Higher Co-Pays Product of Move To More Variety By JACQUELINE FOX Staff Reporter In case you hadn’t noticed, the days of the one-size-fits-all managed health care plan for all companies is history. Health plan providers, such as Blue Cross of California, Health Net Inc. and Kaiser Permanente and the brokers who package the deals, are now cobbling together plans to offer employer groups more options to pass on to their workers and to fit the size and needs of those employer groups. Companies who take advantage of these new hybrid products can benefit from lower premiums because their employees will have to pay for the added choices via higher deductibles and higher co-payments. But industry experts say the more the consumer knows about what they are getting and the more choices they are given, the more willing they will be to cough up their fair share. So also expect to see health plan providers playing a larger role in directly educating consumers about these new products. “What you are seeing now, with innovations in technology and new drugs hitting the marketplace, is growing demand for more choices and workers will be paying more for those choices through higher co-pays,” said Callen Lockett, vice president of public affairs for WellPoint Health Networks, Inc., parent company of Blue Cross of California. “But as individuals become more engaged and more responsible for their own premiums, they will also be demanding more. So we as an industry have to begin looking at providing more education directly to the consumer about what’s available. It’s no longer up to the employer.” Lockett was selected as the Business Journal’s honoree for the Health Care Leadership award for public policy advocate. Blue Cross recently introduced a new HMO plan called Power Select, which is said to be priced at about 15 percent below other products on the market, including its own, and geared toward employers with more than 51 workers. Although the network of physicians on the plan is said to be smaller than Blue Cross’s other plans, Power Select offers three different plan options with three different co-payments to choose from. While details are still being hammered out, Kaiser Permanente, one of the original players in managed care, is putting the finishing touches on its own new cost-sharing products. “Historically, employers have, on a percentage basis, had to spend more than their employees on health care, but that’s changing,” said Matthew Gerlach, senior vice president and Valleys Service Area Manager for Kaiser. “We are looking to introduce new products into the market just before next year’s open enrollment that break out different options for our members, but they will be paying higher co-pays for them. With premiums going up and costs on the rise for care, we are seeing these cost-sharing programs as a way for businesses to cope.” Gerlach was chosen as the Business Journal’s honoree for the Health Care Leadership award for health plan executive. Smaller clients But it’s not just the consumer who’ll need educating on these new hybrids. In-house health insurance brokers and independents who previously stuck to traditional open-system plans now must get a handle on this new frontier. That includes taking a larger interest in the little guys. “No one person has the same needs,” said Renee Glickman-Cohn, founder and executive vice president of RGEB Inc., which provides health insurance for small to mid-sized companies. “It’s just no longer fair for an employer to say to their employees ‘this is what you’ll have because this is what I think I can afford, or this is all there is to chose from.”‘ According to Glickman-Cohn, many brokers have shied away from smaller companies because they either don’t know how to sell the products that are out there for smaller firms, or they just don’t see the payoff. “People in my industry have ignored small businesses for a long time,” said Glickman-Cohn, chosen as the honoree for the Health Care Leadership award for health insurance. “The insurance agents out there believe they won’t make enough money out of the smaller guys so they just don’t think it’s worth their while. But it is, because those are businesses that will become loyal clients and it’s na & #271;ve to think they will always be small.” Steve Tough, president and CEO of the California Association of Health Plans, which represents 28 member plans with roughly 21 million enrollees, says, while price points for products and what consumers are willing to pay will likely be out of step for years to come, educating and engaging the consumer will be the new strategy for bridging the gap. “In today’s environment, a good portion of the payment for health care is made by the employer, so the employee doesn’t really have any sense of what it costs, service by service. So, we’ll see more plan providers getting directly involved with that process, and we’ll continue to see more choices on the table.”

Sector Faces Challenging Times By JACQUELINE FOX Staff Reporter Border to border, the Valley’s health care sector stands as one of the largest economic drivers in the region, with some 75,000-plus jobs and countless numbers of local and related businesses cutting a broad swath across an industry wading through some very economically and socially challenging waters. Skyrocketing workers’ compensation costs, coupled with mandates to boost worker-patient ratios amid growing medical staff shortages, all against a backdrop of double-digit health care costs with no clear end in sight, have the industry rockin’ and reelin’ like it never has before. But now for the good news. It would be next to impossible to zero in on any facet of health care in the Valley without stumbling upon some of the most qualified and revered individuals in the industry. Period. That includes hospital CEOs, pharmacists, health care reform advocates, insurance providers, business leaders who devote their resources to ensuring the Valley has the best there is to offer, and those who care for the nation’s fastest growing sector of the population, seniors. To honor them, the Business Journal conducted its First Annual Health Care Leadership Awards ceremony Dec. 3, selecting 30 individuals from a cross-section of 10 categories in the industry, and then narrowing it down from there to 10 honorees, one for each category. “I think the Valley is definitely a vibrant healthcare community because we have so many sectors represented here,” said Larry Krutchik, founding principal of The Edison Group, a national public affairs firm, and frequent speaker on health care issues. “I think the Valley represents an excellent microcosm of the country’s health care system, with some of the best qualified professionals to be found.” Our hospitals are being run by excellent financial managers who’ve taken some of the Valley’s facilities from deep in the red to black again, and often among the most difficult of circumstances. The Business Journal’s honoree for hospital CEO is Jim Sherman, CEO of West Hills Hospital, a facility teetering on the brink of closure when Sherman arrived in 1998. “The thing that’s most notable about the Valley is the fact that Olive View Medical Center is the only county facility in the region, which means that the Valley’s private sector hospitals have to do much more work to help meet the health care needs of the area’s population, regardless of an individual’s ability to pay,” said Jim Lott, executive vice president of the Hospital Association of Southern California. “And I think that the fact that they are able to do that and still provide the same level of care as in the rest of the county, is nothing short of breathtaking.” Wide range The Valley’s senior community is also in very good hands here, with hundreds of assisted living facilities ranging from 800 to as few as six beds, all focusing heavily on implementing programs designed to meet the needs of the “new senior,” one that is living longer, and one that is more active at later ages than ever before. Molly Forrest, CEO of the Los Angeles Jewish Home for the Aging, is the honoree for assisted living facility administrator, overseeing the Valley’s largest senior facility with a reputation unmatched anywhere. On the insurance side, the Valley is represented by folks who get it when it comes to small businesses the bread and butter of the local economy. Health Care Insurance Leader Honoree, Renee Glickman-Cohn, owner of RGEB Inc., stands out for her commitment to wheeling and dealing with the big health plan providers for packages that fit her customers’ needs, most of whom are small to mid-sized firms, some with as few as three employees. The health plan providers here are clearly industry leaders, from WellPoint Health Networks, Inc., to Health Net of California, to the largest and oldest open-style managed care organization in the state, Kaiser Permanente, which operates two Valley medical facilities. Kaiser’s Senior Vice President and Valleys Service Area Manager, Matthew Gerlach is the Business Journal’s honoree for health plan executive. It’s no secret the Valley is also home to some of the key leaders in the field of bioscience, with Amgen, Inc.’s CEO Kevin Sharer heading up the largest, and most well known player in that sector. But the leaders of two smaller bioscience firms here are making big strides: Dr. Grant Bitter, founder of BitTech Inc., and Edmond Buccellato, president of Advanced Biotherapy Inc. Sharer, Bitter and Buccellato were chosen as the three nominees for bioscience leader. Buccellato was selected as the honoree for his work leading his company out of financial trouble and the company’s advances in pre-market treatments for rheumatoid arthritis and other debilitating diseases, many afflicting children. Well-trained Physicians who work in the Valley’s hospitals, medical centers and private practices are armed with degrees and training from some of the nation’s top schools and medical facilities, including the honoree for medical group leader, Dr. Fredrick Russo, president of Facey Medical Group, an 80-year-old operation with 11 multi-specialty medical group locations and two eye centers. “Not only is Dr. Russo an astute businessman, he is one of the area’s finest physicians,” said Dr. Marcy Zwelling-Aamot, president of the Los Angeles County Medical Association. There are also countless Valley business leaders who volunteer their time and resources to the local health care industry. Among them is the honoree for health care business volunteer, Lee Alpert. He is the founding principal of Alpert & Barr, and has spent much of the last two decades serving as chair of the governing board of directors of the Encino-Tarzana Regional Medical Center, as well as a volunteer at the Jewish Home. Community health organizations, such as Valley Community Clinic, can trace a long list of volunteers who’ve helped keep that facility going strong for more than 30 years. “On our budget, there is no way that we could have provided the consistent care we give to tens of thousands without support from the Valley’s volunteer business community,” said Judi Rose, the clinic’s director of public affairs and a nominee for health care public policy advocate. Those who’ve served the clinic include state Assemblyman Dr. Keith Richman, chosen as the honoree for public sector health care advocate and Ira Freeman, owner of Key Pharmacy and a nominee for health care business volunteer. Freeman is a founding member of the clinic and Richman is a former board member.

Capitol Punishment: Senators Wasting Time With Repeal Guest Column by Gregory N. Lippe May I have the envelope, please? Here it is! This year’s award for the most punishing move by a legislative body goes to: the California Senate! In a move that can only be described as “punishing,” the California Senate’s Labor and Industrial Relations Committee voted to repeal SB 228, the recently approved workers’ compensation reform bill. Why did this happen? Could it be that our senators decided to show our new governor and almost two-thirds of the California voters, who’s really in charge? In other words, that the governor cannot order the legislature to abandon “politics as usual” and fix our state’s problems without regard to the special interests that have a stranglehold on many of our legislators. The recently unveiled Schwarzenegger plan for additional reforms to California’s workers’ compensation system includes a number of well thought-out additions to supplement SB 228 and potentially add up to $11 billion in savings to the estimated $4 billion to $6 billion savings that were anticipated to be accomplished by SB 228. This combined solution would make a significant dent in the current $29 billion cost of workers’ compensation. So what could be wrong with this? The answer appears to be that Senator John Burton, President Pro Tem of the California Senate and Chair of the Senate Rules Committee doesn’t do well with criticism. Burton, who formed a conference committee during the last legislative session for the purpose of arriving at workers’ compensation reform, apparently didn’t like hearing from the governor and the business community that SB 228, the result produced by the committee, although significant, didn’t go far enough to curb the flight of businesses and loss of jobs caused by the substantial rise in workers’ compensation costs. In a “sour grapes” move to punish, Burton called upon his colleagues in the Senate to repeal SB 228, thereby throwing the baby out with the bath water. The greatest disappointment is that Senator Burton’s colleagues heeded his call showing that despite the overwhelming call for change from California’s voters, “politics as usual” is apparently here to stay. It’s important to note that even Sen. Alarcon, who authored SB 228, voted for its repeal. Alarcon was a major champion of the bill’s passage, believed it provided significant reform and publicly voiced opposition to its repeal, yet, when the vote to repeal was called, Senator Alarcon said “aye.” What happened? If SB 228 is ultimately repealed, the resulting waste of time and energy will be monumental. During the last legislative session, approximately 65 workers’ compensation bills were introduced. After spending significant time considering these bills, 20 of them were moved to the conference committee composed of six members, three senators and three Assemblymembers, two Republicans and four Democrats. The bills were gutted and amended, deleting all prior language with intent language inserted that recognized the need of the legislature to reform the workers’ compensation system. The committee was charged with the responsibility of developing such reform. After a significant amount of work and compromise, companion bills SB 228 and AB 227 were produced. These bills which provide fee schedules for outpatient surgery centers, prevent physicians from referring patients to surgery centers in which the physician has an ownership interest, expand alternative dispute resolution provisions and place a ceiling on chiropractic visits, among other items, were recently signed into law by former Gov. Gray Davis. Although additional reforms such as those proposed by Gov. Schwarzenegger are needed, it would be unconscionable to scrap the results attained from the significant efforts expended to date and start over from scratch. When, oh when will our legislators stop impeding progress and return our state to economic prosperity? How can we minimize the effects of egos and special interests? The following are the anti-business bills I have chosen to profile this month: – SB 288: Provides more stringent requirements than those of the U.S. Environmental Protection Agency with respect to new and modified sources of air pollutants. Potentially creating increased costs and susceptibility to litigation. Provides one more reason for California manufacturers to avoid expanding and modernizing their facilities within the state or to leave the state entirely, thus causing the loss of more manufacturing jobs and creating a further negative impact to our economy. Status: Passed Senate and Assembly, approved by governor Sept. 22, 2003. Valley legislators voting for bill: Senate, Alarcon, Kuehl, Scott; Assembly, Frommer, Koretz, Levine, Montanez, Pavley. Valley legislators voting against bill: Senate, Knight, Margett, McClintock. – AB 47: Requires new studies and findings for Timber Harvesting Plans (THPs) that are redundant to existing cumulative impact analysis for THPs. The result will be increased costs of California timber products making California less competitive than other states and countries. California is already at a competitive disadvantage to Canada. Currently a significant amount of the lumber used in California is purchased from Canadian companies. This bill will increase the existing competitive disadvantage, resulting in the loss of more jobs and businesses. Status: Passed Assembly and Senate, approved by governor on Oct. 10, 2003. Valley legislators voting for bill: Assembly, Koretz, Levine, Montanez, Pavley, Richman; Senate, Alarcon, Kuehl, Scott. Valley legislators voting against bill: Assembly, Strickland; Senate, Knight, Margett, McClintock. Valley legislators absent, abstaining or not voting: Frommer Gregory N. Lippe, CPA, is managing partner of the Woodland Hills-based CPA firm of Lever, Lippe, Hellie & Russell LLP (LLHR) and a director of the Valley Industry and Commerce Association (VICA).

Senior Facilities Set for Changes By JACQUELINE FOX Staff Reporter Addressing a rapidly growing aging population and preparing for the large number of baby boomers poised to stampede into retirement over the next five to 10 years, present significant challenges for the Valley’s assisted living facilities. Advances in medical technology have boosted the average lifespan of seniors to well above 80. In fact, seniors 85 and over comprise the fastest growing sector of the nation’s elderly population. But the longer seniors live, the more prone they become to serious health issues, particularly neurological disorders. As such, more and more senior living facilities are adding dementia treatment units to care for patients with memory-impacted ailments, namely Alzheimer’s disease. “The huge issue we have facing us is Alzheimer’s,” said Lori Solomon, co-founder of Accent On Seniors, an Encino-based senior living placement referral service. According to Solomon, roughly 1.2 million California seniors 65 and over have some form of Alzheimer’s; 50 percent of those seniors 80 and older. In addition, most Alzheimer’s patients tend to live another 15 to 20 years after they are diagnosed, which means they demand long-term specialty care. Fortunately, new laws and regulations over the last decade have made it easier for assisted living facilities to offer dementia care services, even for the most extreme cases, where as in years past, patients with high- or end-stages of dementia were usually transferred to specialty facilities or sent home to live with family members or in-home care workers. “We are beginning to see more and more licensed facilities providing dementia care or adding dementia care units because of the extension of life,” said Ben Partington, senior care program administrator with the state Department of Social Services/Community Care Licensing division, which oversees permits for California’s roughly 6,300 licensed senior care facilities. There are roughly 1,267 licensed assisted living facilities in Los Angeles County. The agency does not break out specifics for the Valley. “Over the last 10 years assisted living administrators are setting aside places for those patients and there is a real trend in hiring workers who specialize in caring for them,” Partington said. “But because we have been able to implement new regulations to lift some of the restrictions for caring for dementia patients, we’re able to meet those demands. But those demands are on the rise.” Keeping busy On the other side of the coin, seniors are more active at 70, 80 or even 100 years of age than their counterparts of just a decade or two ago. That means it’s no longer enough to provide a room, food and medical care to keep them or their family members healthy, both physically and spiritually. The senior of today wants and often demands that, if they are going to leave their homes and go into a senior retirement setting, they expect to find activities and programs geared around their interests. That goes for the country club-style facilities as well as the smaller facilities with just 20 or 30 beds. Ditto for those boomers about to impact the market: Solomon predicts that, due to the large number of baby boomers heading into retirement, the number of seniors in the country 65 and over will jump to 40 million by 2010, 80 million by 2030. And remember, these are the seniors who spent the bulk of their 30s and 40s, not settling into old age, but tossing in aerobics classes, kick boxing and other physical fitness programs into their hectic schedules. Provided they are healthy, and predictions are they will be, golf, TV and arts and crafts simply won’t cut it for a large bulk of tomorrow’s assisted living facility consumers. ‘Young’ seniors “I would say that one of the biggest challenges we have before us is what I would call the young seniors coming into the market in the next decade, or those 65 to 75,” said Molly Forrest, CEO of the Los Angeles Jewish Home for the Aging and the Business Journal’s Health Care Leadership Award honoree for assisted living facility administrator. “For consumers to chose to give up their homes and go elsewhere, they’ll want security and safety with their needs being met, and that includes building an environment that stimulates their brain and their spirit.” The Jewish Home, is the Valley’s largest senior living facility, with roughly 800 beds and some 700 employees. “It’s about entertainment, yes,” said Forrest. “But it’s also about expanding their universe with programs that feed their spirit. They say that depression is caused by old age. But that’s just not true. It comes when we fail to give the support for those life losses that come with age, such as not being able to drive a car or take trips.” The Valley’s larger, country club-style facilities, such as Sunrise Assisted Living, are far outnumbered by the area’s smaller facilities with as few as 20 to 30 beds. And, according to Solomon, those smaller facilities are not being outdone by the large senior complexes, because in her view and others in the industry, quality is measured, not by size or amenities, but by the care itself. “I would say the San Fernando Valley is able to meet the needs of all seniors, with plenty of choices,” said Solomon. “And that ranges from the most opulent to the many smaller, more modest facilities we have here. And, despite the bells and whistles that the big chains can provide, it’s really the caregivers themselves that make a facility standout.”

Valley Briefs Tekelec Opens in Mexico Tekelec, makers of switching and signaling devices for telecommunications, has opened an office in Mexico City. The company said it hopes to take advantage of the growing telecom market in Mexico, an industry that is expanding by nearly 15 percent annually. The Calabasas-based company also has operations in London, Brazil, China, Russia and Singapore. Among its clients in Mexico are Telecel SA and Nextel Communications. For the third quarter of 2003 ended Sept. 30, Tekelec earned $8.5 million or $0.089 per share on revenues of $70.7 million. That compares with earnings of $35.7 million or $0.16 per share, on revenues of $73.5 million in the comparable period last year. Tekelec President and CEO Fred Lax commented, “Our team executed very well during the third quarter with revenue increasing 12 percent sequentially, and orders up by 10 percent sequentially. Creative Computer Reports Loss Creative Computer Applications, Inc. (CCA), a provider of information systems for hospitals and other health care providers, said it lost $37,492 or $0.01 per share for the company’s fourth fiscal quarter ended Aug. 31 on revenues of $1.7 million, versus net income of $224,639 or $0.07 per share on sales of $2.2 million in the same quarter of 2002. For the full year, CCA recorded net income of $94,101 or $0.03 per share and sales of $7.4 million. The previous fiscal year, CCA netted $431,659 or $0.13 a share, with sales of 7.8 million. President and CEO, Steven M. Besbeck, attributed the declining sales and earnings to the sluggish economy and the healthcare industry’s preoccupation with the Health Insurance Portability and Accountability Act compliance issues. SMTEK Wins New Contracts Moorpark-based SMTEK International, Inc., a provider of electronics manufacturing services, announced that it has been awarded contracts expected to provide approximately $16 million in revenue per year. In one case, SMTEK won a contract expansion for its medical segment division. The two new contracts affect the company’s aerospace and industrial instrumentation businesses. SMTEK’s contract expansion will be handled in its Thailand facility. The new contracts will be fulfilled from Southern California and Massachusetts. THQ and Sega Partner THQ Inc, and Sega Corp. have announced a co-publishing agreement under which the companies will release two new Nintendo Game Boy Advance Adventures based on Sonic the Hedgehog. The companies previously released two other Sonic-branded games for the Game Boy Advance that boast combine sales of approximately 1 million units. Senator Feinstein in the Valley Senator Dianne Feinstein is slated to present a “Washington Report” and discuss current issues affecting the State of California and the Nation, to San Fernando Valley and community business leaders on Thursday, December 11, at the Walt Disney Studios in Burbank. This is the first time in five years that Feinstein has addressed the Valley. The event is hosted by the Economic Alliance of the San Fernando Valley and the Mid Valley Chamber of Commerce. RSVPs are mandatory because of security clearances required. Contact the Economic Alliance at (818) 379-7000 no later than Dec. 9. VICA Holds 54th Annual Meeting The Valley Industry and Commerce Association will hold its 54th Annual Meeting Thursday, Dec. 11 at the Universal Hilton Hotel, Universal City, beginning with a reception at 11:15 a.m. followed by a luncheon at noon. Jim Parker, CEO and vice chairman of the board of directors of Southwest Airlines will give the keynote address. Mayor James Hahn will give the 11th annual “State of the Valley” address, followed by the chairman’s report by VICA Chairman, Fred Gaines, election of the 2004 board of directors and officers and presentation of the 2003 Harmon Ballin award. The cost is $55 for VICA members, $65 for nonmembers. For more information, call (818) 817-0545. Council Consulted The Sherman Oaks Neighborhood Council’s land use committee is taking a front-and-center role in the early planning stages of two proposed developments in the area. According to Ken Gerston, council president, his panel was approached a couple of months ago by representatives from M. David Paul & Associates, a developer planning to build a mixed-use complex at Sepulveda Blvd. and Camarillo Street. Gerston said the project calls for roughly 50,000 square feet of retail and approximately 400 units of housing. He said the developer has asked the council to provide community input on the project.

Is Higher Education Once Again Just Available to the Privileged? COMMENTARY By JOE HOOVEN In the summer of 1961 I had to make a hard decision. Graduating Los Angeles High School, I could see a summer of partying, taking short trips in my Impala SS and a promotion from box boy to apprentice clerk waiting for me at Ralphs – all the while having the joy carrying over from participating on our high school football team that played for the city championship. I had been an average student, graduating with a 2.5 grade point average. Yet I had a great desire to learn. My father was a composer-arranger in the music business and my mother a songwriter. There were no college academic or athletic scholarships offered, in fact there wasn’t much in the way of finances to pursue higher education. I figured I’d spend the summer thinking about what I wanted to do with my life. In my mind was the fact that no member of our family had ever graduated college. I yearned to be the first. I knew deep down that I had to pursue higher education. At 18 years, it didn’t matter that I had no idea about a career, that I barely had finances, or that I had no concept of how to study in a higher education atmosphere. At 18 years old, I had parts of a dream, and I had the push. So that’s what I decided in the summer of 1961. I inquired about entry to the University of California system. That’s when I learned about the Donohoe Act, a master plan for higher education passed by our state legislature in 1960. Already the largest college population in the country, California created a tripartite higher education system including community colleges, California State Colleges, and the University of California. Rejected by UC, I researched the community college system. I learned that enrollment in a community college was similar to stepping onto a ladder, step by step upward, leading to a transfer to UC or State. I enrolled at Los Angeles City College. The price was right. Tuition of $2.50 per semester. The only other cost was books. I was in. In September I carefully guided the nose of my Impala into the parking lot at Vermont and Monroe. I walked across Vermont and entered my first class. Sociology 1. I spent 3 years at City College. I attended classes with clerks, cabdrivers, waitresses, security guards, single mothers, gangbangers, and ordinary high school graduates. I finally learned how to study with discipline. I was part of an education system that really works. Community colleges accept people from all walks of life, gives them many chances, and in every case changes their lives forever. It is a system that allows one to climb the ladder upward. Fast forward 42 years to 2003, the state is in the biggest budget crisis in history. We have $38 billion in debt and a new governor. Community college budgets were cut $230 million for the year. There were 200 classes dropped at Los Angeles Valley College, 250 dropped at Pierce, 40 dropped at Mission. Tuition has risen to $18 per unit, up from $11. It’s estimated that 50,000 students will drop out statewide. The question is asked, what happened to affordable education for all? For thousands, community college is the key to social mobility and an escape from limited finances. Community colleges are a successful system of education, but the system must be rebuilt. Joe Hooven is a board member of the Patrons Association of Los Angeles Valley College, Immediate Past President of the Universal City-North Hollywood Chamber of Commerce and President of Best Window Treatments Inc., Burbank. Any reader wanting to submit a guest commentary for consideration can call Business Journal Editor Jason Schaff at 818-316-3125 or e-mail him at [email protected]

THE BRIEFING Model Train Store Has Long Ride on Tradition With kids today spending the majority of their time scheming to advance to the next level on Grand Theft Auto: Vice City, it might seem like it’s getting harder and harder to attract them to traditional hobbies like model train collecting. Yet Gary Keck, owner of Burbank’s The Train Shack, has succeeded in the model train game since 1985. Raised on the Westside of Los Angeles, Keck attended Hamilton High School and USC, majoring in history. He originally planned to attend law school, but life got in the way. Keck married, had children, and got a job at Thrifty Drug in the labor relations department, settling worker’s grievances. A lifelong passion eventually got the best of him, and eighteen years ago, Keck jettisoned his labor relations career to open The Train Shack, a retailer of collectible and new model trains. From an inauspicious beginning in a building that was practically a shack, Keck watched his business flourish, moving into new digs four years later. A family-run business, The Train Shack is one the largest stores devoted exclusively to model trains in Southern California, Keck said. The store has trains for all ages on stock, with brands including Lionel, LGB MTH, K-Line, Marklin, Kato, Atlas. However, for all the variety it offers, the Shack relies on an old fashioned emphasis on speedy high-quality service to cater to its loyal clientele. “I had been working in labor relations but doing train shows on the weekends. I decided that was a lot more fun and I decided to open a store. I’ve been into trains since I was nine, but I kind of lost interest as I got older. But when my son was four, I decided that he might want to get involved in trains. I got my old stuff out and he didn’t exactly take to it right away. But I got involved again and I really had a great time. I began doing train shows. “Today with Ebay, train shows, and model train stores, the business is getting a bit more complicated. Business is doing okay, it’s a niche type business. There’s a lot of competition, and you’ve got to make ends meet with a small staff. The key to our business is the service aspect. We’re the longest running train store in the area and owning a business has been a lot of fun. “There’s many positives and negatives in the train business. I certainly wouldn’t recommend it to anyone. I’ve gone from building a business from scratch to being on the verge of retiring. My two children mainly run the business now. I’ve been lucky to have had a great clientele. We do quite a bit of business from word of mouth. “It’s going to be more difficult in the train industry for a while. It’s hard to get younger people into it with all the distractions coming from video games, television, and model airplanes.” Jeff Weiss

North American Scientific Sees Payoff in New Strategy CORPORATE FOCUS By SHELLY GARCIA, Senior Reporter Over the past three years, North American Scientific Inc. has acquired three companies in order to expand into some of the newest areas of radiopharmaceuticals. But none of that mattered much last month when the company announced it would have to extend the phase 2 clinical trials for one of the new products it is developing. The news sent shares in the Chatsworth-based company plummeting 75 percent to $7.69 on Oct. 14, the day after the announcement, compared to a previous high of more than $11, although shares climbed back to the $9 range by the end of the last week. Taking a beating for testing setbacks comes with the territory in the biosciences industry, but at North American, the recent Wall Street reaction overshadowed a larger repositioning of the company that has been underway since 2000 and one that shows signs of finally paying off. “We were projecting $14 or $15 million in revenue this year and next year we were anticipating a rate of $20 million,” said L. Michael Cutrer, CEO of North American. “Now with NOMOS, we’re probably looking at something like $58 million.” NOMOS Corp. is the latest in a string of acquisitions designed to position North American as a vertically integrated provider of products and services for radiation oncology. The just-announced deal is expected to close early next year. In addition to NOMOS, North American Scientific also acquired Theseus Imaging Corp. in Worcester, Mass. in 2000 and, last August, the company bought Radiation Therapy Products, a Seattle firm. Along with brachytherapy seeds, a therapy used to treat early stage prostate cancer and North American’s first entry into the radiopharmaceutical field, these acquisitions are designed to position the Chatsworth company as a vertically integrated supplier to the industry. Building in-house At the same time, North American moved this year to build its own sales and marketing team instead of the distribution agreement it has had over the past five years with Mentor Corp. “So what’s happened now is we have more or less reinvented ourselves,” said Cutrer. “The reason we weren’t doing better from a revenue standpoint, we did take a hit as we transitioned (the sales team). But we got our transition team up and running and we acquired NOMOS, which will help drive revenue going forward.” North American’s most recent quarterly results reflected a decline in revenues to $3 million from $5.3 million in the like period a year ago due to the transition to an in-house sales team and the R & D; costs for Hynic-Annexin V, the product now in clinical trials. The company recorded a loss for the period, which ended July 31, of $2.8 million or $0.28 per share, compared with a loss of $350,000 or $0.03 per share for the comparable period in 2002. “The Annexin program, we’re spending about $1.6 million in the third quarter, on $3 million in sales, so it’s not insignificant,” said Cutrer. “This year we also incurred the cost of the sales and marketing force, and so earnings and operational costs are not representative of where we expect to be.” The payoff on the NOMOS acquisition should begin as early as next year. NOMOS invented what’s known as “intensity modulated radiation therapy,” a form of cancer treatment that concentrates the dose of radiation on the tumor itself, with less impact to the surrounding tissue. Because the radiation can be delivered so accurately to the exact site of the tumor, higher doses can be used, promising greater success in the treatment of the cancer. Market growth expected IMRT currently accounts for only about 20 percent of the treatments used for prostate, head and neck cancers as well as any tumors where sensitive surrounding tissue such as optic nerve or the brain must be protected from high levels of radiation. But it is expected to grow dramatically. “Because of its accuracy, it has been projected that it could be as much as 80 percent of external treatment options,” Cutrer said.

Macy’s, Bloomingdale’s: Hard to Tell the Difference? RETAIL By SHELLY GARCIA Late last month Macy’s Fashion Square in Sherman Oaks unveiled a new, gussied up ready-to-wear department, with 14 new designer labels including such A-list names as Marc Jacobs and Trina Turk. The new selection, which will be further expanded in the spring with designers including Killah, a division of Miss Sixty, and Moschino, fits well into the mix of Westfield Shoppingtown Fashion Square, which draws an upscale shopper, including stylists working for the studios to the East. But what’s unusual about the facelift at Macy’s is that the new selection, more often than not, overlaps directly with the offerings of the mall’s other anchor, Bloomingdale’s, just feet away. Even more perplexing, Macy’s and Bloomingdale’s are both divisions of the same company, Federated Department Stores Inc. There was a time when the different units of a department store company were easily distinguishable one chain might appeal to moderate price shoppers and another might focus on a more high-end clientele. But as department stores have been squeezed out of the mid-priced niche by retailers like Target and Kohl’s, more are turning to high-fashion, even if their brethren occupy the same territory. “Macy’s, in their attempt to try to become more important in the retail mall environment, is doing what a lot of other big name retailers are doing, and that is showcase the luxury market,” said Marshal Cohen, chief industry analyst for NPD Group, a market information company in Port Washington, N.Y. “But what ends up happening is at the same time Macy’s is doing it, so is Bloomingdale’s and so is Nordstrom. In many cases they end up looking a lot alike.” Macy’s, which is traditionally a mid-priced department store, says the changes were made to meet customer demand. “We wanted our assortment to reflect the needs of our customers,” said Amy Pierce, the store manager at Sherman Oaks. “We continually ask for feedback from them so that we can meet their needs.” But others point out that shoppers still want the moderately priced fare that Macy’s once offered, only now they are more likely to look for it at a wider variety of stores. “They’re relying on the old days when the consumer was dedicated to a store. You went to Bloomingdale’s because it matched your expectations,” said Cohen. “That’s not true anymore. Today, 56 percent of consumers shop across the distribution channels, so every other shopper is shopping at a different store. It’s a major issue.” Holiday Heat ‘Tis the make it or break it holiday shopping season, and there is more than the usual hand-wringing this year. First, there is a great deal of uncertainty over how much consumers will be willing to spend. And competition is expected to be more brutal than it’s ever been. Added to those dynamics, shopping malls have another dilemma. Aggressive store expansions in recent years has made one mall look pretty much like the next. All are looking for a point of differentiation. For Westfield Holdings Ltd., which operates Westfield Shoppingtown Topanga in Canoga Park, Shoppingtown Promenade in Woodland Hills and Shoppingtown Fashion Square in Sherman Oaks, among others, at least part of the answer lies in an elaborate promotion that combines charitable gift giving with special discount offers to shoppers. The promotion, called Westfield Works Wonders, held last weekend, was timed to capture shoppers’ attention before the official start of the holiday shopping season Thanksgiving weekend in hopes of keeping shoppers loyal throughout the season. In Sherman Oaks, Westfield distributed discount coupon brochures featuring most of the stores in the center to about 30 non-profit community groups in the area, from Cat Connection to Sherman Oaks Elementary. The groups in turn distributed the brochures to their members, who then can ask the mall to credit their favorite charity for the purchases they make on the designated day. A $7,500 cash prize is divided among the participating non-profits based on the purchase tally assigned to each one. At Topanga Plaza, shoppers buy tickets to a dedicated night of shopping from their local community groups about 70 organizations ranging from the West Valley Boys and Girls Club to the local high school soccer team. The organizations keep the funds collected from the tickets sold and the shoppers in turn get stickers that entitle them to discounts at most of the stores in the mall the individual retailers set their own promotional offers. Last year, participating charities raised $30,000 from the event, which draws about twice as many shoppers more than 65,000 as a typical Sunday night at the mall. Both centers offer other freebies and prizes to shoppers, such as a free photo with Santa, often tied to making a return trip to the mall. “Whatever we can do to jump start the holiday season is obviously going to be a plus for the retailers and Westfield Works Wonders is a way we can maximize the amount of exposure we get and the stores get,” said Najla Tabbah, marketing director at Westfield Shoppingtown Fashion Square. Malls have increasingly added services and amenities in hopes of garnering shoppers’ loyalties for the holiday season, and this year, with the jury still out on how strong holiday sales will be, many have added new services. Fashion Square has added designated parking spaces for expectant mothers close to the mall’s main entrances, for example. Shoppingtown Topanga this year has added an ice rink at the corner of Victory Boulevard and Owensmouth Avenue. “I think there is shopper loyalty because of these things we do,” said Beth Silhasek, marketing director of Westfield Shoppingtown Topanga. ” This is the first installment of a new Business Journal feature focusing on retailing and marketing in the greater San Fernando Valley. The column will appear periodically. Please send news and comments to Senior Reporter Shelly Garcia at (818) 316-3123 or by e-mail to [email protected].