New hospital owners find making it work tough going.

They thought they could do it better than Tenet Healthcare Corp. But the new owners of more than a dozen underperforming area hospitals that Tenet divested are finding the road to a turnaround harder than anticipated.

Most of the facilities date from the 1950s and 1960s and are badly in need of sprucing up, not to mention million of dollars worth of state-mandated earthquake retrofits that will be required in the next several years.

In addition, some of the owners were surprised that patients, grateful that their community hospital was back in local hands, didn't flock to admissions as soon as Tenet handed over the keys. Others who purchased multiple hospitals found that their efforts to conserve money by consolidating services were met with the same resistance that Tenet faced.

"In our case, the hole was dug very deep, so it's a long way coming out," said Dr. Jack Terner, chief executive of Prospect Medical Holdings Inc., of the company's efforts to turn around Culver City's dilapidated Brotman Medical Center. "But everything is manageable if we can leverage our assets and get this hospital running a profit soon enough."

Terner, who was chief of pathology at the hospital between 1973 and 1995, said revenues for Brotman's first three months of new management, September though November, fell well below expectations but that the patient census in December showed significant improvement and could produce a profit this month.

Tenet has been shedding hospitals over the past two years following disclosures that the company, now based in Dallas, propped up its earnings by taking advantage of a billing loophole in the Medicare system. Tenet, once the leading county hospital operator, plans to retain only four area hospitals, including its crown jewel, USC University Hospital in Boyle Heights.

Meanwhile, the new owner groups, which have varying percentages of physician ownership, are finding the going tougher than imagined. Many of the purchases were premised on the idea that the physician owners would direct volume to their own facilities.

"I don't see any failures, and while the doctors may be a little disappointed and would like to think they could have done better by now, many people in the industry think they've done better than expected," said hospital consultant Steve Valentine, president of The Camden Group, which advised several of the groups.

"They may not have realized how difficult it would be to get their contract rates up with the health plans, and to reduce costs through consolidation and staffing changes," he said.

Balancing act

That's been the case with Centinela Freeman Health System, which a group of doctors and local businessmen, aided by private investment firm Westridge Capital, created in 2004 from three South Bay hospitals and related outpatient facilities. Two of the hospitals, Centinela Freeman Regional Medical Center and Daniel Freeman Memorial Hospital in Inglewood, are within a mile of each other, so hospital administrators have been struggling over how to reduce duplication of services without alienating the staff.

Community health activists also kept a close eye on the turnaround in large part because in 2002 Tenet had unsuccessfully attempted to close the third hospital in the group, Marina Del Rey's Daniel Freeman Marina Hospital. It also undertook consolidation at the other two hospitals that was seen as reducing healthcare access to lower-income residents.

"The concern is to what extent you lose valuable community assets because a new owner decides to consolidate to save money," said Lark Galloway-Gilliam, executive director of the non-profit Community Health Councils Inc.. She fears that this month's closure of Memorial's obstetrics unit, with operations consolidated at Centinela, is another sign that management intends to turn Memorial into a long-term care facility for elderly and rehabilitation patients.

Michael Rembis, the system's chief executive, denies that, but argues that the area wasn't supporting two full-service hospitals before, and that some services have to be consolidated so that both hospitals can afford to upgrade equipment and reduce the need to hire highcost temporary nurses.

He notes that both hospitals' emergency rooms will remain open for now, as well as their neonatal intensive care units, which are often so full that frail newborns must be transfenced to other hospitals miles away.

Rebuilding lies

"This is a work in progress," said Rembis, noting that $10 million in capital improvements have been made in the past year, with another $10 million likely in the coming year. "Our turnaround is conditioned on us reducing costs, avoiding duplication and renegotiating our (insurance) contracts so they cover our costs.

Many of the new owners have plans for creating niches in specialty treatments and deepening relationships with their communities that were neglected during the Tenet years.

San Gabriel Valley physician Dr. Jonathan Wu, who owned hospitals in Alhambra and Montclair, formed AHMC Inc. in 2004 to acquire Garfield Medical Center, Monterey Park Hospital, Greater El Monte Community Hospital and Whittier Hospital Medical Center.

AHMC has since added businesspeople and physicians as investors, according to Phillip Cohen, AHMC's regional chief executive, Garfield is a major referral hospital in the Asian community, for example, and Monterey Park has a large Hispanic patient census.

"We worked very hard to maintain continuity and keep morale high," Cohen said, noting that staff at each facility retain significant local control and prominent business leaders have been recruited to the individual hospital boards.

The average daily patient census at Hollywood Presbyterian Medical Center has been steadily rising since a subsidiary of Cha Medical Group, one of South Korea's largest hospital owners, bought the aging hospital in late 2004, and has been offering ownership stakes to local doctors.

Cha's owner, Dr. Kwan Yul Cha, who also owns a Los Angeles fertility clinic and is a backer of stem cell research in Korea, said he intends to open similar facilities at Presbyterian, but that the hospital's core mission is serving its ethnically and economically diverse neighborhood.

"I want everyone to receive the same quality of care whether they are rich or poor," said Cha, who has invested more than $10 million in refurbishment and new equipment. "That will bring in the patients."