D.C. rethinking strategy for United Medical Center takeover

Washington Post Staff Writer
Saturday, May 8, 2010

The District is abandoning efforts in D.C. Superior Court to take over United Medical Center because there are ways less costly than a court-ordered receivership to gain control of the Southeast Washington hospital, Attorney General Peter Nickles said Friday.

Nickles said he saw "lawyers coming out of the woodwork" and did not want to put a financial burden on the city, which contended in a court filing last week that the medical center has been badly managed by Specialty Hospitals of America, the hospital's private, for-profit operator.

The District can take other routes to seize the hospital -- the only one in that area of the city east of the Anacostia River -- and put new management in place, Nickles said. The city holds the "deed of trust" to the property and has rights similar to those of a lender when the mortgage on a house goes unpaid, he said. He did not specify how the city would proceed.

In its court filing last week, the District said Specialty Hospitals had not lived up to its 2007 agreement with the city. The city said the medical center owed millions of dollars in unpaid taxes and electric bills and had defaulted on contributions to its retirement plan -- all debts that Nickles says were hidden from the city.

But this week, a company unit, Specialty Hospitals of Washington, filed documents in Superior Court saying that Nickles and others in city government "have been fully aware of all operational and financial issues relating to UMC since it began operation." Specialty also said Nickles is chairman of an oversight committee that met monthly on hospital matters, and the company attributed its financial woes to the District's denial of full funding of Medicaid payments.

The fate of the medical center, formerly known as Greater Southeast Community Hospital, has been a matter of great interest since 2001 when then-Mayor Anthony A. Williams (D) decided to close D.C. General, the city's only public hospital.

In 2007, D.C. Council member David A. Catania (I-At Large) worked out an agreement to keep the private hospital open. The arrangement called for Specialty and the city to own the hospital jointly and for the facility to be managed by its own board of directors.

But the city's chief financial officer, Natwar M. Gandhi, told city officials that same year that he was concerned about the deal with Specialty, which was in default on a loan involving two other hospitals at the time. Gandhi said the company was not in a strong financial position to run the financially beleaguered District hospital.

In the past 2 1/2 years, the city has poured about $100 million into United Medical Center to upgrade its facilities, and city officials and Specialty representatives agree that care has improved significantly.

Jim Rappaport, a co-founder of Specialty, said Friday that the city has been unwilling to treat the facility as a "safety-net hospital," one that needs more public funding because it cares for many patients who cannot pay.

He said Nickles's suggestion that Specialty was out-muscling the city with lawyers was untrue. "I am disappointed that Mr. Nickles seems to have missed the point that we are trying to reach a resolution on this matter so that our patients -- who mostly live in wards 6, 7 and 8 -- receive the standard of care that they deserve," he said. "This is about patient care. This is about our desire to do the right thing."

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