It's official: El Camino adds Los Gatos site

Hospital execs have profitable outlook for new operation after first year

It was an "end of an era" last week as El Camino Hospital officially took over the Community Hospital of Los Gatos and prepared to extend its services and staff to the new property.

The acquisition will require a $103 million investment, hospital officials say, including capital costs over the next five years. Officials have closed the facility temporarily and will reopen it, they hope, by mid-July.

El Camino staff will run the Los Gatos hospital as a sister site offering basic services such as an emergency department and operating rooms. Staff also will focus on orthopedic, spine, heart and vascular care, cancer and urology at the Los Gatos facility, according to Eric Pifer, who has been named president of the new hospital.

A new name has officially been chosen for the facility: El Camino Hospital Los Gatos.

"This is an end of the era when El Camino Hospital is just one campus," hospital CEO Ken Graham told the board of directors during its April 8 meeting, prior to the April 11 closing.

Hospital executives announced in December that they had entered into an escrow agreement to buy the facility, but said strict disclosure rules prevented them from releasing key details to the public. That decision did not sit well with the few dozen local residents who opposed the purchase and said the public hospital had an obligation to share details with taxpayers before committing to pay for the purchase price and upgrades to the aging facility.

But those opposed were nowhere in sight on April 8 as Pifer told board members that El Camino's financial model shows a $1 million net income in the first year, $9 million the second year and earnings of $10 million to $11 million in each of the next three years of operations in Los Gatos. Achieving those numbers will require an average of 42 patients a day in the first six months and 39 patients a day for the year, he said.

According to the model, to reach the census numbers will require "a very strong focus on opening in mid-summer and maintaining and growing physicians' relationships" in Los Gatos.

Hospital officials project a 25 percent return on the $65 million initial investment after the first year, and say the total investment will be $103 million over five years. That includes $22 million to perform seismic retrofitting work required by the state.

"I think the proof of the pudding is if anyone will show up," Graham told trustees last week before escrow was finalized.

Graham has said El Camino has $400 million in cash reserves and a balance sheet of $1.1 billion.

Buying the new hospital, executives said, allows them to compete with other local hospitals and to meet their strategic goals by moving business southward. Taxpayer funds, paid by residents of the hospital district, will not be used for the new purchase, hospital officials said.

The hospital's business model of attracting 42 patients a day is a realistic goal, Pifer said, especially considering Los Gatos will open with 113 beds. The hospital also has a 30-bed rehabilitation center, and officials are now considering opening this soon.

Business was slipping under the hospital's previous operators, but Pifer said the hospital averaged over 60 patients a day several years ago.

The plan "is primarily based on getting back to numbers the hospital has had over the last several years," he said.

To accomplish this, Pifer said, it's important that the hospital opens in mid-summer, and he and a management team are in the process of hiring doctors and setting up programs. The hospital has received over 200 physician applications. As it prepares to reopen, El Camino staff is also focusing on bringing software to the new site and getting the clinical programs up and running.

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3 people like this
Posted by Bill Krepick
a resident of Blossom Valley
on Apr 16, 2009 at 10:59 pm

I continue to be amazed at the disconnect between the ECH Board's public comments vs. its actions. The Board has repeatedly said that Los Gatos hospital is a small acquisition amounting to nothing more than 'another floor' of El Camino Hospital and therefore requiring no monthly/quarterly profit and loss reporting or financial tracking. Yet this 'other floor' operation requires an initial investment of over $100 million; a separate hospital name for the Los Gatos facility; a new "President" to run the Los Gatos operation; and a committment to support multiple medical specialities. Apparently the ECH Board believes it can dupe taxpayers and ignore its stakeholders' demands for transparent reporting by claiming that a $100 million investment is pocket change and by making optimistic forecasts - while refusing to track and report on the future financial results of the Los Gatos operation. Much of El Camino Hospital's $400 million cash reserve is a direct result of the non-profit hospital's tax-exempt status and the tax revenue it has collected over 40 years from District taxpayers. The ECH Board demonstrates a level of arrogance and fiscal irresponsibility that is unparalleled in the non-profit world.

3 people like this
Posted by Frank Baum
a resident of Blossom Valley
on Apr 17, 2009 at 1:19 pm

Based on this example of the El Camino Hospital District buying a facility outside the district, I can't wait for the Mountain View Whisman School District to purchase a failing school in East Palo Alto to help serve that community.

3 people like this
Posted by JS
a resident of Monta Loma
on Apr 17, 2009 at 2:02 pm

If the El Camino Hospital District had enough money to purchase a hospital in Los Gatos, why were we asked to approve a bond measure a few years ago? Surely, El Camino's operating profit could have been used to build the new hospital building right here in Mountain View.

Posted by Name hidden
a resident of North Whisman

on May 28, 2017 at 5:30 pm

Due to repeated violations of our Terms of Use, comments from this poster are automatically removed. Why?

Sorry, but further commenting on this topic has been closed.

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