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Two Brothers Who Purchased Alvarado Hospital Understand Doctors

For all of their professional careers, Drs. Pejman and Pedram Salimpour , following their father’s example , could never resist helping a sick child.

So it wasn’t totally startling that one of the Los Angeles area’s best known physician families decided to take the case of Tenet Healthcare Corp.’s ailing Alvarado Hospital, which the two brothers purchased for $22.5 million earlier this year.

Never mind that the pediatrician brothers have never owned a hospital before, or that San Diego-based Alvarado is more than 140 miles from the medical practice their father established in Los Angeles after the family fled Iran in the early 1980s after the revolution there.

“If it closes it will affect thousands of people, so its success will not only be a business success for us but a personal one,” said Pejman Salimpour, 45, a former clinical chief of pediatrics at Cedars-Sinai Medical Center.


Not Easy

The brothers aren’t finding it easy in turning around the 306-bed Alvarado, which lost more than $3 million in 2005 and was the subject of a three-year federal probe into charges that some doctors were paid kickbacks for referring patients to the hospital.

Every other major hospital operator in town passed on making a serious bid when Tenet put it on the market last June.

They formed Plymouth Health and came forward with their offer, backed by a group of private investors led by Los Angeles-based Omninet Capital LLC, whose co-founder Parviz Nazarian is Pejman Salimpour’s father-in-law.

“I think Tenet knew that not only did we have the resources to keep the hospital open but also have the sophistication,” said Pedram Salimpour. ” we understand what doctors need in order to practice medicine.”


Investor In Qualcomm

Plymouth is the first health care industry investment for Omninet, which is better known for its early investment in the San Diego-based wireless communications giant Qualcomm Inc. But Ben Nazarian, Parviz Nazarian’s son and another Omninet principal, said the Salimpours had more to offer than family ties when they approached his firm.

“They’re both doctors and businessmen and we believe that gives them a unique perspective,” Nazarian said. “We also have a special relationship with the San Diego area, and believe that with the right owners and management, Alvarado has the opportunity to become a premier hospital again.”

Whether they succeed in turning around the hospital is, for now, an open question. One complication is that the hospital serves a high percentage of Medicare and Medi-Cal patients, which means low reimbursements.

Furthermore, the hospital has long suffered from below-average reimbursement rates from private payers, too.

Nathan Kaufman, managing director of San Diego-based health care consultant Kaufman Strategic Advisors, said that with Medicare proposing to slash its budget by $17.4 billion next year and consolidation in the health insurance industry increasing the bargaining leverage of insurers, this is not an easy time for a stand alone hospital.

“How is the hospital industry going to make up the Medicare cuts?” asked Kaufman. “By getting more out of Blue Cross, and good luck with that if you’re not a market leader like Cedars-Sinai.”

For their part, the Salimpours note that Plymouth has hospital consultants advising them and they worked closely with Tenet after the deal was announced to bring an experienced hospital administrator on board after the hospital’s chief executive quit before the deal closed.

Significantly, the final sale price was well below the $36.5 million announced last October and less than half the reported $50 million that Tenet originally sought for the hospital.

The money saved will help the Salimpours as they work with the post-Tenet management team to determine what capital improvements need to be made at the hospital, in addition to an estimated $70 million in earthquake retrofitting.

The brothers also believe that the relationships that they have built with HMOs through CareNex have helped in negotiating new reimbursement contracts.

Another advantage: San Diego has a bed shortage, Pejman Salimpour said. That works in Plymouth’s favor during negotiations with third-party payers that can’t afford to lose another network hospital in the region.

“No hospital can survive if it continues to lose money, so in order for this to work, we need fair, reasonable reimbursement rates,” Pejman Salimpour said, noting that Plymouth won modest contract increases with all but two of the hospital’s main third-party payers, where negotiations continue. “We have a ways to go, but this is a good start.”


Business Background

While new to the role of hospital ownership, the Salimpour brothers are no business neophytes. They operate CareNex Health Services, headquartered in the same Sherman Oaks building as the main Salimpour Pediatric Medical Group clinic where they are partners with their father.

CareNex provides neonatal patient management services to hospitals and health insurers in three states, with Blue Cross of California its biggest client.

Beyond their command of hospital economics, the brothers will need their soft-spoken charm to win over hospital staff, San Diego community leaders and the third-party payers the hospital will need to survive.


Deborah Crowe is a staff reporter for the Los Angeles Business Journal, a sister newspaper to the San Diego Business Journal.

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