Local medical centers with research accent turn to primary care market.

A few years ago, only a select cross-section of people was admitted to UCLA Medical Center for treatment. The high-profile hospital gained its reputation by performing cutting-edge surgeries and developing new treatments for exotic maladies. But that focus is changing.

UCLA has been on a tear in recent months to contract with physicians' groups which provide primary care.

USC's University Hospital is also foraying into the world of primary care. Last year, it put together an independent physicians' group under the guidance of the hospital.

Both university medical centers -- which had been known primarily for research and education -- are branching out due to economic necessity.

As the nation's health care system moves toward a managed care environment, both hospitals have formed strategic alliances with primary care physicians to ensure continued prosperity in the health care future under managed care.

Most hospitals in Southern California are operating below capacity. And university hospitals are in an even more precarious position than acute-care facilities. Since both L.A. university hospitals excel at experimental and highly-specialized procedures, both are among the highest-cost care facilities in town.

Under a managed care system, lower-cost hospitals are likely to get larger patient loads. So both the USC and UCLA facilities are looking at ways to keep their patient loads high to cover operating costs and carry on with the business of training doctors.

UCLA, for its part, has always been a specialists' hospital. Physicians on staff at the UCLA Medical Center are also professors at the UCLA Medical School. As such, few have private patients because most had no private practice. Few routine medical procedures were performed at UCLA. Patients were admitted to UCLA mainly when referred by physicians with other hospitals who needed a highly specialized procedure performed. Organ transplants, for example, are done frequently at UCLA, but rarely at other institutions.

The dawning era of managed care is fueling many changes for those practicing medicine, and UCLA is implementing strategies to minimize the damage that could be done to the hospital's methods of practicing medicine.

Health maintenance organizations have greater control over which hospitals their enrollees are admitted to. Physicians who are contracted with HMOs can refer their patients only to hospitals that have contracts with that same HMO.

The scenario goes something like this: HMOs contract with physicians and hospitals for their services. Enrollees can choose their primary care physician. But when that person needs in-patient hospital care, the person may check in to only those hospitals that have contracted with the HMO. So, for hospitals to get access to HMO enrollees, they must establish relationships with primary care physicians who are contracted with HMOs.

Last month, UCLA signed a contract with the Henry Mayo Newhall Family Group, a Santa Clarita-based primary care physicians' group. It also recently contracted with United Pacific Medical Group, another primary care group that is based in the San Gabriel Valley.

The difficult part for UCLA is that the relationships that are being worked out, for the most part, are based on financial considerations, according to Mark Laret, deputy director of external affairs for the UCLA Medical Center. In the managed care era, control over health care cost means that HMOs are hoping to contract with physicians and hospitals that can promise care at low costs. Low price has never been a selling point for UCLA.

To that end, "we are making sure that it costs no more to put patients in UCLA than in any other community hospital," Laret said. Hospital administrators at UCLA managed to shave $50 million off the medical center's annual budget last year. According to Laret, that feat was accomplished through a combination of layoffs and a restructuring of the way services are provided.

USC's physicians' group, also known as an independent physicians association, was put together by the hospital for much the same reason. Creating an IPA, according to USC's Dean of the School of Medicine Stephen Ryan, will enhance the appeal of the faculty and the hospital to primary care physicians.

"We are needing to partner with primary care physicians, and the IPA will make that easier to do," said Ryan.

Logistically, the IPA will make USC's partnership with primary care physicians simpler. Rather than contract with several different groups of specialists, the primary care group can sign on with one group -- USC's IPA -- that offers comprehensive specialty coverage.