Some on Council Now Doubt Wisdom of Hospital Deal

Saving Greater Southeast became his crusade, but some council members said Catania would not consider alternatives or requests to slow negotiations with Specialty.

When council member Marion Barry (D-Ward 8) suggested that the city set up a corporation to buy the hospital and later hire an operator, Catania said there was no time to study that idea. When council member Jack Evans (D-Ward 2) suggested seeking a larger ownership group, Catania said Specialty was the only entity that stepped forward after an extensive search.

"First of all, David did a great job to keep this hospital going. He was sincere," Barry said. "He was fearful that the hospital would be closed. He was against the wall, and he had to act. But David got defensive when I started asking questions."

Catania, who has said the deal was the best the city could get, declined to comment.

Meanwhile, Gray had told his colleagues that Greater Southeast needed immediate attention and that he favored the plan for the city to help Specialty buy the hospital from Arizona-based Envision Hospital.

Under Envision, whose management has been criticized as causing the hospital's problems, vendors were going unpaid and employee walkouts were threatened. A Nov. 7 deadline for Specialty to complete the purchase also was looming.

Gray said the process should not be slowed because Greater Southeast was in dire straits. "Every day that went by led to the path of no return," he said.

But about two weeks before the council took its final vote, Gandhi, in his four-page confidential letter to Nickles, detailed problems with the city's partnership with Specialty and concluded that Specialty was "not in a strong financial position."

Gandhi wrote that the company's five-year operating plan "does not include sufficient detail to provide confidence that the proposed operating model can be realized and the hospital will be viable. Thus, the District is at risk to provide annual operating subsidies."

The letter did not specify an amount for such subsidies, which have been a politically charged issue. A plan to build a $400 million hospital on the site of D.C. General collapsed last year, in part because city leaders worried that the deal could have led to requests for millions of dollars in subsidies.

Gandhi also noted in the letter that the District needed more information about how Specialty planned to repay the $49 million in loans that would be part of the package.

During negotiations, Nickles discovered that Specialty was in default on a $39 million loan used to buy two other D.C. hospitals over the past two years. Nickles added language to the agreement so that the creditor, GE Capital, would not be allowed to seize Greater Southeast as an asset.