What works at two hospitals.

Considering the Valley hospitals that have been forced to close over the last few years, it's easy to see why some people in the industry believe that whoever can keep a hospital's doors open these days ought to be given a medal.

Medically, it's easy to see that the hospitals left standing have a lot to offer. The Grossman Bum Center at Sherman Oaks Hospital is one of the best in the world, Encino Tarzana Regional Medical Center operates a nationally recognized cardiac unit and consistently wins quality awards. Several other hospitals are outfitting themselves with state-of-the-art technology in order to attract some of the area's best physicians.

It's also easy to forget that running a hospital is a business operation. It's hard for most executives to imagine a business that depends so heavily on skilled labor, is forced to do business without setting its own rates and must stay open at all times doing society's most necessary work. But it's a daily reality for medical staffs.

Valley Presbyterian Hospital serves some of the most needy patients in the Valley. More than 50 percent of the patients coming through its door qualify for public assistance under the Medi-Cal program. It's also faced an influx of patients due to the closure of Northridge Hospital Sherman Way Campus. Despite its challenges, the hospital has been able to build a new, 188-bed state-of-the-art patient tower and has completed the first half of its fiscal year in the black by almost half a million dollars.

Providence Health System's two hospitals, Providence Holy Cross Medical Center and Providence St. Joseph Medical Center, combine to supply the Valley with more than 680 hospital beds. Although the hospitals serve a population that's much more affluent than Valley Presbyterian's patients, the company still fights to keep the hospitals open under financial pressures. Combined, the hospitals are spending more than $35 million on expansion and new construction projects while maintaining and operating margins between one and two percent.

"We're diligent in trying to root out any cost inefficiencies," said Arnold Schaffer, CEO of both Providence hospitals. "We compare ourselves at almost every level, whether it's staffing or supply utilization, to numerous hospitals and numerous databases. I know how many laboratory employees or housekeeping employees or physical therapy employees we have for the amount of patient care we provide. I can compare that to like hospitals in Los Angeles, California or the nation."

Providence Holy Cross operates one of the Valley's two trauma centers, and because it is part of a larger organization and its hospitals provide a wide range of services, they are able to pull slightly better rates from insurance companies.

But with the money that it does make, Providence is making a notable investment into its community.

Starting in 2007, Providence Holy Cross will begin construction on a new, $116 million patient care building with 101 beds. The building, deemed necessary as admissions have grown 60 percent over the last nine years, should be ready to open in 2010. Holy Cross is also in the middle of a $7.8 expansion of its emergency room, and St. Joe's is raising money to build a $35 million cancer center. Later this summer, the company will open the Providence Holy Cross Health Center in Santa Clarita, offering outpatient surgery, imaging and oncology services.

Robert Bills, President of Valley Presbyterian, has been with the hospital for 31 years, long enough to see the surrounding population age, and become much more socio-economically diverse. Since the early 90s, he said, the percentage of the hospital's patients that rely on Medi-Cal have gone from about seven percent to 50 percent. When Northridge Hospital Sherman Way closed last year, the hospital saw even more low-income patients coming, especially to its obstetrics units and emergency room.

"We are the only full-service, free-standing, non-profit hospital in the San Fernando Valley," said Bills.

Since the hospital cannot rely on a larger corporate presence to negotiate the best rates for its services, the hospital has had to rely on its specialties in order to attract patient. Known for its women's and children's services in particular, Valley Presbyterian has the largest neo-natal intensive care unit and the largest pediatric intensive care unit in the northern part of the county.

Valley Presbyterian's patient mix, being more than 25 percent reliant on Medi-Cal, qualifies the hospital for significant money from the state. The current reimbursement system could change later this year, however, and Bills is in constant negotiations to ensure access to the funding that keeps the hospital afloat.

Meanwhile, since absorbing Sherman Way's patients, the hospital has seen emergency room visits go from about 80 to 140 per day. The new patients do add to the hospital's revenue base, but they've also forced it to beef up on its complement of expensive temporary nurses.

Valley Presbyterian has also been forward looking, completing its new 188-bed patient tower last summer with rooms more than double the size of the rooms in the older towers. The hospital recently received $500,000 in grants to expand its emergency room, the operation of which Bills considers one of the hospitals most important duties.

"If you don't have the beds, staff, facilities or the specialty coverage, you go on diversion, you basically close down your emergency room to ambulance paramedic runs," said Bills. "We've talked with the people at emergency services.. .we are the last hospital to go on diversion in the Valley."