District takes over SE hospital that defaulted on city loans

By Tim Craig
Washington Post Staff Writer
Thursday, April 15, 2010

District officials have taken control of United Medical Center in Southeast Washington from the New Hampshire-based company that the city partnered with three years ago to turn around the long-troubled hospital.

On Monday, after Specialty Hospitals of America defaulted on several of its loan agreements with the city, the District assumed full control, according to Attorney General Peter Nickles.

The move suggests that United Medical Center, formerly known as Greater Southeast Community Hospital, will now be a so-called city-run facility until a new owner is found.

City officials said the hospital will continue to provide in- and out-patient and emergency services under the leadership of Frank G. DeLisi, the hospital's chief executive. But Nickles said he has sent in "expert consultants" to "turn the hospital around."

"We and our expert consultants are running it, and we are making decisions about removing personnel," Nickles said. "And we are going to turn that hospital around to make sure that hospital continues and prospers. There are a lot of people who are interested in buying it but not in its wounded state."

The city's tenuous relationship with Specialty has been common knowledge for months, after The Washington Post reported that the hospital was struggling to pay its bills -- even though the District had sunk almost $80 million into the facility in 2007 to modernize it.

At that time, the 184-bed facility was in danger of closing. But city officials, who did not want to lose the only District hospital east of the Anacostia River, formed a partnership with Specialty to run the facility.

Under that agreement, hammered out in fall 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.

But Specialty failed to meet its repayment obligations to the city, Nickles said. Officials with Specialty, a for-profit company that had no previous experience running a large, urban hospital, were not available to comment.

D.C. Council member David A. Catania (I-At Large), chairman of the Committee on Health, said the city took back the hospital to "protect its investment."

"I think this is a valuable asset, and the city is very wise to essentially not have a fire sale on an asset that is valuable and getting more valuable," Catania said.

In recent weeks, the city has taken various steps to shore up the hospital, which serves some of the city's poorest residents.

In March, the city increased the hospital's Medicaid reimbursement rate to 95 cents per dollar, pumping an additional $4 million annually into the hospital. The D.C. Council also approved an emergency $6 million payment to the hospital in February.

But Catania said he does not think the latest turnover will require the city to invest more money into the hospital. Catania also sought to downplay the notion that the city was entering the hospital business, noting that the Health Department will not be running the facility.

"There is management in place that will continue to run the hospital with outside consultants," Catania said. "This is not going to be the city running the hospital."

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