Move to Baptist promises a boost for Intensiva

A fledgling St. Louis company that runs hospitals within hospitals foresees stronger revenues by moving its pioneering Oklahoma City complex from Integris Health's Southwest Medical Center to Baptist Medical Center.

Intensiva HealthCare Corp., which went public this month, handles only the most critical cases. Its seven facilities across four states provide specialized care for those requiring intensive medical monitoring and treatment. Its typical patient stays more than 25 days.

That may sound like a small niche, but Intensiva estimated the cost of treating such patients nationwide exceeds $2 billion annually. Paving the way for the St. Louis firm was its Southwest Medical Center facility, commanded by President Madaline Roedle. It was the first of Intensiva's critical care hospitals, opening with 11,000 square feet on March 16, 1995. Receiving Medicare certification as a long-term hospital that November, it is licensed for 38 beds -- 7.8 percent of Southwest's 298 licensed beds. "As of June 30, 1996, this was the only company facility with a positive cash flow and producing operating income," according to Intensiva's initial public offering prospectus. After acquiring Southwest, Integris requested Intensiva relocate its hospital to Baptist, a 529-licensed-bed facility with an occupancy rate of 69 percent. "Because we have a lot more higher acute patients," said Tom Rice, president and chief operating officer for both Integris Southwest and Baptist, "we consolidated our patients here and have a floor for them to relocate to." Intensiva plans to begin the week-long moving process Dec. 2. It will then begin a seven-year lease for a "substantially" larger area within Baptist, said Vice President Joel Brandon. He estimated moving costs at about $7,000 to $10,000. The bottom line for Integris will be the same. "It's a long-term lease," said Rice, "basically the same as at Southwest." Rice expects Baptist customers to benefit from the change. "It provides a place for the specialists here to transfer patients who will be here. The long-term the physicians will still be on campus to follow their patients." Southwest, meanwhile, will be able to turn its emptied space into a post-surgery recovery ward. Rice said the change would require virtually no renovation. Brandon also foresees improved results. "We're anticipating a 10 percent to 15 percent increase in gross revenues," he said. At Southwest, Intensiva's staff of 75 manages an average daily census of 20 patients. "Our average daily census is projected to run 25 to 30 patients" at Baptist, he said. In addition, "we will be operating a six-bed intensive care unit that we currently do not have," he said. Combined, those changes will force Intensiva to increase its staff. Intensiva foresees a minor reduction in revenue during the transition. "We're not projecting losses greater than probably 10 days worth of revenue," said Brandon. Despite the change's positive aspects, Brandon said many co- workers face some sentimental challenges. "We broke ground, so to speak," he said. "We were essentially the beta site for testing acute care for Intensiva HealthCare. "Madaline has spent the better part of her 30 years in health care in Southwest Medical Center, and I have spent four or five years at Southwest Medical Center. And a number of our employees have come from Southwest. Relocating will be quite a change for us... but the opportunities going forward will be much greater." Intensiva recorded six-month net revenues of $6.1 million this year, compared with $200,000 the prior year, according to the prospectus. More than half of the 1996 revenue -- a total of $3.3 million -- was generated by the Oklahoma City unit. The local facility had an operating margin of $800,000, or 24 percent. As might be expected, the local arm incurred the highest operating expenses of Intensiva's seven facilities. Of the $5.6 million required to run the entire company through the first half of this year, the Oklahoma City operation used up $2.4 million. Intensiva expects to open three facilities in leased space within general acute care hospitals through the rest of this year, including one in Muskegon, Mich., this month. With a service area population of more than a million, the Oklahoma City operation has the largest market to draw upon. It does not, however, have the most licensed beds among Intensiva's units. That title goes to Hammond, Ind., with 43, and the 40-bed facility soon to open in Columbus, Ohio. Leasing underutilized space within hospitals allows Intensiva to minimize capital and overhead costs. Intensiva relies on its host hospital for services such as diagnostic support, hotel and ancillary services, waste disposal and laboratory resources. As with most start-ups, Intensiva has reported losses through its short existence. Initial and administrative costs led to a $215,000 loss for 1994 -- before the Oklahoma City facility opened. For 1995, with only the Oklahoma City arm open for more than a week, Intensiva recorded a loss of $2.8 million from net revenues of $1.48 million. Through the first half of this year, the addition of four hospitals led Intensiva to report a loss of $1.7 million, up from $1.2 million in 1995. About 67 percent of Intensiva's revenue for the first six months of this year came from Medicare patients, the prospectus said. That was up from about 47 percent the prior year. The prospectus warned that proposed changes in Medicare and Medicaid could limit or curtail company growth. However, the document attributed the increase in Medicare net revenues to the addition of new facilities "in the early stages of operation." Intensiva offered 2.5 million shares in its initial public offering. Its Nasdaq stock carries the symbol IHCC.

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