The Arizona firm that has made numerous bids to rescue financially ailing Greater Southeast Community Hospital offered to buy the facility for $21 million yesterday, drawing criticism from creditors who said the deal was riddled with loopholes.
They complained that the proposed buyer, Doctors Community Healthcare Corp., seemed to be taking no financial risks and may not follow through on the purchase--pushing the hospital out of business within months anyway. Doctors Community, of Scottsdale, Ariz., offered to purchase only the main 280-bed hospital and not two nursing homes or a smaller hospital owned by the Greater Southeast system.
But negotiations continued during yesterday's hearing, and by the time U.S. Bankruptcy Judge S. Martin Teel Jr. adjourned court for the night, settlement talks had made progress. Many of the dozens of lawyers involved in the case said the chances of a court-approved sale had improved dramatically.
Teel set another hearing for tomorrow morning, authorizing an additional $340,000 in operating funds to be released to the hospital by creditors who control the facility's receipts.
"I'm very optimistic that we'll come to a settlement by Wednesday," said Robert Shelton, one of Greater Southeast's attorneys.
The creditors, who are owed $70 million, began yesterday's hearing by asking Teel to order that Greater Southeast be liquidated immediately, a move they said would yield more of the money they are owed than the proposed deal would.
They portrayed the Doctors Community offer, tendered Sunday night and then revised during proceedings in the afternoon, as a shell game.
"This agreement, while we understand the [hospital's] desperation, should not be accepted by the courts," said Sam Alberts, who represents Greater Southeast's unsecured creditors. "This agreement will cause more harm than good."
Alberts predicted that the purchase would drive the hospital out of business before the year ends--and leave creditors with even less money than they would get if the hospital's assets were sold now.
Peter D. Isakoff, an attorney for a financing subsidiary of Daiwa Bank of Japan that is owed about $12 million, said the deal had "severe and obvious flaws," including protections for Doctors Community that really made the transaction worth $17.5 million, not $21 million.
Isakoff and Alberts criticized a provision that would allow Doctors Community to abandon the deal if it failed to renegotiate new contracts with unions and vendors and win assurances that state and federal agencies wouldn't try to recover past Medicare and Medicaid overpayments from the hospital.
"There is no leverage to hold the buyer's feet to the fire," Isakoff said.
But Doctors Community attorney David B. Tatge said his firm will follow through. "We have every intention of closing this deal," he said. "That's why we're here."
Earlier in the day, at rallies in front of the federal courthouse, activists from Southeast Washington warned that the shutdown of the only full-service hospital east of the Anacostia River would set off not only a health-care availability crisis in Ward 8 but an economic disaster as well.
Activist Howard Croft said the loss of 1,100 hospital jobs would disrupt the housing market and lead to mortgage foreclosures and personal bankruptcies in the area.
The activists called on D.C. Mayor Anthony A. Williams (D), who guided $8.5 million in taxpayer money to the hospital between May and August, to bail the hospital out again if necessary.
CAPTION: Activists rally at the courthouse in support of Greater Southeast Community Hospital, saying they fear a health and economic crisis if the hospital closes.