Orange Coast Memorial Medical Center has gone from losing more than a million dollars a month to its first monthly profit in more than two years,without layoffs.
The key to the turnaround, say hospital officials, was the renegotiation of managed care contracts. And the hospital hopes that those contracts, plus a new doctor-group affiliation that allows it to offer more services, will keep it in the black in the months to come.
The 230-bed Orange Coast Memorial reported steep operating losses over the past couple of years. The facility posted net losses from operations of $13.6 million in 1999 and $14.3 million in 1998, according to the Business Journal’s most recent hospital list. Net patient revenue in those periods totaled $43.6 million and $48.1million, respectively.
A good portion of the hospital’s losses came about because of unfavorable managed care contracts signed when Long Beach-based Memorial Health Services bought the hospital from FHP International Corp., according to Marcia Manker, Orange Coast Memorial’s chief operating officer. Memorial paid $87 million for the hospital in 1996.
“When we first took it over, we needed to get all the contracting in order. That took a good two years to get all the HMOs, all the PPOs,” Manker recalled. “And then you had a brand-new hospital in a very crowded market and that wasn’t a priority for the health plans.”
Manker specifically said, however, that Orange Coast Memorial’s contract with FHP, which was later acquired by Santa Ana-based PacifiCare Health Systems Inc., “was wide-ranging, all-inclusive and below market rates.” She said that pact was renegotiated last summer, “which really helped our bottom line.”
PacifiCare of California spokeswoman Cheryl Randolph declined to comment on the past contract because it was negotiated prior to PacifiCare’s acquisition of FHP. Randolph did say that PacifiCare has worked with Memorial Health Services and values its partnership.
Manker said that her hospital and others in the Memorial system have new contracts with other providers like Aetna, Cigna and Health Net.
Orange Coast Memorial’s negotiations with health plans coincided with medical group consolidation and network shifts, Manker said. She said that the Memorial system, which includes Saddleback Memorial Medical Center in Laguna Hills and Anaheim Memorial Medical Center, used its size as leverage in the talks with the HMOs.
Manker stressed that the operating losses mainly came from past contracts and that Orange Coast Memorial didn’t undergo any other restructuring and did not lay off workers. The hospital has around 600 full-time employees.
Separately, Fountain Valley-based Edinger Medical Group signed a contract with Orange Coast Memorial covering inpatient and outpatient medical, gynecological, surgical, obstetrical, neonatal and diagnostic care. Edinger also is moving and expanding its patient care and business operations from Fountain Valley Regional Hospital and Medical Center to a building on Orange Coast Memorial’s Talbert Avenue campus.
Orange Coast Memorial has begun promoting its new doctor affiliations and services such as its breast care center and Manker said the hospital is examining the possibility of adding more programs.
Additionally, Manker said Orange Coast Memorial, because of its past, had to enter certain lines of business well into its existence.
“When Memorial purchased it from FHP, it lacked so many of the components that a hospital possesses, all the various health plan payer contracts,” she said. “We didn’t even bill Medicare , we just served the HMO.”
Today, Medicare makes up around 25% of Orange Coast Memorial’s inpatient business, according to Manker. “We’ve had dramatic growth. It’s one of our better payers.” n
