SAN FERNANDO: Valley Hospitals Cling to Their Independence
In the "era of consolidation," some independent hospitals in the San Fernando Valley are choosing to flaunt their independence, the Los Angeles Times reports. Van Nuys' Valley Presbyterian Hospital boldly declared its independence last week in a press release announcing its board had "unanimously agreed 'to remain an independent, not-for-profit community medical center.'" According to board chair David Fleming and hospital administrators, "the merits of merging are far from proven." That is easy for them to say, as their hospital is one of the few stand-alone hospitals to consistently run in the black. Fleming attributes the hospital's financial solvency to lessons the hospital has learned "over the years to run smarter and leaner and focus on what the local population really needs," adding that it has "tried to be smart in a lot of little things" like keeping information systems current. Another independent valley hospital, Granada Hills Community Hospital, has declared its intention to remain independent as long as possible. President and CEO Tom Wallace stated, "Our mission is in supporting a community, not in supporting the stockholders." Wallace expects his hospital to run in the black this year, after losing money in previous years. Bernard Glossy, CEO of independent Verdugo Hills Hospital, recently announced that his hospital had declined a five-member purchasing and bargaining alliance last year because he thought the group's intentions did not adequately meet the needs of the hospital's patients. He stated "The one thing we can't lose is the focus on the local community and serving its needs." Fleming says that while his hospital continues to be financially healthy, in the health care industry the "dynamics change so quickly that you always have to keep options open." However, he concludes "There would have to be a substantial change in the financial picture to force us to say we can't go it alone" (Gray, 7/27).
Merger Lull May be Temporary
While the number of hospital mergers and acquisitions slid from 35 in 1997 to 18 in 1998, industry experts expect that trend to reverse in the near future. Hospitals who are already bargaining with "powerful managed-care health plans" for reimbursement face a number of legislative mandates. Cuts in Medicare reimbursements and an upcoming California mandate requiring all hospitals to meet strict seismic safety standards dictate that the already financially-strapped hospitals will encounter more fiscal challenges. According to Ed Vanacore, an analyst with Sutro & Co., "A lot of hospitals in this industry will be encountering some trouble, and this may create some consolidating opportunities. [F]or-profit chains are gearing up for future acquisitions by cleaning up their balance sheets and selling properties outside their target markets" (Gray, Los Angeles Times, 7/27).