TMC Healthcare is scrambling to "rebalance" its finances and reach its goal of being the No. 1 health-care provider on Tucson's East and Southeast sides.
Its April 26 disclosure that it was laying off 100 workers and cutting 50 vacant jobs at TMC was only the most visible sign of change that has rocked TMC Healthcare, the parent organization of Tucson Medical Center, the city's largest hospital.
President and CEO Frank Alvarez acknowledged last week that his financial projections had been faulty. But experts credit Alvarez with taking difficult but necessary steps to ensure that TMC Healthcare has a viable future.
Another step was a big one that few people noticed. On the last business day in December, less than three years after purchasing El Dorado Hospital for $32 million, TMC Healthcare quietly sold the facility for $41.5 million to a California health-care real estate developer.
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While TMC still owns the land El Dorado occupies, the building itself is owned by Montecito Medical of Santa Barbara, Calif., and managed by Florida-based DASCO Cos., a real estate investment trust.
Another erasure on TMC Healthcare's list of expansion projects: The timeline for tearing down the sprawling, 60-year-old TMC and replacing it with a multi-story hospital has been postponed to 2012 or later. And plans to build a 90-bed "feeder" hospital at South Houghton and East Drexel roads are on hold indefinitely.
Saguaro Physicians, the doctors' group that was included in TMC Healthcare's 2004 purchase of El Dorado Hospital, has three clinics in that area and will soon open a fourth.
"One of the projects that's on my plate is to recruit more physicians to the area," said Barbara Smith, Saguaro Physicians' chief operating officer, who held a similar post for 10 years at El Dorado. "I concurrently need to build a patient population for those physicians to serve."
One of her strategies is to scan the home sales lists in the Sunday paper. To each new home owner on the Southeast Side, Smith sends a "welcome to the community" letter from her doctors' group.
"We are busy at Broadway and Houghton, and Rita Ranch and Corona de Tucson," Smith said. "But none of those practices has enough patient flow to support building a hospital."
Fewer El Dorado patients
The decision to close El Dorado last August — less than five months before it was sold — also brought disappointing financial results.
"We thought we would get 75 percent of El Dorado's patients," Alvarez said last week, "but we got closer to 50 percent." The rest went to St. Joseph's Hospital, about a mile south of El Dorado at 350 N. Wilmot Road, and other hospitals.
Closing El Dorado had a dramatic effect on TMC's operating rooms and emergency department, where patient numbers increased 20 percent and 17 percent, respectively, said hospital spokeswoman Julia Strange. But TMC's average daily census went up just 3.6 percent, Strange said, and the hospital found itself overstaffed with former El Dorado employees.
The year-end result: a $4.7 million operating loss for Tucson Medical Center. But its parent organization, TMC Healthcare, finished 2006 with a $22.9 million profit after the hospital's loss.
The $22.9 million reflects a $17 million rebate from TMC Healthcare's self-insurance company and nearly $5.4 million from rent paid on TMC-owned medical office buildings, donations to the TMC Foundation and other sources, Alvarez said.
TMC Healthcare might have used some of that profit to offset the hospital's loss, but red ink would have flowed again at this year's end, TMC officials said.
"The better business practice is to make the hospital break even. We're not looking to make a lot of money, but you don't want to lose a lot of money either," Strange said.
"We're not in dire financial straits," Alvarez said. "What I'm telling people is financial liability is not the issue. We're rebalancing so we can continue to grow. I'll be having meetings with our staff to explain this, so they can see this is not a disaster."
DASCO Cos. marketing vice president Kathleen G. Huff said the community "absolutely" should have confidence in TMC.
"It's not unusual for hospitals to (sell) assets so they can take those funds and reinvest them in other areas of patient care," Huff said Friday.
Council on Aging input
Marian Lupu, executive director of Pima Council on Aging, said she was happy with the way TMC included her in their planning discussions, which she sees as having positive results. El Dorado's third floor will be converted into a skilled nursing facility, and its first floor will house TMC's senior programs, including its new Alzheimer's education and support program.
"They made a commitment for senior services to be there for a minimum of five years," Lupu said. "That's really all we can ask for."
But these are difficult times for all hospitals, said Greg Pivirotto, president and CEO of University Medical Center.
"We are deeply concerned about the future," in part because the Bush administration is calling for deep cuts in Medicare and Medicaid spending, which would seriously cut hospital income, Pivirotto said.
"If that happens, things are going to get much tougher in an already tough industry," he said. "I think, like the rest of us, Frank (Alvarez) is looking at this and saying 'We can't wait. We need to make sure our house is in order.'"
TMC TIMELINE
Dec. 9, 2003
TMC Healthcare officials announce plans to tear down the 60-year-old, one-story hospital at 5301 E. Grant Road and replace it with a $280 million, multi-story hospital by 2010.
Dec. 15, 2003
TMC Healthcare announces it will buy El Dorado Hospital. The purchase two months later costs the organization $32 million.
April 2005
TMC Healthcare announces plans to build a 90-bed Rincon Community Hospital on the Southeast Side, to open in early 2008. The plan to rebuild TMC is moved back two years to 2012.
May 2006
TMC Healthcare announces it will close El Dorado by year's end and remake the property into a nursing home and other services for seniors. TMC says it still plans to open a hospital on the Southeast Side by 2008.
August 2006
TMC Healthcare closes El Dorado earlier than planned, moving most of El Dorado's 500 employees to similar jobs at TMC.
December 2006
TMC Healthcare sells El Dorado Hospital to Montecito Medical of Santa Barbara, Calif. for $41.5 million. DASCO Cos. of Florida takes over management of the property.
April 26
TMC lays off 100 workers and eliminates 50 vacant positions, saying the cuts will save $6 million by the end of this year. Hospital officials reverse their earlier priorities, postponing Rincon Community Hospital indefinitely and saying rebuilding TMC will be their top priority. They still hope to open the new TMC by 2012.
