The federal courthouse was closed and quiet for the holiday yesterday, with the exception of a small, stuffy courtroom where dozens of testy lawyers and executives spent all day arguing the fate of the only D.C. hospital east of the Anacostia River.
Within a week--perhaps today--100,000 District residents who live near cash-starved Greater Southeast Community Hospital will find out whether the 35-year-old facility is to be rescued or shut down so its land, buildings, supplies and equipment can be offered for sale like salvaged auto parts.
If U.S. Bankruptcy Judge S. Martin Teel Jr. opts for liquidation, 1,100 employees will be thrown out of work, and Southeast Washington residents will have to travel much farther to reach a full-service hospital. District officials, who two months ago stopped the flow of taxpayer money keeping Greater Southeast afloat, are standing by with an $800,000 plan to transport patients out if the hospital closes.
Neighborhood health-care activists are keeping a courtroom vigil and hoping that doesn't come to pass.
Greater Southeast has agreed to be purchased by Arizona-based Doctors Community Healthcare Corp., which assured Teel that it has the financial backing to pay $21 million for the facility and intends to complete the transaction by January. Greater Southeast officials had resisted the firm's overtures beginning last winter, but when city financing evaporated in September, Doctors Community became their last hope.
They aren't the only ones who have changed their minds and shifted positions almost daily.
The 280-bed hospital's creditors are owed $70 million, and only a week ago they unanimously favored liquidation as the best way to recover the most money from the bankruptcy process.
But this week, the creditors broke into factions. Those with the strongest legal guarantees of recovering their money--a financing subsidiary of Daiwa Bank of Japan that would recoup $11 million and the District government, which was entitled to a $3.1 million loan repayment--are pushing for approval.
The unsecured creditors, including holders of $45 million worth of municipal bonds sold by Greater Southeast, are trying to derail the sale. As one lawyer in the case put it, those creditors are struggling with the fact that they will be "getting a haircut" from a sale that will leave little in the pot for them to split.
To help settlement talks along, Mayor Anthony A. Williams (D) and leaders of the D.C. Council and the D.C. financial control board sacrificed the city's guarantee of recovering its $3.1 million loan in order to entice Doctors Community to stay in the deal.
The talks almost succeeded yesterday. Several lawyers said the creditors were within $300,000 of compromising, but the talks pulled apart before the hearing.
The creditors who favor liquidation called expert witnesses to testify that the hospital and related assets are worth $26 million and to portray the buyer as unreliable.
"There is no way Doctors [Community] can close this transaction," said Bernard A. Katz, a certified public accountant. He predicted that the buyer's lender, National Century Financial Enterprises, would use loopholes to back out of the deal after it learns how bad things are at the hospital.
But in a telephone cross-examination from his office in Dublin, Ohio, National Century Chairman Lance Poulsen told Teel that even if the hospital's financial situation is found to be worse than it seems, he still would be ready to provide the entire financing.
Time after time, he enunciated the amount of his firm's loan pledge to Doctors Community: "Twenty . . . one . . . million . . . dollars."
Attorneys for the hospital, Doctors Community and Daiwa argued that even if the facility is liquidated, there would be no bonanza for creditors. Whatever sum they recovered would be reduced by $16 million before creditors would get a dime because of laws requiring two months' severance pay to all employees, among other things.
The creditors dispute the accuracy of that number.
After the hearing, Doctors Community chief executive Paul R. Tuft said he hopes the judge will decide the matter today.
"We want to do the deal. We have a firm commitment to do the deal," he said. "The liquidation scenario doesn't hold water. We made a compelling case to move forward and save the hospital for the community."
Time is running out for the hospital. Next Thursday is payday, and the patient census is declining. It fell from 172 last week to 140 Wednesday, partly because D.C. emergency medical services officials on Monday diverted ambulances from Greater Southeast's emergency room out of concern that the hospital might close.
However the case ends, the lawyers already have run up enormous bills. At individual rates exceeding $300 an hour, one consultant estimated that court hearings are costing $8,500 an hour in attorneys' fees.
The creditors' attorneys recently budgeted $1.5 million in legal fees just for November and December, according to a source, and Teel will have to decide how much of that to award.
Whatever fees the judge grants will come from the estate.