By balancing its budget, this pediatric hospital can now make plans for future expansion.

In April 2006, Rady Children’s Hospital, headquartered in San Diego, appointed Kathleen Sellick its new president and CEO. Since opening its doors in 1954, this pediatric trauma center has focused on providing the highest quality of care for children, and Sellick’s appointment only strengthened that vision for the future.

“This is the culmination of an extensive national search by our committee of trustees and physician leaders to find an outstanding leader with experience, dedication, and a heart for children,” said Ronald Kendrick, chair of Children’s Hospital and Health Center at the time of the appointment (Kendrick passed away after a three-year battle with cancer this June). “Kathleen has a deep appreciation of the critical role that Rady Children’s plays in caring for the kids in our community. We look forward to her leadership as we enter the next stage of our growth and development.”

Keeping up
Rady Children’s is the only hospital in the San Diego area solely dedicated to pediatric care. The 248-bed facility includes 54 critical care and 38 neonatal intensive care beds, 60 medical/surgical beds, 40 hematology/oncology beds, and an additional 59 beds located at its Convalescent Hospital. In addition to its main campus in Kearny Mesa, Rady Children’s has 15 neighborhood centers dedicated to both primary and specialty care.

Rady’s service offerings range from asthma and allergy care to behavioral health, critical care, emergency medicine, cardiology, gastroenterology, nephrology, neurosurgery, psychiatry, and rheumatology for children of all ages, from birth through adolescence. Its environment is designed to be child friendly, with anxiety-reducing designs, lighting, color, and art. The hospital also sponsors San Diego’s teen run and focused Youth-to-Youth Helpline.

In January 2007, Sellick announced that, to keep the hospital up to date with state seismic regulations, nearly $500 million in building projects and technological upgrades would be needed in the next five years. According to the San Diego Union-Tribune, $350 million of the estimated cost will go to building a five-story, 279,000-square-foot acute care pavilion. The building, to be completed in 2010, will include 84 acute care beds, a cancer center, surgical center, and an NICU.

Between 1997 and 2003, the hospital lost roughly $50 million due to the rising cost of healthcare delivery, shrinking reimbursements, and a stock market dip that reduced a large portion of the hospital’s operating costs. However, Rady Children’s finished 2006 with an operating income $14.3 million in the black, bringing the hospital’s total earnings for the previous three years to $22.1 million.

While roughly $74 million of the necessary construction funds will come from Proposition 61, a taxpayer-funded measure to provide money to children’s hospitals in California, and $60 million will come from a generous private donation, Kendrick realized the hospital must increase its endowment and reserves to stay on solid ground and fulfill its construction goals. “It’s critically important for us to increase our endowment so we are not susceptible to fluctuations in the financial markets and continually rising costs,” he told the Union-Tribune in January. “We’re in relatively sound financial shape now, but we must be prepared for the future and to invest even more in our growth and development.”

Growing need
In July, Rady Children’s opened an urgent care and psychiatry center in Escondido. Rady Children’s is the 50,000-square-foot medical office building’s biggest tenant, with 7,500 square feet of leased space that many at the hospital hope will relieve ED volumes at the Kearny Mesa campus. In 2006, the Kearny Mesa ED treated 65,000 patients, and the new facility has the ability to treat 25,000. “It won’t relieve the problem, but it will help,” Dr. Katherine Konzen, medical director at Rady Children’s, told San Diego Business Journal in April.

Rady’s move to the medical office building will bring more primary and specialty care business to Escondido, including audiology testing for newborns, physical therapy services, and an integrated outpatient psychiatry and urgent care program. The outpatient psychiatry program was formerly located in a 2,500-square-foot office in Rancho Bernardo, and its urgent care services were formerly in a 4,200-square-foot location in downtown Escondido. Prior to the merger, both locations were at and, in some cases, over capacity.

“You can’t offer good customer service when you have a three-month waiting list, and that doesn’t help when you’re talking to health plans,” Konzen told San Diego Business Journal, referencing Rady’s previous waiting list for psychiatry services, which had already dropped from an average of 10 people down to three as of April.

According to Tim Jacoby, Rady Children’s senior managing director of facilities, the hospital spent roughly $630,000 on improvements to the space in Escondido, which was only a slight increase from the amount it was spending on the Rancho Bernardo and downtown Escondido sites. “It wasn’t so much about saving individual rents,” Jacoby said. “It was more about consolidating individual services into one site where they could grow.”