Three companies from our region will be competing next month in the Greater Los Angeles segment of Ernst & Young’s Entrepreneur of the Year awards.

Rick Stollmeyer of MindBody, Jessica Firestone of Tempest Telecom Solutions and Jeff Green of The Trade Desk are among the 19 finalists.

The program is now in its 27th year, and I’ve made the trek to the awards event at a swank location in Los Angeles during most of the past 13 years that the Business Times has been publishing. Although there’s not supposed to be cheering in the press box, I find myself rooting quietly for our tri-county entrants to take home the hardware.

The Entrepreneur of the Year program has done a good job of recognizing that the Highway 101 corridor punches above its weight in producing noteworthy businesspeople. (Full disclosure: I was a semi-finalist myself a number of years ago.)

But it’s also true that some world-class companies and their owners have been passed over for the top prize — John MacFarlane, founder of software.com and now head of Sonos and Lynda Weinman of lynda.com among them — while others such as Killick Datta’s company, Global Feet, are no longer around. I thought that Pete Jordano of regional food distributor Jordano’s deserved at least a nod as a finalist, and I thought that past winner Mike Towbes should have joined Sara Miller McCune in the national round of competition that follows the LA awards.

It seems to me that in recent years, the program has not been as engaged in the emerging technology sector in our region as it was in the past. And since the awards categories are not announced in advance, I’m never happy when the evening program pits two regional stalwarts against each other in the same industry sector.

This year I have my hopes that the judges will recognize at least one of our region’s three finalists as a winner — and I’m glad that there is representation from all three counties in our region. Here’s what I hope the judges take into account:

• For San Luis Obispo-based Mindbody and CEO Stollmeyer, it may be hard to appreciate the incredible impact that one company can have on a small community. The software that Mindbody has brought to the fitness, health and yoga studio space has had a huge global impact, but perhaps just as important, Mindbody has become the new face of tech in the SLO region and one of the county’s largest employers with more than 300 employees. The firm has said it would like to staff up to as many as 1,000 employees in coming years. That is a huge development for the future of the Central Coast as a technology center.

• For Santa Barbara-based Tempest Telecom, the noteworthy story is, at least in part, the rise of women to the top ranks of the tech sector. Picking Firestone of Tempest in 2013 might be a quiet vindication for skipping over  Weinman of Lynda.com a few years back.

• Finally, for The Trade Desk and founder Jeff Green, there is just something about the entrepreneurial DNA in our region. Green was involved with an advertising exchange based in the Santa Barbara area that was sold to Microsoft — and now,  just a few years later, he’s been wildly successful in building a new form of advertising exchange service that operates at a blazing fast speed and has attracted a lot of attention.

They are up against some stiff competition. Other finalists include Mel Elias, CEO of The Coffee  Bean  & Tea Leaf; Jeff Stibel of Dun & Bradstreet Credibility; and Bob Sinnott, head of money manager Kayne Anderson.

Because there may inevitably be a built-in bias bias in favor of established names within LA County, the fact that none of our finalists has wow-factor name recognition could make it a long night.

But for now, let’s cross our fingers and recognize that between them, this year’s finalists have created more than 10,000 jobs and increased revenue 53 percent since 2010. That’s according to an analysis of data supplied by the finalists to the Entrepreneur of the Year folks.

The winners will be announced Academy Awards-style at a June 18 dinner at the Beverly Hilton Hotel. We’ll see you there — or bring you a full report when the results are in.

• Contact Editor Henry Dubroff at hdubroff@pacbiztimes.com.

And what’s behind a hospital in the city of Santa Barbara asking twice as much as a facility in nearby Lompoc? And perhaps more puzzling, why is the payment these hospitals actually receive generally the same even though asking prices vary so widely?

Those are the questions raised by a report from the Centers for Medicare and Medicaid Services, a federal government agency that collected data from nearly every hospital in the country. The numbers show huge discrepancies between what hospitals charge for common inpatient procedures, even among hospitals in the same geographic area.

Sierra Vista Regional Medical Center in San Luis Obispo, for example, charges $102,000 for major joint replacement. Compare that to the $66,000 Santa Barbara Cottage Hospital asks for, or the $32,000 charged by Lompoc Valley Medical Center. Sierra Vista’s price is almost identical to the amount listed for Community Memorial Hospital in Ventura, but take a look at other common procedures and those two hospitals vary widely in their pricing for those operations.

The amount a hospital charges Medicare for a procedure, though, is very different — and often much higher — than the amount the hospital eventually receives from the agency. And notably, the amount Medicare reimburses each hospital for the same procedure is pretty much the same.

For joint replacement, for example, Sierra Vista charges nearly seven times more than the amount Medicare typically reimburses for the cost of the procedure. The agency that released the data, which includes the 100 most common inpatient procedures covered by Medicare at more than 3,300 hospitals around the country, said it did so as part of the Obama administration’s quest to make health-care providers “more affordable and accountable.”

So far, though, it appears that the data is leading to more questions than answers.

“Charges are completely irrelevant. Nobody pays hospital charges,” Jan Emerson-Shea, a spokeswoman for the California Hospital Association, told the Business Times. “Medicare doesn’t pay those charges. Commercial health plans don’t pay them, because they negotiate with hospitals … The charges you see are irrelevant numbers.”

Uwe Reinhardt, an economics professor at Princeton, explained the price-payment discrepancy another way in a May 10 column for the New York Times. “‘Charges’ are the prices that a totally inebriated foreign billionaire would pay a U.S. hospital if his wife were not around to control the bloke,” he said.

Reinhardt’s point is that if the data is offered to help patients shop around for the best price for medical procedures, it doesn’t help all that much because it’s unlikely that a patient — or Medicare, or the patient’s insurance agency — would actually pay the asking price.

Joan Bricher, chief financial officer for Santa Barbara Cottage Hospital, said Medicare usually reimburses about 70 percent of the “charge” price for a given service, and Medi-Cal typically pays about 50 percent. The majority of Cottage’s patients are covered by either Medicare or Medi-Cal.

For hospitals in the Tri-Counties, the numbers indicate that, at least for patients who are covered by Medicare or Medicaid, shopping around to find the best prices for medical procedures isn’t all that helpful. “What actually matters is that Medicare pays each hospital almost the same amount. So it doesn’t really matter what hospital you choose,” Emerson-Shea said.

Take the example of treatment for simple pneumonia. According to the data, Twin Cities Community Hospital in Templeton asks for $48,018 to treat the condition, while Marian Regional Medical Center in Santa Maria charges $21,162 and St. John’s Regional Medical Center in Oxnard charges $32,054. But even though the so-called charges differ by tens of thousands of dollars, the amount that Medicare pays the hospitals is very similar. Medicare reimburses Twin Cities an average of $4,925 for treatment of simple pneumonia. The program pays Marian, which charges almost $30,000 less for the treatment, almost the same amount — $5,427. And St. Johns receives an average of $5,489 from Medicare.

For private insurance companies, Emerson-Shea said, the story is similar. Those companies negotiate payments with hospitals based on a variety of factors, including how many of that particular procedure the hospital performs, the severity of the patient’s sickness or injury, and the cost of labor in the community where the hospital is located, among many other determinations. The “charge” number is given little or no consideration.

Patients and their insurers aren’t likely to use the data from the Centers for Medicare to choose which hospital they go to, said Alwyn Cassil, a spokeswoman for the Center for Studying Health System Change, a health policy research agency in Washington, D.C. “Charges are an artifact of hospital billing practices,” Cassil told the Business Times. “There’s a lot of interest in transparency, and many people think if we could just somehow help people understand payments and costs, it would magically make the system function better. But the reality is that the idea that you can use this data to shop for health care doesn’t make sense.”

Cassil, Emerson-Shea from the California Hospital Association, and Cottage Hospital’s Bricher all said patients are likely to make hospital selections based mostly on their health insurance plan and how much their particular insurers will pay for a certain procedure at a certain hospital.

How hospitals determine ‘charges’

If the amount a hospital says it charges for a service, treatment or procedure is irrelevant to the amount it’s actually paid by Medicare — and if charge information is largely irrelevant to consumer decision-making — why do hospitals list those prices at all?

According to a statement from C. Duane Duaner, president of the California Hospital Association, the data “highlights the complexities involved with the way our nation currently pays for the delivery of complex hospital patient care services. The current hospital pricing and payment systems weren’t designed for individual patients to receive bills directly. Rather, they have evolved since the enactment of Medicare in 1965 into what is often a convoluted list of charges for every item or service.”

The law that put Medicare into effect required every hospital in the country to maintain a document called the “chargemaster,” which listed the price for every service and procedure. At that time, Medicare paid the listed prices. In the 1980s, Medicare moved away from that payment system to one using so-called diagnostic-related groups — a system still in place today. Under that system, hospitals classify services, products and procedures into a “group,” and it is prices for those groups that are listed on the Centers for Medicare data report. Essentially, Emerson-Shea said, the new payment system rendered the “chargemaster” system almost obsolete, but hospitals are still required to maintain those documents.

The amount hospitals aim to collect from Medicare and private insurers, Bricher said, is largely unrelated to the prices listed. She said Cottage Hospital takes many factors into account. The hospital starts with the base cost of the procedure, which includes supplies and drugs, then adds other costs such as labor. The cost of procedures vary wildly between hospitals, she said, partly because services and patients are always different. “A knee is not a knee is not a knee, and a sick baby is not the same as a well baby,” she said.

Bob Baden, chief financial officer at Lompoc Valley Medical Center, said his hospital also determines the base price of a service by looking at the cost. He said that although the hospital tries not to increase prices year by year, it does review Medicare pricing to make sure the hospital is charging at least as much as Medicare typically reimburses.

St. John’s Regional Medical Center and St. John’s Pleasant Valley Hospital, located in Oxnard and Camarillo, respectively, sent the Business Times a statement. “Our pricing is set to ensure that the needs of our hospitals and communities are met, and represents the cost of doing business in the Ventura market. Some of these costs include labor, equipment, seismic improvements, pharmaceutical costs, etc.,” the statement says.

A spokeswoman from the three Dignity Health hospitals on the Central Coast — Arroyo Grande Community Hospital, French Hospital Medical Center in San Luis Obispo, and Marian — said their prices are designed to reflect the needs of the community, balanced with the cost of doing business.

The other hospitals in the Tri-Counties either didn’t respond to requests for comment or declined to comment.

Pricing reform proposed

Many experts say that to achieve pricing transparency, the system must change. “As the hospital community in California, we realize the system doesn’t make sense,” Emerson-Shea said, adding that the state’s hospital association is using next year’s implementation of the Affordable Care Act as a catalyst to find a method to overhaul the pricing system.

On a federal level, the American Hospital Association is working on the same problem. “The complex and bewildering interplay among ‘charges,’ ‘rates,’ ‘bills’ and ‘payments’ across dozens of payers, public and private, does not serve any stakeholder well, including hospitals,” American Hospital Association President and CEO Rich Umbdenstock said in a statement. “The AHA and its members stand ready to work with policymakers on innovative ways to build on efforts already occurring at the state level.”

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But it’s not another clash of commercial giants such as Cumulus Media and Clear Channel Communications. The contenders are KCBX and KCLU, two nonprofit public broadcasters that carry content from National Public Radio and similar syndicates. They receive some federal funding, but much of their operating budget comes directly from listener donations.

Both stations say they have experienced a surge in listener interest.

San Luis Obispo-based KCBX, which can be heard from Santa Barbara to Salinas, replaced its afternoon classical music schedule with news and information and has brought on a popular local call-in show called “The Reluctant Therapist.” Only a few months after the change, the station experienced its most successful pledge drive ever.

Thousand Oaks-based KCLU, which can be heard from East Ventura County through Goleta, has purchased a station in Santa Maria that will expand its footprint all the way to the Five Cities area and bring it right to KCBX’s doorstep, competing for listeners and donors. KCLU General Manager Mary Olson said listener interest drove the purchase.

“It’s the same factors that had us expanding into Santa Barbara in 1998. People living in Santa Barbara or just driving toward Los Angeles would listen to our station and like what they heard, and we started getting calls,” Olson told the Business Times. “The same thing has happened here. … People are living outside the Santa Barbara and Ventura area even though they may be working there. One of the places they’re moving is Santa Maria. We started getting the same message: I started listening to you during the day, and I want to have you at home in the evenings.”

Olson said the Santa Maria station’s programming will vary from what it broadcasts in Ventura County on 88.3 FM and South Santa Barbara County on 102.3 FM and 1340 AM. While staples from National Public Radio, Public Radio International and the BBC will likely be similar, other material such as traffic, weather and Central Coast news will be unique.

“We’re going to be expanding the scope of our news coverage. That will include stories and features that will just be heard on 89.7 FM [the Santa Maria frequency],” Olson said. She said that coverage would range from stories about Santa Barbara County governance to profiles of Central Coast business and community leaders, among other things.

At KCBX in San Luis Obispo, the station replaced classical music with news and information programs during its 1-4 p.m. slot. The decision was a tough one — arts and cultural programming are part of the station’s mission — but when all-classical-music station KUSC brought a repeater to San Luis Obispo several years ago, KCBX started to lose some classical listeners. At the same time, other listeners had been requesting more news and information programming, said General Manager Frank Lanzone. KCBX decided to take the plunge and switch, and within just a few months, listeners signaled their approval with their dollars. “The drive did really well — we had never made quite that much money in such a short period of time,” Lanzone told the Business Times. “In the past, it’s been easy for us to just go with the flow and leave things the way they were. With the possibility of losing federal funding now more possible than it’s ever been, we’ve had to pay attention to the business end more than in the past.”

The increased interest in news and information programming comes at a time when most commercial radio stations have cut back or eliminated straight news coverage. “We’ve had the quality news with Morning Edition and All Things Considered and have NPR’s newscasts throughout the day. It’s always been part of what we do and what people appreciate. Now, we’re giving them more of that, and it’s seeming to make a difference,” Lanzone said.

KCBX has also debuted a locally produced hour-long show called “The Reluctant Therapist” with part-time Cal Poly instructor and working marriage counselor Elizabeth Barrett. Barrett’s show was once a scripted 15-minute format, but she now hosts a wider-ranging discussion about mental health and takes calls and comments. Lanzone said it’s been a hit.

“It had only been on since January, and it’s only on once a week, and during the pledge drive it received considerable mention,” Lanzone said.

When KCLU comes on the air on the Central Coast in June, the question will become not just where listeners tune in, but where they send their pledge drive dollars. Olson said that she does not view KCLU’s move to Santa Maria as a move to compete with KCBX.

“Expanding awareness of public broadcasting in the area is going to have a positive effect on both of our stations,” Olson said. “Each station has it’s own personality – it’s like a person. Stations reflect their personality, and KCBX is unique.”

But Lanzone said there would be direct competition. While KCLU is a public service of Thousand Oaks-based California University in Thousand Oaks, KCBX is an independent nonprofit whose sole mission is to run the radio station.

Lanzone said that KCLU and KCBX will be “so closely formatted, their audience is our audience. Our programs are their programs. There’s no place else for them to draw from. I’m concerned about it, but on the other hand, we’ve got longevity and we’ve got loyalty. People understand what we’re doing, and I think they’ll continue to support us.”

• FULL DISCLOSURE: The Business Times provides volunteer news and commentary for a daily business news segment for KCLU.

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Sarah Gallagher, president and CEO of ThinGap, a company that makes lightweight motors with extremely good power density. ThinGap’s newest technology could find uses in everything from unmanned aerial vehicles to electric cars.
(Stephen Nellis photo)

Ventura-based ThinGap will soon roll out a new line of advanced motors that could find uses in everything from unmanned aerial vehicles to electric cars.

For more than a decade, ThinGap has been making lightweight motors with extremely good power density — that is, they produce more than three times the horsepower per pound of motor than the competition.

The company has sold more than 140,000 units, finding favor in applications where weight is critical, such as unmanned aerial vehicles and portable oxygen concentrators designed to replace bulky metal tanks, giving patients better mobility.

A traditional electric motor contains what’s called a stator. It’s a stationary ring made out of an iron-bearing material and wrapped with coils of wire. A magnetic rotor is suspended inside the stator, and when electrical current runs through the stator’s coils, it causes the magnetized rotor to turn as a motor. Conversely, if the rotor is turned by an outside force, its magnet induces a current in the stator coils to generate electricity.

ThinGap’s original technology replaced that iron stator with a standalone etched copper sheet with a special pattern that caused the rotor to move when electrified. Now, the company is moving on to a “composite stator” that embeds conductors in a different material, which the company can’t yet disclose because a patent is pending.

“It’s a new take on electromagnetic machine design,” said Sarah Gallagher, president and CEO of the company.

Aside from the weight savings that come from eliminating a bulky iron stator in a motor, there are also some performance bonuses.

When a traditional motor is used as a generator, the iron stator can reach a point called “magnetic saturation” where the motor can’t generate any more electricity even if the rotor is turned faster. That doesn’t happen in ThinGap motors.

Moreover, because there’s no iron in the stator, the rotor isn’t magnetically attracted to the stator. That attraction is always present in traditional motors, and it creates a jerkiness as the rotor has to overcome the force of its attraction to the stator.

That doesn’t happen in ThinGap motors, making them extremely smooth. In turn, that allows them to be used for things like polishing silicon wafers, where even the slightest jerkiness could cause imperfections in the surface.

“When you’re looking for high precision, that’s where the smoothness of our motors comes in,” Gallagher said.

One of the biggest market opportunities for ThinGap is unmanned aerial vehicles, which Ventura County is pushing to become a testing ground for through various channels.

ThinGap motors are already being used as generators in some of those vehicles. The company recently completed a project with the Defense Advanced Projects Research Agency to test out a new motor that could be used as the main propulsion for an unmanned aerial vehicle. “The goal was to have a 440 pounds of thrust. It was for take off and landing,” Gallagher said.

If the UAV manufacturing market takes off in Ventura County, ThinGap believes would be well positioned to work with companies in that space.

“We offer custom machine design,” said Evan Frank, the company’s director of engineering. “A lot of our business is working with the customer very closely to integrate our motors into their design.”

In the meantime, the company has been in contact with a range of industries, from wind turbines to electric vehicle makers, about its technology. “We plan to be offering four new motors in the next year,” Gallagher said.

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Zhejiang Beta Pharma will be 51 percent owner of the the new firm, which will be known as Amgen-Beta Pharmaceuticals. The deal is still subject to approval from Chinese authorities.

Amgen’s moves toward China signal a growing strategy of tapping and developing international markets as some of its core patents expire in the United States.

Last year, Amgen made a major move on the distribution side, possibly signaling a willingness to push generic biotech drugs into international markets. The company agreed to purchase Mustafa Nevzat Pharmaceuticals, a major supplier of pharmaceuticals and injectable medicines in Turkey, in a deal that values the Turkish firm at $700 million.

Amgen said that its focus on Turkey and the surrounding region is part of a broad international expansion strategy for the company. Amgen established an affiliate in Turkey in 2010 and currently markets two products there.

But China is a much larger prize, one that Amgen needs to cash in as some of its best-selling drug patents expire in the U.S. and Europe in the next few years. Vectibix, in particular, is an attractive target because its sales are increasing and its primary competitors are not yet sold in China.

“This joint venture brings us one step closer to providing Chinese patients with Amgen’s medicines and supports our strategy of expanding in key, fast-growing markets,” Anthony C. Hooper, an executive vice president at Amgen, said in a statement.

In January, Amgen said it would build a manufacturing facility in Singapore. The company said it anticipates investing $200 million to build an innovative new facility, which will initially focus on expanding Amgen’s manufacturing capability for monoclonal antibodies.

The facility will be capable of manufacturing both clinical and commercial products, the company said.

Gillepsie, who officially takes the top post at the school this summer pending final contract negotiations, has more than 19 years of experience in the community college system. He’s served as a faculty member, director, dean and vice president at four different community colleges in both rural and urban settings. Currently, Gillepsie is vice president for instruction and student services at Yavapai College in Prescott, Ariz.

Ventura College’s outgoing president is Robin Calote, who is retiring at the end of June.

“I am pleased Dr. Gillespie will be joining us at the District and leading Ventura College,” Jamillah Moore, chancellor of the Ventura County Community College District, said in a news release.  “He is a visionary leader with broad experience and has a unique understanding of the challenges facing students and faculty in the community college system of California.”