Firm Will Close Drug-Alcohol Treatment Unit : Comprehensive Care Says Baldwin Hills Hospital Has Lost Money for 2 Years

Comprehensive Care Corp. of Irvine said Monday that it will close its 104-bed psychiatric and chemical dependency treatment hospital near the Baldwin Hills by midweek because of the 14-year-old facility’s inability to survive increased competition in Southern California.

CareUnit Behavior Center at 5035 Coliseum St. has been losing money for two years, the company said. It lost $600,000 during Comprehensive Care’s 1987 fiscal year and another $1 million so far in fiscal 1988, which ends May 31.

About 100 employees at CareUnit Behavioral Center will be laid off today and the 21 residents will be transferred to other centers by Wednesday, the official closing date, Comprehensive Care spokesman Ken Estes said.

Industry analysts said the closing of the facility reflects the increasingly fierce competitiveness of the drug and chemical dependency treatment business in Southern California. Among the competitors are a number of large Southern California hospitals that have opened treatment centers in the past five years, including Cedars-Sinai Medical Center, Centinela and Martin Luther King hospitals.

“It’s like they (Comprehensive Care) felt they couldn’t compete with what is coming into the marketplace,” said Margo Vignola, an analyst with the New York brokerage firm of Salomon Bros.

Couldn’t Justify Expense

Irvine-based Comprehensive Care, the nation’s largest provider of alcohol and drug dependency treatment, said the neighborhood surrounding the hospital had deteriorated in recent years, creating the need for beefed-up security. At the same time, new treatment centers have opened elsewhere, making it difficult to attract patients. Comprehensive Care has directed much of its marketing effort towards West Los Angeles and the San Fernando Valley.

Estes said Comprehensive Care’s management tried to make the facility profitable by offering new programs, such as psychiatric services, to its core of drug and alcohol dependency programs. However, the company recently decided that it could not justify the expense of major renovations--including a new roof--that would be needed to meet state standards.

“We just couldn’t get paying patients,” Estes said. He said the building will be put up for sale.

He added that the company also had trouble collecting from the patients it did attract. Between July, 1986, and June, 1987, he said, CareUnit Behavioral Center of Los Angeles accumulated $1.4 million in bad debts, including inadequate reimbursements from both insurance carriers and patients.

At a charge of about $350 a day, Comprehensive Care provides a three- to four-week treatment program for detoxification and rehabilitation of those addicted to drugs or alcohol.

Estes acknowledged that Comprehensive Care is feeling the pinch of competition, reflected in both declining profit and share of patients.

Since 1981, he said, the company’s market share has dropped from 27% to about 11%. And the company’s net profit declined from a peak of $17.2 million in fiscal 1985 to $12 million in fiscal 1987. For the first nine months of fiscal 1988, the company posted net earnings of $6.6 million, down from $9.3 million during the same period of fiscal 1987.

Market Changing

However, Estes said CareUnit Behavior Center of Los Angeles is the only Comprehensive Care facility operating at a loss. The company continues to expand, he said, and has opened new centers in San Diego and Denver since the first of the year. It is scheduled to open another in Tampa, Fla., in about a month.

Those familiar with the drug and alcohol dependency treatment industry, said companies such as Comprehensive Care are having difficulty adjusting to changes in the market, including more restrictive insurance reimbursement policies. But they predicted that burgeoning demand for their service will keep them in business.

“The chemical dependency business is booming in Southern California and the closure of one facility is not indicative of a general trend,” said David Langness, vice president of the Hospital Council of Southern California.