Competition becoming fierce in lucrative organ-transplant niche.

Cedars-Sinai Medical Center, despite a flurry of controversy regarding its performance last month of the world's first pig-to-human liver transplant, is moving forward with plans to become one of the foremost organ transplant centers in the world.

In a press conference, Dr. Leonard Makowka, the surgeon who performed the controversial operation and who heads Cedars-Sinai's transplant program, made it very clear that the hospital would be performing more cross-species transplants and that the strategy has the full support of the hospital's board.

The board of directors' vision for Cedars-Sinai is quite simple, said Ron Wise, a spokesman for the hospital.

"They want to create a major, major international transplantation center," he said. "We're taking a leadership position in cross-species transplantation."

This goal could be the life preserver that saves the Westside hospital from drowning in red ink.

For the first three months of 1992, the hospital lost $33 million, according to the latest figures available from the Office of Statewide Health Planning & Development.

Wise wouldn't reveal how much revenue or profit the transplant program contributes to the hospital. But he did note that the program is profitable.

Dave Allen, controller at UCLA Medical Center -- Cedars-Sinai's main competitor for transplant business -- said UCLA's transplant niche is what has been keeping the hospital going.

"The bread-and-butter stuff, like normal (baby) deliveries, just doesn't make money any more," he told the Business Journal in September.

UCLA, one of the largest transplant centers in the world, performs about 500 to 600 transplants a year, compared with Cedars-Sinai's 100-plus transplants.

But being the first hospital to perform a pig liver transplant or, for that matter, being one of the most established transplant centers in the world like UCLA, just isn't enough to guarantee profits any more, said health care experts.

With the growth of managed-care companies and more hospitals performing transplants, the profits are harder to come by, they said.

Allen said UCLA, which has one of the nation's largest heart and liver programs in the country, has historically enjoyed lots of leverage when negotiating with managed-care companies.

But as transplants have become more commonplace with development of anti-rejection drugs, more hospitals have jumped into the business. And with more hospitals competing for transplant business, managed-care companies are starting to develop set prices for procedures, instead of paying pretty much whatever price the hospital charges, said Lauri Rustand, administrative director of UCLA's transplantation programs.

"A few years ago transplants were a profit center," she said. "But competition in the hospital and insurance business is changing that."

Estimated survival rates
                               One year      five years
Heart                             80%           53%
Liver                             65%           55%
Kidney                            94%           75%
Pancreas                          79%           70%
Heart-lung                        65%           30%
Lung                              65%           30%
Bone marrow                       70%           50%
SOURCE: MILLIMAN & ROBERTSON, INC.

Kaiser Permanente, a managed-care company based in Pasadena and Oakland, set up its own bone marrow transplant unit 10 years ago, said Allen Mann, manager of public affairs. He said in 1992, Kaiser will perform between 20 and 25 bone-marrow operations, up from 15 in 1991.

Dr. Arthur Southam, chief executive officer of CareAmerica Health Plans in Chatsworth, said overall reimbursements his company has paid for transplant procedures increased from $100,000 a year about three years ago to between $2 million and $3 million a year today.

Dr. Ronald Busuttil, director of UCLA's transplantation program, said in 1983 there were only three hospitals with similar programs in the entire country.

Now UCLA competes with Cedars-Sinai and St. Vincent Medical Center in L.A., Loma Linda University Medical Center in Loma Linda, and Scripps Memorial Hospital and Sharp Memorial Hospital in San Diego. In addition, the newly opened USC University Hospital reported it is starting to kick its transplant program into high gear.

According to John Ross, a spokesman for the American Hospital Association, the number of U.S. hospitals performing transplants has jumped from 301 in 1985 -- only 4.8 percent of all hospitals -- to 558 in 1990 -- 9 percent of all hospitals.

In California, the number of hospitals that perform transplants has increased from 30 in 1985 to 47 in 1990, he said.

"Right now in L.A. there are more than enough transplant centers," said UCLA's Busuttil. "We do 250 liver transplants and Cedars does 50. That probably is all that needs to be done in L.A."

Competition just between Cedars and UCLA has been tough enough.

In July, UCLA hired Dr. Paul Waters, director of Cedars' lung transplant program. Rustand said Waters was performing about 25 to 30 lung transplants a year at Cedars and he is expected to do about the same for UCLA.

When asked if UCLA was going to go after cross-species transplants, Busuttil said such transplants are about five years away.

"There is a tremendous amount of research needed in the rejection process, as well as ethical problems, such as using animal organs," he said.

Entering into this competitive fray is USC University Hospital, which opened in May 1991 and performed about 44 kidney transplants from June 1991 to May 1992, said Jeff Green, the hospital's administrator for special projects.

The transplant program is headed by urologists Dr. Robert Mendez and Dr. Ralph Mendez, who are identical twins.

In July, the new USC hospital hired Dr. Vaughn Starnes, former head of the heart/lung transplant program at Stanford University, to direct the cardiothoracic centers for USC University Hospital, Children's Hospital Los Angeles and County USC Medical Center. (Hospitals often share expenses for complex procedures, such as transplants.)

Green said the hospital has about seven people on the waiting list for a lung transplant and now is just waiting for an organ.

The USC University Hospital also plans to start a heart transplant program led by Starnes in January. Green said the hospital just recruited Dr. Mark Barr, head of transplant cardiology at Columbia University, to perform the follow-up treatments for heart transplants. Green said Barr will join the hospital in December.

He said part of the 10-year plan at the USC Medical School is to have a program dedicated to multi-organ transplants. He said there is also discussion of performing liver transplants.

"We're looking to be one of the leading transplant centers in the western United States," he said.

Along with the fierce competition among hospitals, USC also has to compete for organs.

The only way for a hospital to obtain organs is through the federally run United Network of Organ Sharing. Candidates are selected for organs based on how sick they are, their blood type and their size.

The geographic area in which the donor is located is given first preference. If there's not a match in that market, the organ goes to hospitals elsewhere in the region and then, to the national market.

UCLA's Rustand said insurance companies are beginning to channel transplant operations to certain hospitals based on each hospital's survival rates.

She said the transplant centers that will survive will be the ones with better outcomes and more experience.

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