Even as it complicates the 22-year-old agreement behind the Foggy Bottom hospital, the lawsuit could also hinder one of the District’s far-reaching health policy goals: the creation of a new hospital in Southeast, replacing United Medical Center, the city’s long-troubled public hospital.
United Medical Center is scheduled to close in 2023 and has already ceased providing core services, including obstetric care, to a large swath of the city. Supporters of the new hospital say it is needed to address the glaring health inequities that separate the predominantly African American neighborhoods of Southeast from the District’s wealthier and whiter Northwest, which has several full-service hospitals.
UHS and the university are in talks with the city on that project and tentatively plan to run a new, 200-bed hospital the city would build on the site of St. Elizabeths, a sprawling and largely defunct psychiatric hospital that has been slated for redevelopment.
But the project has weathered intense opposition, and the specter of potentially disruptive litigation could be seen as a new obstacle by D.C. Council members who will ultimately have to approve the deal. Lawmakers already came close to scuttling the project a year ago, when they sought to impose constraints that led hospital officials to temporarily halt negotiations with the city.
Council member and health committee chairman Vincent C. Gray (D-Ward 7), who has led the push on the council for the new hospital, said he couldn’t predict what effect the lawsuit might have on his fellow lawmakers’ willingness to sign off on the project.
“I’m going to continue to monitor this as closely as I possibly can,” Gray said. “I think we’re poised and ready to go forward, and I think that’s what we should do at this stage. I suppose anything could happen, but I’m hopeful that we can keep our eyes on what’s most important here.”
Officials in the administration of Mayor Muriel E. Bowser (D) have been in talks with executives at George Washington University Hospital — the joint venture between UHS and the university — for more than a year. The mayor’s office has not set a deadline for reaching a final deal, but the talks would need to conclude in the coming months if the city is going to meet its goal of opening the new hospital by the end of 2022.
Bowser’s office did not respond to requests for comment Tuesday.
In its complaint, George Washington University alleges that UHS has left the university’s medical school and affiliated network of practicing doctors “struggling financially” and dependent on subsidies from the larger university — despite the fact that the hospital partnership has had an average operating margin of about 13.5 percent for the past four years. The complaint asserts that figure is well above the median 2.4 percent operating margin of U.S. teaching hospitals.
“Instead of investing sufficient Hospital revenue in the University’s research and teaching missions . . . UHS has paid itself these funds in the form of outsized dividends from artificially inflated, excess profits,” the complaint states.
In a statement provided to The Washington Post, an attorney for UHS denied the allegations in the university’s lawsuit, saying the suit was a ploy to break the terms of the 50-year contract the university entered with UHS in 1997. At the time, UHS noted in its written statement, the university’s hospital was “in dire financial straits” and was restored through the corporation’s investments and management.
“This lawsuit is nothing more than an attempt by the new leadership of the university to renegotiate — via litigation — agreements it entered into over 20 years ago,” the statement reads. “UHS regrets that GWU’s new leadership has elected to file an unfounded lawsuit, to the substantial expense and distraction of all involved, rather than attempt to resolve its business concerns through good faith discussions.”
UHS also said that it “has lived up to all financial responsibilities under the parties’ agreements … and continues to do so today.”
Lorraine Voles, the university’s vice president for external relations, acknowledged that GWU has been seeking to overhaul the terms of its agreement with UHS, which she said does not allow for sufficient investment in areas such as research, teaching and primary care.
“The way the agreement was written and the financial arrangements are not allowing us to fulfill the academic mission,” she said.
However, Voles said university officials had tried to address those concerns with UHS, to no avail, before they filed the lawsuit.
“Over the years, there have been repeated attempts to engage in discussions about how this partnership, this arrangement, isn’t working,” she said. “This wasn’t a first step. This was kind of the last straw.”
The lawsuit, filed by both GWU and Medical Faculty Associates — the practice associated with the university’s medical school — also names top UHS executives as defendants.
It is unclear how the dispute between the university and UHS could affect George Washington University Hospital’s major new project in Southeast. The District has set aside $300 million to build the new hospital, which GWU Hospital would manage.
Bowser announced a tentative deal with GWU Hospital last year, after city officials had searched fruitlessly for years for a private-sector partner to run a new hospital east of the Anacostia. City officials and neighborhood activists say a new facility is needed to replace the District’s public hospital, which in recent years has been dogged by scandal, financial problems and fatal lapses in patient care.
However, the deal came close to imploding last December, after the council set restrictions on the deal — including protections for current unionized employees at United Medical Center — that GWU Hospital executives said were unacceptable.
The negotiations briefly ground to a halt but have since resumed. Once Bowser’s office has finalized a deal, the council must vote to approve it.