Tenet Corp. Can Expect Bruising Westlake Battle

THOUSAND OAKS —  Drawn to the Conejo Valley by community demand, Tenet Healthcare Corp. could face a tough battle in a market where a larger competitor dominates and two other hospital chains have recently failed to turn a profit, industry experts and local health officials say.

The country’s No. 2 hospital chain, Tenet of Santa Barbara, confirmed last week that it is interested in locating in the Westlake area, filling a void left when Westlake Medical Center closed last year.

The upscale enclave that straddles two counties sits in the middle of a region dominated by the nation’s largest for-profit hospital provider, Columbia/HCA of Nashville, with hospitals in Thousand Oaks and West Hills.

Still, Tenet is moving forward with plans to open a 24-hour emergency facility in March and, according to sources, exploring the idea of a larger facility with birthing and operating rooms.

The options include starting from scratch on a 28-acre parcel near the Westlake Hyatt or waiting to see if the cancer hospital that bought Westlake Medical Center is able to legally lift its deed restrictions and offer more expansive medical services.

Tenet has also been talking about partnering with Ventura County Medical Center, which has been blocked in its attempts to come up with public funds for needed upgrades to its kitchen and medical laboratory. But county officials have been talking to Columbia/HCA as well. Up until last week, local health officials thought Ventura could be the site of the county’s first boxing match between Columbia/HCA and Tenet.

“I had no idea they are coming to Westlake Village,” said Monty Clark, regional vice president of the Health Care Assn. of Southern California, a trade group.

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When the final bell rings--wherever the match--Todd Richter, a health care analyst for Dean Witter Reynolds in New York, believes Columbia/HCA will still be standing.

“Tenet and Columbia are in a lot of markets together,” he said. “Is there a market where Tenet is beating Columbia? I don’t know of one.”

Although Tenet recently announced a merger with rival OrNda HealthCorp of Nashville, the combined company will still be half the size of Columbia/HCA.

On the other hand, Tenet does dominate the California market. While Columbia/HCA will have 22 hospitals statewide when it completes the purchase of a San Diego area hospital system, Tenet is poised to have 29 in Southern California alone.

“Columbia doesn’t have in California much in the way of penetration. We don’t feel it here,” said Lori Singer, a spokeswoman for Tenet’s Encino-Tarzana Regional Medical Center, which will sponsor the Westlake 24-hour center.

But Richter said Columbia/HCA’s buying and negotiating power is such that no hospital can afford to go head-to-head with the chain. The corporate giant is able to offer better deals that managed care providers, such as health maintenance organizations, are unable to resist.

Even in a wealthy community, “when push comes to shove, people like to have their doctors’ bills paid by their insurance company,” Richter said.

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One indicator that a community could support another hospital is occupancy rates, Richter said. If a hospital’s occupancy rates are above 75%, it is operating basically at capacity.

According to Ron Phelps, chief executive officer at Columbia Los Robles Hospital in Thousand Oaks, occupancy rates there are between 65% and 70%. A year ago, before Columbia closed Westlake Medical Center, Los Robles had occupancy rates around 50%, according to state records.

A spokeswoman for Columbia/HCA said the company was not surprised by Tenet’s move into the Conejo Valley and called it “logical.”

“It’s free-market forces at work,” Susan Whitten said.

Just in the last five years, those forces have wreaked havoc on health care in the Conejo Valley.

During the recession, both Los Robles and Westlake saw their occupancy rates drop. In July 1995, Columbia/HCA acquired Westlake Medical Center and announced its intention to keep the hospital running.

Five months later, Columbia/HCA officials said they had changed their minds. Ultimately, the Westlake facility was sold to Salick Health Care Inc. of Los Angeles, which now runs a cancer specialty hospital there.

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But even before Columbia acquired Westlake, it was a money loser, said Jim Henderson, a former member of the board at Westlake when it was owned by Universal Health Services.

“It was losing money, definitely losing money,” said Henderson, who continues to sit on the board of trustees at Los Robles.

“At a couple of our board meetings, I remember them saying that we showed a profit--before corporate allocations or debt reduction. We all laughed because that meant we lost less that month,” said Henderson, who estimated the red ink cost Universal “tens of thousands” monthly.

The situation only grew worse under Columbia/HCA. According to officials, the hospital was losing as much as $10,000 to $20,000 a day by the time Salick purchased the facility.

“We did what we felt was appropriate based on our assessment of market need,” Columbia/HCA’s Whitten said. “Tenet is doing something based on their assessment of market need, which is obviously different.”

Dr. Frank Gillingham, who will run Tenet’s 24-hour urgent care, said the community need was evident in the protests that followed Columbia/HCA’s decision to shut down Westlake Medical Center.

As many as 300 people turned out to protest on the day the emergency room shut its doors. And area residents, including Gillingham, went to Tenet asking the chain to provide health services in the Westlake area.

“I just want to thank God, because this is answering the prayers of many people in the community,” Gillingham said.