Greater Southeast's Buyer Inspires Hope, Skepticism

Specialty Hospitals Has Thick Résumés but Slim Record

The company that the District is counting on to rescue Greater Southeast Community Hospital is led by a small group of people with lengthy résumés marked by successes in health care, finance and business.

But Specialty Hospitals of America has a limited track record and no experience owning a general hospital, making it one of the least likely champions for the city's most troubled facility.

"I have reservations like everybody else about whether it will work," said D.C. Council Chairman Vincent C. Gray (D). "Is the hospital too far gone to save, and is Specialty the group that can turn it around?"

The company was founded five years ago in a living room in Maine and is headquartered in a coastal corner of New Hampshire. New England is a world away from the issues it will confront in Ward 8, although Specialty already runs two long-term care institutions in the District.

Physical, fiscal and staffing conditions are its most immediate challenges at Greater Southeast. Only hours after concluding the Nov. 7 purchase, Specialty's president, Eric Rieseberg, acknowledged: "Rarely do you find so many problems in one facility."

One of the company's three founders and a native Washingtonian, Rieseberg, 57, has spent his entire career in health care. People in the industry describe him as astute and focused and say his experience bodes well for Greater Southeast.

"He really understood the business of health care," said John Shea, a vice president at the Bon Secours Health System in Baltimore, who worked with Rieseberg at a national management and consulting firm.

Rieseberg says the business is as much about the mission as the bottom line. "Whatever we do, it's in the interest of patients," he told Greater Southeast's administration, according to one doctor. "That takes precedence over everything else."

Specialty's chairman brings a very different profile. Jim Rappaport, 51, was recruited to bridge the gap between hospital programs and real estate. He hails from a prominent Boston family of developers whose patriarch was a dominant force in the city's urban planning for decades. In 1993, Rappaport, his father and brother formed an investment firm that has managed almost $2.5 billion in real estate.

Rappaport is best known in Massachusetts for his political past. A Republican activist there and in national circles, he ran an aggressive campaign in 2002 against the party's pick for lieutenant governor. He also is recognized for his philanthropy, particularly in the field of cancer. The disease represents a shared bond between him and Rieseberg; both had children who received diagnoses of malignancies at very young ages.

The chairman's son lived. The president's daughter did not. That personal history puts Rappaport's fast-talking salesmanship of Greater Southeast in a broader perspective. "We have a chance to do something no one else has been able to do," he said this month. "It's one of the most important things we've done in our life."

Specialty has set the bar high. On the afternoon it took over, Rieseberg urged an audience gathered in the hospital's auditorium, "Come back in six to nine months, and you will not recognize the place."

But its executives' self-confidence has at times alienated local leaders more than impressed them. Many remain skeptical of Greater Southeast's future and wonder about development the for-profit company might pursue on the 17-acre property on Southern Avenue.

The District's commitment to contribute $79 million in public loans and grants to the deal essentially came by default after the hospital attracted few bidders during the year it was on the market. Other institutions in town kept their distance, and national chains declined to get involved.

Specialty's operation is limited to its two District facilities. Rather than the usual range of services associated with a hospital, they provide long-term care for people with acute wounds, respiratory complications or nursing-home needs. Their latest regulatory reviews were mixed, citing numerous deficiencies that could cause patient harm. But some families give effusive evaluations of their performance.

D.C. officials generally agree that the 180-bed Specialty Hospital of Washington, on Capitol Hill, and the 145-bed Specialty Hospital of Washington at Hadley, in Southeast, have improved under the company's ownership. Specialty says that it has invested $4 million in new equipment at the facilities and that occupancy has risen at both to more than 85 percent since 2005, among the highest rates in the city.

"Both of those operations are better than how they found them," Gray said recently. He thinks similar progress would begin to stabilize Greater Southeast, which for much of this year has been as critically ill as some of its patients. Specialty plans to transform the facility into a "medical mall" that would quadruple the number of beds, restore services and provide short- and long-term care, psychiatric treatment and primary care.

The company predicts its approach could reverse $8 million in annual losses within 18 months.

City officials credit the company with helping Greater Southeast survive this long. Its assessment teams spent hundreds of hours there early on, taking inventory of a number of problems, including a leaking roof and obsolete technology. A regulator called them "high-level people" with extensive expertise. "They're not messing around," he said.

And this week, Specialty named Greater Southeast's new chief executive, a man described as a turnaround whiz for distressed hospitals. Gary Rowe has led facilities in Florida and several Midwestern states, including spending seven years at St. John's Regional Medical Center in Missouri. He holds a master's degree in administration from George Washington University.

One local official with fewer doubts is D.C. General Counsel Peter Nickles, who negotiated the city's complex funding agreement with the company. He disagrees with critics who say Specialty is getting a free ride on the District's money.

"This is a bet-your-company investment," he said. Once the public funds have been spent -- with tight city oversight, he pointed out -- "they're going to have to start pouring dollars into this. They're not going to be able to do this on the cheap."

Nickles thinks Specialty has as good a chance as almost anyone to pull it off.

"This could be a hugely successful venture," he said. "If they do it right, with a little bit of luck."