Hopes were high for both Brotman Medical Center in Culver City and Midway Hospital Medical Center near L.A.'s Miracle Mile district when groups led by physicians bought them from struggling Tenet Healthcare Systems nearly four years ago.
Brotman, acquired by an investor group led by Los Angeles-based Prospect Medical Holdings, was to be transformed into a cornerstone of a managed-care empire. Midway, renamed Olympia Medical Center, was to cater to a more upscale patient base.
But since then, the hospitals have taken widely divergent paths. Olympia has successfully turned itself around from a multimillion-dollar loss in 2003 and recorded a $3.8 million profit in 2007. But Brotman, unable to control costs and quickly raise revenues, filed Chapter 11 bankruptcy in 2007 and is trying to reorganize by early next year.
How each hospital has fared provides a roadmap for how some hospitals can still thrive in this era of cost-conscious health insurers, overloaded emergency rooms and mounting numbers of uninsured patients.
"Overall, hospital revenues have doubled in the last six years. But some have not made it. They've not been able to control their costs and grow their revenues," said Glenn Melnick, health economist at Rand Corp. in Santa Monica and director of the USC Center for Health Policy and Management.
Administrators at the two hospitals and industry experts cite several reasons for the differing performance. For starters, Olympia has successfully kept costs in check, while Brotman was unable to do so until very recently. For example:
- Olympia quickly renegotiated vendor contracts, while Brotman only got around to renegotiating some of its contracts after filing for bankruptcy;
- Both hospitals focused on reducing the length of patient stays, though Brotman's push came later;
- Brotman had to deal with more high-cost union contracts, which took time to renegotiate;
- As a larger, older facility, Brotman had to spend more on deferred maintenance.
Meanwhile, on the revenue side of the ledger, they point to:
- Olympia's ability to renegotiate contracts with insurers to obtain higher reimbursement rates and the inability of Brotman to do so until it was too late;
- Olympia's push to provide more specialty services, including wound care, geriatric health and sports medicine, while Brotman stayed mostly with Medicare and managed care patients until only recently;
- Olympia's successful recruitment of physicians with more prestigious practices.
Many of the advantages that Olympia has enjoyed are the result of its smaller size it has about half the beds of Brotman and the comparatively better condition of the hospital when Tenet sold the facility in early 2005. It was bought for $12 million by a group of physicians led by Shahram Ravan.
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