Southeast Hospital to Be Sold for $31 Million

By Susan Levine
Washington Post Staff Writer
Thursday, August 23, 2007

The owner of Greater Southeast Community Hospital agreed in principle last night to sell the troubled facility to a New England company that plans to quadruple the number of beds and expand services to create a "medical mall" of care.

The $31.5 million deal with Specialty Hospitals of America, which both sides hope to finalize by Nov. 1, could hinge on a contribution of as much as $27.5 million from the District to cover Greater Southeast's considerable debts from its most recent bankruptcy and years of unpaid vendors' bills.

The city also will be asked to expedite some regulatory reviews, Specialty executives said. They would not confirm the amount of money the company would put toward the purchase from Envision Hospital Corp.

The chairman of the D.C. Council's Committee on Health characterized such government involvement as a worthwhile investment in a part of the city that has long been underserved medically. Council member David A. Catania (I-At Large) said the money would be repaid in kind many times over through the hospital's provision of care to uninsured residents.

"This isn't the typical deal where the city lays out money and gets nothing in return," Catania said.

Catania's position has the support of council Chairman Vincent C. Gray (D) and council member Marion Barry (D-Ward 8), who represents the community most affected by Greater Southeast's tortuous deterioration since its first bankruptcy in 1999.

"It was a long and rocky road, and the people . . . have suffered," Barry said last night. "It was time to bring it to an end."

Although the three council members expressed enthusiasm for Specialty's plans for the facility, they acknowledged it is a damaged hospital -- in reputation and services -- that drew few bidders and only qualified bids during the year it has been for sale. No other hospital in the District stepped forward to take over its operation, though many of them worried out loud about the impact were Greater Southeast to close.

Given that reality, the agreement reached last night "is the best deal under the circumstances we could get," Catania said. "A couple months ago, we were looking at this place devolving into a clinic."

Gray said he did not anticipate problems in winning the support of the council, which he said has shared "great anxiety" over Greater Southeast's future.

"Under other circumstances, we might have looked at this differently," Gray said. "But again, we've got an extraordinary set of circumstances with Greater Southeast."

City Administrator Dan Tangherlini said the Fenty administration was unaware of the terms of the proposed deal and would need to know more before committing public funds.

"We haven't seen" it, Tangherlini said. "If they expect any city involvement, we'll have to talk about that."

He said Mayor Adrian M. Fenty (D) was aware of Specialty's interest over the last several months and "is supportive of a transfer of ownership."

"We knew all along this could happen, and in the right hands this could be a valuable asset," Tangherlini said. "We're excited this could continue and improve quality health care east" of the Anacostia River.

Specialty came to the District in late 2005 when it began running the former MedLINK Hospital and Nursing Center Capitol Hill. It then purchased Hadley Memorial Hospital from Arizona-based Envision and began offering similar long-term acute care and skilled nursing care there.

Specialty Chairman Jim Rappaport said last night that Greater Southeast would offer "a vastly broader array of medical care to the community" under the new ownership. The 110 traditional hospital beds likely would be increased by several dozen and support a strengthened emergency department, intensive care unit and obstetric services, he said.

Several hundred beds would be added to create a "medical mall," including an adolescent and adult psychiatric unit, care for patients needing often lengthy, specialized care because of illness or injury and elderly patients requiring nursing home services, Rappaport said.

Specialty intends to put "significant operating capital into the process," he said.

Within the next month, now that they have a purchase agreement, company executives hope to present their plans to the community. The expected changes include renaming the 41-year-old hospital on Southern Avenue. "Regardless of the good intentions of . . . Envision, those good intentions have not been met," Rappaport said. "And it's important that a new age be opened with a different name."

Company executives and city officials emphasized that potentially difficult negotiations lie ahead. Yet their announcement last night offered the first real possibility in years for a new future for Greater Southeast. In contrast, the fate of the troubled Prince George's Hospital Center is no closer to resolution.

Robert Malson, president of the D.C. Hospital Association, endorsed Specialty's purchase without reservation. "Since they've gotten to town, what they've done for the long-term acute needs of the city has been fantastic," he said.

Envision Chairman Paul Tuft, who has been pilloried for Greater Southeast's decline, said he wouldn't look back when its sale is completed.

"I feel like I'm passing the baton on to a much better future," he said.

Staff writer David Nakamura contributed to this report.