Washington's Doctors Hospital, the city's largest privately owned medical facility, has applied to become a nonprofit corporation - an action that could block its five-year effort to move from its crowded, inadequate downtown building to newer facilities.
Conditional approval was granted for the move in September 1977. But city officials were preparing a letter to the hospital's owner yesterday asking why papers have been filed with the District of Columbia's recorder of deeds to change the 265-bed facility from a privately owned company that pays about $250,000 annually in taxes to the city to a nonprofit corporation that will pay no taxes.
Department of Human Resources officials most closely involved with the proposed move of Doctors Hospital from its 40-year-old structure at 1815 I St. NW to a newer, renovated building at 1143 New Hampshire Ave. NW, said Monday that they did not know the hospital was attempting to change its tax status before they were informed of it by The Washington Post.
Department of Human Resources Director Albert P. Russo said Monday that if Doctors Hospital plans to become a nonprofit corporation, the conditional approval he has given for the hospital to move would, in effect, be canceled. That is because the proposed change in corporate status would require a new filing by the hospital and new approval by the city - a complicated, time-consuming process.
Applying for new approval means its "a whole new ball game," Jacqueline E. Johnson, assistant director for state agency affairs, said. "It could be denied. It's as simple as that. We will not prejudge any application."
If Doctors is changed to a nonprofit corporation, one result would be the sale of the hospital by its present owners to the new corporation, which would sell bonds to pay for the facility and its renovation, according to James Davis, vice president for hospital management of American Health Services, the company that runs Doctors Hospital for its owner.
In granting conditional approval of the federally required certificate of need to move Doctors Hospital to the New Hampshire Avenue site, Russo last September emphasized as one of his reasons that Doctors "is the only hospital of 15 (in the city) that is a taxpayers."
In a letter granting the conditional approval, Russo wrote the hospital's owner - Washington Medical Center Inc. - that "any changes in financial arrangements . . . that differ significantly from those approved by this letter must be immediately reported to the department for a determination of their continued adequacy."
According to Russo and Johnson, Washington Medical Center has neither formally nor informally notified city officials of its intentions. Russo said Washington Medical Center's president, H. Charles Deyerberg, had, about six months ago, mentioned that tax-free status was being considered "as a possibility" but that the matter was discussed "rather informally."
Johnson said Russo told Deyerberg at that time that, if the hospital changed its corporate structure, an amendment would have to be filed with the city. "And this has not been done," Johnson said.
Repeated attempts to reach Deyerberg or some other official to speak for the Washington Medical Center yesterday were unsuccessful.
Articles of incorporation for Doctors Hospital of Washington Inc. were filed with the city's recorder of deeds office on January 6, 1978, under the D.C. Non-Profit Corporation Act. According to the papers, "The corporation is [WORD ILLEGIBLE] and shall operate exclusively for charitable, educational or scientific purposes. In furtherance of these purposes, the corporation's primary activities will be to own and operate an acute general hospital."
Davis confirmed yesterday that Washington Medical Center Inc. has asked the Internal Revenue Service for a ruling on the nonprofit corporation's tax-free status.
Once the ruling is obtained, "and we foresee no problem with that," Davis said, the nonprofit corporation would purchase the building at 1143 New Hampshire Ave., which was built by Washington Medical Center as a nurshing home and operated more recently as the Metropolitan Hotel. Davis said the building would be purchased with part of the proceeds from a $22.5 million bond issue floated by the new corporation to finance the purchase and renovation costs.
According to Davis, the nonprofit corporation and Washington Medical Center would have no connection - "None whatsoever, absolutely none." Davis said he did not know the purchase price of the New Hampshire Avenue facility.
The present Doctors Hospital has experienced growing difficulties in the last several years.Although licensed to operate 321 beds, the hospital currently has only 206 in operation. Despite this lower number of beds, the hospital operated last year at only 70 percent of capacity, well below the 85 percent level considered to be optimal for hospitals.
One of the hospital's principal suppliers of patients, the Group Health Association, has made clear its intention to seek its own 150-bed hospital facility in cooperation with the Washington Hospital Center, the city's largest nonprofit hospital, which is unrelated to Washington Medical Center. GHA supplied between 40 and 60 patients a day to Doctors Hospital.
One of the reasons given by Russo for a previous extension in a deadline to complete plans was to allow Doctors to reach GHA's medical needs at the New Hampshire Avenue site. Negotiations between Doctors and GHA, however, failed to reach an accommodation. Russo's letter of approval last September effectively excused Doctors from making any further attempt, stating that efforts to reach agreement has "been undertaken in good faith."