Sports Club links fitness, health care by putting med office next to gym.

The Sports Club Co., a Los Angeles-based chain of upscale exercise centers, has begun situating medical group offices next to its gyms in a new venture to exploit the links between fitness and health care.

On Dec. 1, Sports Club's new subsidiary, HealthFitness America, opened a medical group office at Sports Club/LA's anchor Westside facility on Sepulveda Boulevard.

Constructed at a cost of $500,000, the elegantly decorated HFA medical group office is filled with state-of-the-art exercise and testing equipment. Its initial staff of about 20 physicians, mostly orthopedic specialists, will engage in preventative medicine and rehabilitation for neck and back injuries, officials said.

Sports Club members can make appointments at the facility, but HFA also wants to attract outside patients from health plans, according to company officials.

"We're in negotiations with major health plans right now. We're looking for a carve-out for muscular-skeleto care," said Dr. Bert Rosenthal, HFA's president, referring to specialized treatments health plans contract with outside firms to perform. A cardiologist by training, Rosenthal was founding director of the cardiac care unit at UCLA Medical Center.

He believes health plans will be attracted to the dual fitness/health care concept as a money-saving measure. He noted that people who exercise regularly consume 40 percent less in health care dollars on average, which would in turn make HFA patients an attractive financial risk.

Along with the Sports Club/LA location, HFA has short-term plans to open medical offices at the Sports Club/Irvine location, as well as a 140,000-square-foot facility that opened on Manhattan's Upper West Side last April, a joint venture with Massachusetts-based footwear manufacturer Reebok International Ltd.

More sites possible

The other fitness centers under Sport Club's ownership - which include 10 Sports Connection and Spectrum locations - are being evaluated for potential HFA sites, company officials said.

Sports Club President John Gibbons said he expects the initial site to generate $6 million to $8 million a year, adding nearly 50 percent to Sports Club/LA's current annual revenues. Gibbons projects the HFA side of the business will account for more than a third of the company's annual revenues by decade's end.

While Sports Club's revenue has increased dramatically the past year, its rapid expansion has also boosted debt and operating expenses and cut into short-term profits, according to recent filings with the Securities and Exchange Commission.

For the third quarter ended Sept. 30, Sports Club had net income of $124,000, or 1 cent per share, on revenues of $9.1 million. Net income a year before was $188,000, or 3 cents a share, on revenues of $3.7 million.

Despite favorable analysts' reports, Sports Clubs' recent performance has depressed its stock price to 52-week lows. It was trading in the $3.50 a share range on the American Stock Exchange last week, down from $8 earlier in the year.