A physician and an entrepreneur have teamed up to reopen an inner-city Los Angeles hospital that they hope will stay afloat by attracting a high volume of cash-only patients, or at least those with good credit.
"We hope this will be a model for a new style of healthcare delivery," said Robert Bourseau, one of the hospital's principals.
The hospital is 152-bed City of Angels Medical Center, scheduled to open this month pending final state health inspections.
Formerly the Ross-Loos Medical Center, the hospital hasn't seen an inpatient since 1993 when its operator, Cigna Health Plans of California, stopped providing acute-care services there.
Bourseau and Rudra Sabaratnam, M.D., a Los Angeles psychiatrist, acquired City of Angels from Ross-Loos Realty last July for $14.2 million.
Bourseau, 64, owned signing and office furniture firms in the 1960s and 1970s before venturing into commercial real estate, brokering hospital purchases for such firms as the former National Medical Enterprises. He began a hospital management and consulting firm, Intercare Resources, in 1983. He was chief executive officer of San Fernando (Calif.) Community Hospital in the late 1980s (now Mission Community Hospital) when he met Sabaratnam, who was chief of the hospital's medical staff. They began partnering on managing hospitals in 1989.
Sabaratnam, 54, received his medical degree from his native Sri Lanka, and in 1970 emigrated to New York, where he completed his psychiatric residency. He moved to Los Angeles in 1974 to practice.
Bourseau is president and Sabaratnam is secretary of City of Angels' parent company, Los Angeles-based National Psychiatric Services, which has reopened and managed five psychiatric and skilled-nursing facilities in the past decade. Sabaratnam and Bourseau own two of the facilities, 118-bed Ingleside Hospital in Rosemead, Calif., about 10 miles east of downtown Los Angeles, and 64-bed Bayview Hospital in San Diego.
Since acquiring City of Angels, the entrepreneur and the doctor have spent $4 million refurbishing the facility. They've extended staff privileges to 90 physicians, and they've hired a 39-member nursing staff. Total nonphysician employment is expected to be about 95.
Most important, they think they've hit on a business strategy that will make a go of the new venture.
The new owners intend to cater to the mostly low-income Latino neighborhood surrounding the hospital. They believe they can beat the neighboring hospitals on cost, and that advantage will be directly marketed to cash-paying patients rather than health plans.
According to City of Angels' market research, residents within a 10-mile radius have the potential to pay $1 billion a year for healthcare out of their pockets.
According to the hospital's business projections, nearly a quarter of the estimated $28 million in net patient revenues for next year will come from self-pay patients.
By comparison, 610-bed University of California Los Angeles Medical Center on the more affluent west side of Los Angeles obtains less than 5% of its net patient revenues from self-pay patients, said UCLA Health Sciences spokesman David Langness.
To entice cash-paying patients, City of Angels will offer price quotes for procedures over the telephone.
"We want to make it as easy to get a cash quote for a procedure as it would be calling a car dealer to get a quote on replacing a carburetor," Sabaratnam said.
Credit will be available for patients who can't pay cash, although details on the financing terms were not made available.
Moreover, in a town where providers live or die by HMO contracts, City of Angels' commercial payer base will be only an afterthought.
Just three patients from a projected average daily census of 69 are expected to have coverage from commercial health plans. The remainder are projected to consist of cash-paying patients, as well as Medicare and Medicaid recipients.
Observers believe City of Angels has potential for success but voiced concerns about the ultimate price that cash patients pay.
E. Richard Brown, director of the UCLA Center for Health Policy Research and an expert on low-income healthcare issues, said he believes the community surrounding the hospital is quite willing and able to pay out-of-pocket medical expenses. But he also suggests this can be exploitative.
"The folks they're marketing to . . . end up paying a huge portion of their incomes toward healthcare relative to more affluent members of the community," he said, noting that patients with insurance pay far less out of their pockets.
But, Sabaratnam and Bourseau said, in exchange for their money, patients will get better service. They will have access to a medical staff that's mostly fluent in Spanish and will even be served Latin-American cuisine in the hospital.