An Arizona firm that owns one of the District's smallest hospitals has stepped forward with a $24 million offer to save the financially ailing Greater Southeast Community Hospital from a court-ordered liquidation.
The bailout plan from Doctors Community Healthcare Corp., of Scottsdale, Ariz.--which also owns Hadley Memorial Hospital, a Southwest Washington facility--is being welcomed by District officials, who in recent days have decided that they do not want to shell out more taxpayer money to keep Greater Southeast alive.
Since May, the D.C. government has lent, advanced or granted $8.5 million to the nonprofit group that runs Greater Southeast, to keep the 280-bed hospital breathing until a plan for its emergence from bankruptcy could be resolved.
Less enthusiastic about the Arizona group's offer are officials at Greater Southeast, who said yesterday that they are concerned that the group--which besides the 70-bed Hadley owns four other urban hospitals in Chicago and Southern California--is not financially strong enough to stabilize the hospital on Southern Avenue SE.
D.C. government officials believe a turf battle is actually at the root of Greater Southeast's reluctance, saying the hospital's directors would prefer a city bailout that would leave them in control of the facility, rather than an outright takeover by a private interest.
"Greater Southeast doesn't want to negotiate with someone who's going to take them over," a top city official said. "It's a turf issue."
Yesterday, D.C. officials cast the offer from the Arizona group as the best hope for Greater Southeast, given the city's reluctance to ante up more public money to save a private hospital.
"It's important to recognize that the board of Greater Southeast is really in the driver's seat at this point," said Ivan C.A. Walks, the city's health director. "They have solutions, and if they choose to take advantage of them, there's an opportunity to continue serving the citizens of Ward 8."
Walks said taxpayers should not be a primary source of capital for the hospital, the largest employer and only major health provider east of the Anacostia River.
"Greater Southeast is a private hospital, and they have an obligation to look for private solutions," Walks said. "If those solutions exist, it's not reasonable for everyone to look at the city and say, 'What are you doing?' I would look at the board of Greater Southeast and say, 'What are you doing?' "
But David E. Rice, a lawyer for Greater Southeast, said hospital officials have met or spoken with Doctors Community owner Paul R. Tuft and his financial backers several times this year about a possible takeover, adding, "We have no reason to think this is any more real a deal than before."
The future course for Greater Southeast is likely to be set this week. A federal bankruptcy judge has threatened to rule as early as tomorrow that the hospital--which is $70 million in debt and running out of cash--should have its assets liquidated to satisfy creditors.
Greater Southeast board Chairman Virgil C. McDonald said he is hopeful about another possible solution, this one involving Daiwa Bank, a subsidiary of a Japanese bank that wants to recover $12 million in loans to Greater Southeast.
In this scenario, Daiwa would bankroll an $8 million to $12 million turnaround plan that hospital consultants contend could put Greater Southeast back on its feet by spring.
That plan would involve trimming the hospital's full-time payroll by up to 125 employees (leaving it with 875) and reorganizing some programs.
"If that happens, we are on the way to pulling ourselves out of this hole," McDonald said last night. "We have the expertise to run the system."
But city officials dismissed that proposal yesterday because, they said, it relies on a city guarantee to repay Daiwa if the turnaround plan fails.
"The city cannot do that," said one senior official in Mayor Anthony A. Williams's administration. "The bottom line of all these plans is, [Greater Southeast officials] see the city as the deep pocket, but it's a private hospital."
The possibility of a private rescue is a powerful lure to Williams (D) and other members of the city's newly appointed health care restructuring commission, who met in emergency session Saturday. An official who attended the meeting said the commission concluded that the hospital consultant's turnaround plan is "based on unrealistically favorable perceptions of what the management and the hospital were capable of doing."
Several city officials said McDonald and board members of Greater Southeast have not accepted the realities of the situation, noting that McDonald canceled a Friday meeting with Doctors Community's Tuft at the last minute.
McDonald denied that a desire for control is driving the hospital board's decisions. "It doesn't matter to me," he said. "I'm not there to make this a career but to make sure there is quality health care for this community."