Gray is looking for a way forward on UMC. (Bill O'Leary/The Washington Post)

A report completed this month for the D.C. Department of Health Care Finance concludes that the city-owned hospital should embrace an “ambulatory and physician-centric” model rather than continue as a traditional acute-care hospital with more than 300 inpatient beds.

In a letter accompanying the report, Gray told the hospital’s board that it “must immediately begin the work to build a sustainable business model as prelude to the later sale of the hospital,” including the creation of “immediate action plan” to implement the findings of consulting firm RSM McGladrey.

Gray’s embrace of the report represents his most definitive statement to date on the future of United Medical Center, which has been in city hands since then-Mayor Adrian M. Fenty (D) ousted its prior operator, Specialty Hospitals of America, in July 2010.

The Southern Avenue SE facility, formerly known as Greater Southeast Community Hospital, has lurched through a series of financial crises for more than a decade as it has struggled to provide care to a disproportionately poor and uninsured clientele.

The hospital’s fiscal picture has improved significantly since its last crisis, showing an $8 million accounting profit for the fiscal year that ended Sept. 30. But it has had difficulty collecting the revenue it is owed and remains reliant on the District for cash, leading to concern about its ongoing effect on the city’s bond ratings.

Shifting the facility toward outpatient care, the McGladrey report said, would “stabilize UMC and provide a pathway for sustainability, regardless of the shape health-care reform takes moving forward.”

While complimentary of the progress the hospital has seen in recent years, including its upgraded facilities, the consultants criticized a lack of internal operating procedures, subpar accounting operations and excessive compensation for its staff physicians. They also highlighted some critical problems that could threaten the hospital’s accreditation. But they concluded that, with a change of focus, the facility could be sustainable enough to be sold or leased to a private operator within three years.

Here is the report’s executive summary. For a larger view, click here.