Hospital Deal Gets Financing From D.C.

Greater Southeast Community Hospital has been struggling financially.
Greater Southeast Community Hospital has been struggling financially. (By Nikki Kahn -- The Washington Post)
By Nikita Stewart and Susan Levine
Washington Post Staff Writers
Wednesday, October 24, 2007

The D.C. Council unanimously approved a final agreement yesterday to spend $79 million to help a for-profit company purchase the troubled Greater Southeast Community Hospital, despite a warning from the city's chief financial officer that the buyer is financially unstable.

Natwar M. Gandhi released his disapproving four-page report yesterday morning, contending that New England-based Specialty Hospitals of America "is not in strong financial condition" and that its five-year operating plan does not show that the hospital will be viable under the company's ownership.

"Should the business plan fail, it is likely that additional funds of substantial amounts will be needed to keep the hospital running," Gandhi wrote in his financial impact statement.

Although at least half of the council members expressed concern over Gandhi's warning, the prospect of Greater Southeast's imminent demise if the sale collapses prodded the unanimous vote. Greater Southeast is the city's only hospital east of the Anacostia River, an area where residents suffer from high rates of cancer and diabetes and other chronic diseases.

"I do not like this deal," council member Marion Barry (D-Ward 8) said bluntly. He supported it, he said, "only because the lives of 140,000 people are in jeopardy."

Council Chairman Vincent C. Gray (D) said the city's only two options were to go with Specialty or watch the institution shut under its current owner, Envision Hospital Corp. of Arizona. "To allow this hospital to close would be absolutely unconscionable," he said.

Specialty, which had said it would walk away from the deal without city assistance, anticipates completing its purchase by Nov. 7. It would move quickly to renovate the facility, said George Lowe, a lobbyist representing Specialty. He said there will be spruced-up landscaping and parking lots, as well as cosmetic changes on floors and improvements in care. "We really do look forward to being a good neighbor," Lowe said yesterday afternoon.

A small group of hospital employees witnessed the council discussion and vote, breaking into smiles as the outcome was announced. Several have worked at Greater Southeast for decades, remaining even as it deteriorated because of two bankruptcies, decreased services and obsolete and broken equipment.

"We just hope big things come out of it," Thomas Tobias, an anesthesia technician with 30 years' tenure, said of the funding plan.

Council member David A. Catania (I-At Large) called the deal, which was negotiated for the last month and completed Friday, "a tightly worded public-private partnership agreement" between the city and Specialty. It gives the city veto power over "a host of actions" the company might take at the hospital and requires Specialty to meet medical performance measures and provide health benefits to the community.

Under the agreement, the city will provide $30 million in grants for renovations and equipment, a $20 million loan in working capital and $29 million to acquire the hospital and settle long-standing debts. Specialty will be required to use savings from a real estate tax exemption to repay the $29 million. After that, the exemption lapses.

The company plans to restore services that Greater Southeast has cut in recent years and operate about 150 beds for short-term acute care. An additional 350 beds will be added for psychiatric and long-term care, according to executives.

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