With a master plan in hand, Beverly Hills-based Deanco Healthcare is working fast to reshape the 145-bed Mission Community Hospital it took control of more than 18 months ago. In the company’s bid to acquire the financially-distressed hospital for $37.8 million and turn it into a for-profit facility, Deanco President Jack Lahidjani has launched a massive clean-up effort. He retrained the staff, cut wait times in the emergency room, invested more than $2.5 million in plant and equipment and convinced some 100 new physicians to bring their surgery cases to the hospital. The Panorama City hospital is now on the verge of reopening a new floor with 25 beds — an investment of roughly $1 million. And starting this month, its well-known psychiatric department will go after patients of the closing Cedars-Sinai Medical Center’s psychiatric department, which recently announced its plans to shut down in the near future. The moves have begun to raise patient volume and are expected to shift the payer mix, pulling in more commercial payers and reducing the hospital’s reliance on government programs, which has historically accounted for almost 90 percent of MCH revenues. But even as Deanco points to improvements, saving this troubled institution promises to be a tall order. Previous members of the board say similar measures have been tried before — without lasting success. “Some of the programs worked and they brought in some new doctors, but then we could not get the patients to come in,” said Stanley Silver, a long-time member of the MCH board who left two years ago. “There were times when this hospital was completely full of patients, but we still could not break even because the mix of payers we had could not generate a profit.” The other risk — should Deanco succeed in acquiring MCH from San Fernando Community Hospital Inc. and change its status to a for-profit institution — is that it could alter the profile of this small community hospital that has always served the needs of the poor and mentally ill. Deanco has certain contractual obligations to make sure that doesn’t happen. Under the terms of its agreement with the hospital’s board and the California Attorney General, which must sign off on the purchase of the hospital — Deanco must commit to keeping Mission Community’s nine Emergency Room beds, 60 psychiatric beds, 10 intensive care beds, a five-bed medical detox unit, and invest $5 million in rebuilding its North Tower in order to re-open and maintain 75 medical-surgical beds. It must also commit a minimum of $2.8 million to charity care. Lahidjani says he “absolutely” has every intention of fulfilling these obligations. But in order to do those things, this community hospital must change — and change fast, he said. The hospital already has filed for bankruptcy once before and was in danger of doing so again in 2010 before Deanco stepped in and agreed to follow a three-step process to save the hospital. It started with a consulting contract, led to management control and will eventually result in Deanco’s purchase of MCH, provided the company meets certain financial and performance milestones. “The intent behind the structure was to make sure we don’t push the facility further into debt and financial duress,” Lahidjani said. Lahidjani says Deanco is 12 months ahead of schedule and should be able to complete the purchase by the end of next year. The hospital’s net revenue this fiscal year has increased 46 percent from $51.85 million in the fiscal year ended June 30, 2010, while earnings before interest, taxes, depreciation and amortization jumped 300 percent from $532,774 in the same period. This was driven in part by a higher approval rate for Medi-Cal services, which went from 89 percent in 2009 to 95 percent in November 2011. The percentage increases for the net revenue figures and earnings for the current fiscal year could not be confirmed because the hospital has yet to file with the Office of Statewide Health Planning and Development. At the same time, patient volume has increased, as evidenced by an occupancy rate that was 80 percent this year, up from 76 percent a year ago, according to figures provided by the hospital. The hospital said that from January to October, it has seen an increase of 20 percentage points in those who would recommend the hospital, or rate it an 8, 9 or 10 on a scale of 0 to 10, with 10 being the best score. Last week, MCH reached another milestone, appointing James Theiring the new permanent CEO. Theiring replaces former CEO Heidi Lennartz, who left her post a few months ago. Theiring joined the company 18 months ago as chief financial officer and was later appointed interim president. The board made him permanent CEO last week. Theiring comes to MCH from Kindred Hospital in Culver City. Theiring agrees that changes needed to be made. “We still have a mission to serve the community,” he said, “but as we grow the commercial business and our Medicare and Medi-Cal business, the uncompensated care costs should go down as a percentage of the total. What we want to do is grow those other things, so we can support that better.” Lahidjani, who hails from the restaurant and hospitality industry, has attacked the financial and operating problems at MCH on three fronts: he is trying to bring in more surgeons, especially spine and orthopedic surgeons; he is ramping up customer service, and cutting costs. To attract surgeons, Deanco has invested several million dollars in a da Vinci minimally-invasive surgical suite, and the Medronic O-arm, a surgical imaging system, which Lahidjani believes to be the only such machine in the San Fernando Valley. It was an expensive investment, but one that Lahidjani hopes will pay off in more physicians bringing their patients to the hospital, and in the long-run, in more commercial insurance business and less reliance on government payers. He is also making the hospital more hospitable to doctors. “When they want to book a case, they make one phone call to the surgical coordinator and everything is taken care of, from transportation to pre-op, to post-op and diet. The doctor shows up to practice medicine and we take care of everything else,” Lahidjani said. Deanco has also invested in retraining the staff, going as far as hiring consultants to teach employees to be more cordial and responsive to patients. “We want them to treat the patients as if they were their own family,” he said. To make sure employees don’t disturb patients while they sleep at night, he has installed security cameras and noise detectors. The idea is to develop a culture of accountability, Lahidjani noted. “We had everyone sign off on an agreement that these are the standards of care and these are the benchmarks they will be held accountable for,” he said. The third part of the plan has been to reduce costs. Since labor is the biggest expense of any hospital, Deanco has focused on reigning in theses cost. One especially effective practice, Lahidjani said, has been morning “cocktail meetings,” where the hospital CFO meets with every department head to assess the daily census and the attendant staffing needs. If there is extra staff in one unit of the hospital, the staffer is reassigned to units that need extra help. In this way, Deanco has driven labor costs from more than 60 percent of total costs to roughly 55 percent, according to hospital officials. Efforts to reduce the hospital’s uncompensated care burden have been equally important. Because the hospital’s Behavioral Health Unit is so well known, police and fire-fighters bring mentally ill patients to MCH even if they are in the vicinity of other hospitals. Once these patients — many of them without insurance or any financial means — enter the hospital, MCH is obligated to care for them. So Lahidjani said he has held several talks with area police and fire departments to ensure that patients near West Hills Hospital and Medical Center, or Providence Tarzana are taken there, not MCH. After numerous challenges that included a temporary closing of the facility in 1992, the Northridge earthquake that decimated parts of the hospital in 1994 and a bankruptcy filing in 1997, Lahidjani hopes that Deanco’s plans are enough to lift the hospital out of perpetual distress. “We want to be a low-cost provider in the area. We want to be the destination of choice for physicians. We want to be the hospital that is agile and flexible and can navigate its way through any type of government cutbacks or financial challenge.”
Hospital Eyeing Quick Recovery
