An Arizona firm that negotiated a $39 million deal to take control of Greater Southeast Community Hospital shocked dozens of hospital officials and lawyers yesterday by withdrawing the offer only an hour before it was to be announced in federal bankruptcy court.
The brinksmanship meant that representatives of the financially struggling 280-bed hospital have until tomorrow to nail down a deal or face a court-ordered liquidation of the hospital's assets.
Without an infusion of cash from a buyer, the hospital on Southern Avenue SE will run out of money tomorrow unless its creditors agree to an extension. The hospital is $70 million in debt.
Grim-faced attorneys for the hospital's creditors left court yesterday without commenting.
Several sources said that executives of Arizona-based Doctors Community Healthcare Corp. changed their minds just before they were to sign the sale documents. The sources said the company's chairman, Paul Tuft, and its main financial backer, Lance Poulsen, chairman of National Century Financial Enterprises, didn't want to pay so much for Greater Southeast.
The deal was to include the main hospital and an adjacent nursing home, plus a smaller hospital and a nursing home in Fort Washington.
Neither man was in court yesterday. However, company officials made clear that they hope to reach a new agreement today.
"We learned unexpectedly and much to our chagrin at 1:30--only an hour prior to this court's scheduled 2:30 hearing--that for whatever reason, Doctors Community Healthcare Corp. had chosen to back away from its proposed purchase price and reconsider the transaction," hospital attorney David E. Rice told U.S. Bankruptcy Judge S. Martin Teel Jr. "Needless to say, that was not an acceptable development."
But officials with Doctors Community, which owns Hadley Memorial Hospital in the District, said they were blindsided by Greater Southeast's last-minute disclosures that state and federal officials are trying to recover $4.6 million in overpayments to the hospital. They also complained that there were "major discrepancies" in the hospital's inventory of which medical equipment it owns and which it leases.
"It's been an incredibly long week for everybody involved," said Doctors Community spokeswoman Sharon Kirsch. "Twenty-four hours will not seem in retrospect as crucial as it does right now. We're absolutely prepared to move forward. We have every intention of moving forward."
The hospital filed for bankruptcy court protection in May and has survived since then with the help of $8.5 million grants and loans from the D.C. government.
Last month, Mayor Anthony A. Williams (D) decided that taxpayers should not continue the bailout if a private firm is standing by to purchase the hospital, a key provider of care to residents in Southeast Washington and Prince George's County.
CAPTION: The private, nonprofit Greater Southeast Community Hospital is $70 million in debt. An Arizona company had planned to buy the hospital for $39 million.