even loss leader, with the idea that after initial treatment, patients can be directed to doctors on staff.

Other elements of success

Many of the patients qualify for Medicare or Medi-Cal, the state's version of Medicaid. And unlike other hospitals with higher overhead costs, City of Angels reports that Medicare and Medi-Cal reimbursements are sufficiently high to generate profits.

City of Angels also opened a pediatric center after determining that the neighborhood has a high percentage of young mothers and women of child-bearing age. It now has plans to open an alternative birthing center catering to Latinas.

Meanwhile, the hospital has steered clear of sophisticated programs, such as transplant surgery, where there is lots of competition. It also does not have an emergency room, though Fenton says it has not ruled out establishing one in the future.

"(City of Angels) is able to control the patients they get," said Jim Lott, executive vice president of the Healthcare Association of Southern California. "What really drags down those hospitals are the uninsured patients. If they open an ER department, it will kill them."

While Fenton acknowledged the hospital might not see the most-serious ER cases, he stresses that City of Angels is under the same legal obligation to treat all patients who show up at its doors. As a result, it is not collecting for all medical care provided, though he conceded that its rate of unpaid care is only 5 or 6 percent, while many hospitals with ERs have rates twice that level.

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