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District's United Medical Center needs money to stay open

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By Tim Craig
Washington Post Staff Writer
Wednesday, January 13, 2010

United Medical Center, formerly known as Greater Southeast Community Hospital, is struggling to pay its bills and might need a bailout to stay open, according to D.C. Council members.

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The situation at the hospital, which was renamed in 2007 after an infusion of money from taxpayers, is so dire that city leaders have begun looking for a new owner for the 184-bed facility. "Apparently, there are some very significant financial deficiencies as it relates to running this hospital, and there may be a need for a new operator," Council Chairman Vincent C. Gray (D) said Tuesday.

According to council members, the hospital has an operating deficit of as much as $20 million, and a bank recently denied its request for a $5 million line of credit.

The financial turmoil comes after D.C. government pumped $79 million into the troubled facility in recent years to modernize it and prevent the city's only hospital east of the Anacostia River from shutting its doors.

"Right now we are looking at a hospital that is improved substantially, from a capital perspective," said council member David A. Catania (I-At large), the chairman of the Health Committee. "But what we have is an accumulation of expenses for which there was not the revenues to meet."

A hospital spokeswoman referred requests for comment to Eric F. Rieseberg, chairman of Specialty Hospitals of America, which owns the facility. But the spokeswoman said Rieseberg was traveling Tuesday and was unavailable to comment. Several calls to other spokespeople at Specialty's headquarters in New Hampshire were not returned Tuesday.

Catania cautioned that the hospital is not in danger of closing, as had been the case in 2006 and 2007 when the city stepped in to save it.

Under that agreement, hammered out in the fall of 2007, Specialty agreed to buy the hospital from Arizona-based Envision Hospital, whose management had been criticized for causing the facility's problems. The city provided $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.

Until recently, the deal appeared to have been a success. The hospital gained its accreditation back last January after it had lost it for a year. The facility, which serves many of the city's poorest residents, also received a new roof and generators, major improvements to the emergency department and replacement of nearly all radiology equipment. In February, the hospital opened a 50-bed acute-care unit, the first in the city.

But Catania said the hospital's fiscal condition worsened last year because of the recession. City leaders now fear the hospital's owners could default on their agreement with the city.

Attorney General Peter Nickles said the hospital's cash flow is so problematic that it is struggling to complete construction of a $1.7 million elevator that federal regulators want built.

"I am looking at the whole issue of their financial statements and accounts payable and accounts receivable," Nickles said. "The hospital has done a very good job with patient care, but the problem is, it is a safety-net hospital so there is not much private insurance there."

Neither Catania nor Gray were willing to speculate on how much, if any, of additional city funds might have to be directed to the hospital so it can meet its financial obligations.

"The real question is, where do we go from here?" Catania said. "There is no question in my mind had we not intervened, the hospital would be closed today. But we are not out the woods by any stretch, and these accumulated (bills) are a real concern."

To prepare for a potential default or another bailout arrangement, Gray began meeting this week with potential new owners and operators for the hospital. But he declined to say who he's meeting with, citing the sensitivity of the negotiations.

"We are working with the administration to allow some transition to another provider," Gray said.

The hospital's continued fiscal challenges will likely embolden critics of the council's 2007 agreement with Specialty to keep it from closing. The council, at Catania's urging, unanimously approved the agreement, despite a warning from Chief Financial Officer Natwar M. Gandhi that Specialty was financially unstable.

Gandhi's analysis, which was delivered to council members a few hours before the vote, concluded that the new owner was "not in strong financial condition" and that its five-year operating plan did not show that the hospital was viable.

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