Saint John's Health Center abruptly ousted its top two executives and most of its governing board as the Santa Monica hospital tries to grapple with years of losses and increasing competition from bigger rivals.
Sisters of Charity of Leavenworth Health System, a Catholic nonprofit that owns Saint John's and 10 other hospitals in the U.S., dismissed hospital CEO Lou Lazatin, the chief operating officer and 15 members of the hospital's 17-person board, effective Thursday.
Mike Wall, former head of Northridge Hospital Medical Center, was named interim president and chief executive at Saint John's. He replaces Lazatin, who had been the hospital's CEO since 2005.
Los Angeles billionaire Patrick Soon-Shiong, who has committed $100 million to the hospital in recent years to make it a national leader in medical research and patient care, said he was shocked and disturbed by the sudden changes. He said that Lazatin was fired and escorted out of the building Thursday and that hospital board members were then fired by email.
Michael Slubowski, chief executive of Denver-based SCL Health System, called Lazatin's departure a "confidential" matter and declined to comment in any detail.
"We thank Lou for her service," he said. "We are setting off on a new strategic direction that we think is in the best interests of the community and the hospital."
Lazatin could not be reached for comment.
The 266-bed hospital has been losing money in recent years, according to filings with state regulators. It reported a loss of $21.9 million for 2010 and $12.8 million for 2011, records show. Patient revenue last year was $891.3 million, down 8% from a year earlier.
Amid those financial difficulties, Soon-Shiong has been a major benefactor. He said he learned of the changes Thursday while meeting with Saint John's doctors, nurses and other staff members about his plans to build an institute for genomic pathology there next year. He also had plans to begin construction on a sports science center to accompany the existing Chan Soon-Shiong Center for Life Sciences.
Soon-Shiong said those expansion plans are now on hold.
"I will be evaluating our options over the next two months and having discussions with other partners in the city," he said. "I was very disappointed and aghast that the board was not, to my knowledge, consulted and that people who have dedicated their lives to helping others were treated in this way. I am really not sure of the motivations of this new leadership team."
Slubowski said he had a "pleasant conversation" with Soon-Shiong about the management changes and assured him the board of the hospital foundation would not be affected.
Hospitals are wrestling with major changes in reimbursement under the federal Affordable Care Act that reward medical providers that keep patients healthy and curb spending. In response, hospitals have been merging with one another and acquiring large physician groups.
Saint John's is the only California hospital run by SCL Health System, whose other 10 hospitals are in Colorado, Montana and Kansas.
Steve Valentine, president of Camden Group, an El Segundo healthcare consulting firm, said Saint John's faces intense competition from big-name institutions such as the UCLA Health System and Cedars-Sinai Medical Center. He said it might make sense for Saint John's to be acquired by a bigger Catholic hospital chain or to partner with another health system.
Slubowski said it's a priority to improve the hospital's finances and it will be looking to partner with area healthcare providers in order to better compete.
"At this point we are not selling the hospital to anyone," Slubowski said. "Our goal and hope is to remain a Catholic institution."
The Santa Monica hospital was founded in 1942. It sustained major damage during the 1994 Northridge earthquake and was rebuilt over time.
chad.terhune@latimes.com
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