Hospital Deal Gets Financing From D.C.

One of Gandhi's main points of contention involved Specialty's claim of $34 million in "goodwill" assets, which the company expected the city to accept as proof that it could cover its liabilities.

"Goodwill" is an accounting term used to characterize assets that are not tangible -- the value of a company's name or its customer base, for example. In Specialty's case, the goodwill referred to the value of its two other D.C. hospitals, which provide skilled nursing and long-term acute care. The company maintains that the facilities are worth more than the simple value of their medical equipment.

But Gandhi decided that goodwill represents "intangible assets" that should not count toward Specialty's ability to meet its liabilities, government sources said.

Lowe disputed Gandhi's analysis. He said Specialty had $84 million in gross receipts and turned a profit of $14 million this past year. He noted that its hospital in Southeast sits on 66 acres appraised at $35 million, and its Capitol Hill facility is worth $15 million for its business operations alone.

"The company is not insolvent," Lowe said. "The company is performing very well."

Audited financial statements back up its claims, he said.

Gandhi's report was delivered to council members' offices, in some cases slipped under doors, several hours before the council began discussing Greater Southeast.

Catania, who was instrumental in pulling together the deal, called the report "bizarre" and "inaccurate." His relationship with Gandhi has been strained in recent years because of the public financing of the new $611 million baseball stadium for the Washington Nationals. Catania opposed using taxpayer dollars for the stadium and criticized Gandhi's cost estimates as flawed.

Catania said yesterday that Gandhi's report on the hospital was payback.

"I personally think there's some score-settling going on," he said. "The only forewarning I had of this was [Monday] morning when he came to talk to me out of the blue. . . . I walked out."

Gray asked why Gandhi waited until yesterday morning to release a negative financial impact statement, adding that Gandhi's staff participated in meetings and negotiations. "We were all surprised to get this at the eleventh hour," he said. "It's not going to change my mind."

But Gandhi said in an interview that he had alerted Peter Nickles, general counsel to Mayor Adrian M. Fenty (D), to the potential problems Oct. 5 in a confidential letter that contained much of the same language as his fiscal impact statement did yesterday.