City, Buyers Reach Deal on Southeast Hospital

By David Nakamura
Washington Post Staff Writer
Monday, September 17, 2007

D.C. Mayor Adrian M. Fenty has struck a deal to invest $79 million in public money to help support the sale of financially troubled Greater Southeast Community Hospital to a New England-based company, government sources said last night.

The deal, which would require the D.C. Council's approval, comes after weeks of negotiations between Fenty administration aides and representatives of Specialty Hospitals of America. Last month, Specialty officials said they had agreed to purchase Greater Southeast from Envision Hospital Corp., but only if the District government were to invest heavily in the deal.

Under the terms of the proposed sale, the city would lend Specialty $20 million to help cover the purchase price and daily operations of the hospital, said the government sources, who spoke on condition of anonymity because an official announcement is set for a news conference this morning at Greater Southeast. Specialty would be required to repay that loan over 10 years.

The rest of the $79 million would come in two parts. The District would spend $29 million to pay off debt owed by Greater Southeast to its doctors and vendors, money the city could recoup through sales and property taxes if additional offices are built on the hospital campus, the sources said.

Finally, the city would invest $30 million in new infrastructure and equipment at Greater Southeast. That money would be considered a direct grant that does not have to be repaid, but it would be tied to performance measures that Specialty must meet or risk incurring financial penalties, the sources said.

The city is considering funding the investment with money from its portion of the federal tobacco settlement fund, sources said.

Greater Southeast is the only hospital east of the Anacostia River, where residents in wards 7 and 8 have complained that health-care services are woefully inadequate. Under Envision, the hospital's performance and services have declined, and the increasing debt has put the hospital on the verge of collapse.

D.C. Council member David A. Catania (I-At Large), chairman of the Committee on Health, helped negotiate the sale to Specialty. Fenty (D) has supported a private sale of the hospital, but his aides initially balked last month when they learned that Specialty wanted up to $87 million in city investment. The District denied the company's request to relieve its debt burden at two other hospitals it owns in the city.

Previously, council Chairman Vincent C. Gray (D) and council member Marion Barry (D-Ward 8) have supported the sale of the hospital. Council member Jack Evans (D-Ward 2), who heads the council's finance committee, has expressed concerns.

If Specialty were to sell Greater Southeast, half the proceeds would go to the city, the government sources said. Furthermore, the agreement requires Specialty to continue operating an emergency room and an obstetrics-gynecology facility, the sources said.

Specialty Chairman Jim Rappaport did not immediately return a phone message left last night. A spokeswoman for Fenty declined to comment.

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