Executives and owners of the former Daniel Freeman Memorial Hospital are considering closing the emergency room and converting much of the hospital to non-acute care uses, hospital and other sources said.
The hospital, now named Centinela Freeman Regional Medical Center, Memorial Campus, was purchased less than two years ago from struggling Tenet Healthcare Corp. It would be the first of 13 former Tenet hospitals in Los Angeles County to take such a politically sensitive step.
Nine hospital emergency rooms have closed in the past five years in Los Angeles County, most of them causing a furor.
A decision on the emergency room could come as early as next month, say sources familiar with the discussions. The governing board of the Centinela Freeman Health System would make any decision.
Hospital management is discussing converting the emergency room at Memorial into an urgent care facility, a family clinic or a combination of the two, Deborah Ettinger, Centinela Freeman’s vice president for business development, confirmed.
She would not discuss specific plans for the rest of the hospital. But she confirmed that the hospital has consulted with two non-profit community health agencies, the Venice Family Clinic and the South Bay Family Health Center, about what type of replacement clinic might better serve the surrounding community.
Venice Family operates the nation’s largest free clinic, and South Bay Family has clinics in four cities, including one at a former hospital-affiliated clinic in Inglewood.
The for-profit Centinela Freeman system was created in November 2004 while Tenet, formerly based in Santa Barbara, was unloading the bulk of its Los Angeles holdings to cut costs in the wake of a financial scandal.
A local investor group, led by Los Angeles-based Westridge Capital and including many local doctors, took over the Daniel Freeman Memorial and the Centinela Hospital Medical Center 1.5 miles away, both in Inglewood, along with the Daniel Freeman Marina Hospital in Marina del Rey. Since then, hospital management has attempted to stem chronic red ink at all three hospitals by consolidating departments and reducing management overhead.
It appears those efforts were not enough.
Ettinger said that while no final decisions have been made about closing the emergency room or converting hospital beds to non-acute care uses, such as rehabilitation, the picture should become clearer in a few weeks. She blamed the hospital’s poor finances on meager reimbursements from government and private insurers.
“It’s a tough reimbursement environment that we’re in,” Ettinger said. “It’s a hospital that has struggled for many years. The daily patient censuses are not as high as they should have been to support this size of a hospital.”
Tenet reported a $24.6 million loss at Memorial in 2004, and despite the efforts of the new owners to cut costs and provide services more efficiently, the hospital still lost $7.3 million in 2005. The hospital staffed only 51 percent of its 351 licensed beds on average, according to state regulatory data.
In an interview with the Business Journal earlier this year, Michael Rembis, the system’s chief executive, noted that the new owners had made $10 million in capital improvements in the past year, with at least $10 million expected this year. At the same time, services were consolidated for more efficiency.
The system’s obstetrics units were consolidated at Centinela Hospital, with acute rehabilitation and pediatrics moved to Memorial, though the latter department has since been closed for renovation.
And to free up more cash for improvements and other uses, the hospital system earlier his month refinanced its debt via an Alabama-based real estate investment trust that specializes in health care properties. The two mortgages, valued at $65 million, were based only on the value of the Centinela and Marina campuses, not Memorial.
Community response
Community activists have kept a close eye on the three hospitals for years, especially since Tenet unsuccessfully attempted to close the Marina hospital and sell it for its real estate value nearly three years ago. It also made changes at the Inglewood hospitals that were seen as reducing health care access to lower-income residents. The possibility of closing the emergency room did not go over well.
“Tenet shouldn’t have been allowed to sell two hospitals that close to each other to the same group,” said Lark Galloway-Gilliam, executive director of the non-profit Community Health Councils Inc. “Unless you’re Starbucks, if you own two of the same businesses that close to each other, the market would say close one and build up your capacity in the other so that you’re maximizing your dollars. Otherwise, you’re just in competition with yourself.”
A study by the hospital indicated that about 60 percent of patients who used the two Inglewood emergency rooms could have just as well been served by a cheaper-to-operate urgent care clinic or a community family clinic, Ettinger said. If emergency room facilities were consolidated at Centinela, a public education campaign likely would be launched to direct non-critical cases to the new facility at Memorial, she said
But community health activists are skeptical about Centinela Freeman’s ability to change the habits of its diverse patient base, who are accustomed to using emergency rooms as primary care facilities if they have no insurance or their regular doctor is not available.
“They’ll just end up putting too much stress on the remaining facility,” Galloway-Gilliam said of the nearby Centinela Hospital Medical Center. “If they can’t keep the emergency room open, they should sell it to someone who can.”
County Emergency Medical Services Director Carol Meyer was similarly skeptical, noting that her estimates are that each Inglewood emergency room sees about 40,000 patients a year. That is in part due to the December 2005 closure of Robert F. Kennedy Medical Center in Hawthorne, a hospital that was owned by the Daughters of Charity Health System, leaving 75 emergency rooms left in the county. RFK was never part of Tenet’s L.A.-area operations.
Neither the county nor state has much power, short of filing suit, to block the closure of an emergency room at a privately owned hospital, especially if the hospital can document financial distress.
A hospital must give the state Department of Health Services at least 90 days formal notice of intent to close an emergency room. The state then notifies the affected county, which is obligated to compile a community impact report and hold a public hearing in the affected community. The county Board of Supervisors can then make a recommendation to the state.
Other hospitals sold off by Tenet, which is now based in Dallas, include Hollywood Presbyterian Medical Center, Brotman Medical Center and Monterey Park Hospital. However, none has announced any plans to close their emergency rooms.
Also last week, the University of Southern California sued Tenet, accusing it of failing to adequately invest in its elite USC University Hospital, one of the few remaining hospitals the corporation still owns in the county. USC said problems stemmed from the corporation’s fraudulent Medicare billing practices, which has forced it to pay hundreds of millions of dollars in penalties to the government, has crimped its ability to invest in the facility. Those same problems had earlier prompted Tenet to unload most of its L.A.-area hospitals.
