Los Angeles Business Journal

Special Report: Troubling Symptoms

By Deborah Crowe Monday, November 10, 2008

When L.A. County's Martin Luther King Jr./Drew Medical Center closed in 2007 it left thousands of residents without a hospital, but the crisis seemed mostly confined to South Los Angeles.

Then over the past year, three private hospitals including one in tony Century City that closed sought bankruptcy protection leaving thousands more uncertain about where they could seek care.

After decades of inadequate government funding, battles with insurers and struggles to serve the nation's largest population of uninsured patients, the hospital industry crisis is starting to hit close to home, much closer.

How bad is it?

The past year marked one of the worst in a decade that saw14 hospitals with emergency rooms close, leaving fewer than 100 hospitals to serve nearly 10 million people spread across 4,000 square miles. That's far fewer hospitals than many other cities on a per capita basis. And it's only expected to get worse.

Last year, 98 hospitals in the county that reported financial data to the state had a combined net loss from operations of $1.16 billion, a bigger loss than 2006. The loss is expected to widen this year and there is little hope for improvement in 2009.

"People in this state should be a lot more concerned," said Steve Valentine, who as chief executive of El Segundo industry consultancy Camden Group has examined the books of many of the region's sickest hospitals. "Hospitals...are very wobbly."

Indeed, it's no longer the other guy's problem.

Get into an accident on a San Fernando Valley street and some ambulance drivers will drive all the way to Long Beach Memorial Hospital, a hospital known for an unusually well staffed and efficient emergency room.

Sounds crazy, but even with heavy freeway traffic, drivers know they can unload patients and be back on the road sooner than if they had to wait three hours or more at one of the Valley's busier emergency rooms.

How can most hospitals be so busy? A few years ago the overloaded and underfunded Los Angeles County-USC Medical Center stopped accepting transfers of indigent patients being treated at private hospitals, leaving facilities countywide with patients unable to pay their bills. It's the same reason some hospitals have found themselves sucked into controversy after discharging homeless patients on Skid Row. They often have no place else to take them.

At the beginning of the decade, Jim Lott, vice president of the Hospital Association of Southern California trade group, would use the phrase "Band-Aid on an open wound" to describe the ineffectiveness of government efforts to shore up the hospital system. And that's before 12 of the hospitals had closed.

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