Physicians & Surgeons Sale Proposal Would Preserve Emergency Care

Operators of Physicians & Surgeons Hospital informed San Diego city officials Thursday that they have found a potential buyer who has pledged to continue operating the hospital as an acute-care facility with an emergency room.

According to Donald Thayer, vice president for development of National Medical Enterprises, hospital operators met early Thursday with the city manager’s office and some council members to name Nationwide Medical Systems, which owns one hospital and a pharmacy chain, as the potential buyer of the facility.

In a press release issued by National Medical Enterprises, Benjamin Davis Jr., president of NMS, was quoted as saying his company would continue to run the Southeast San Diego hospital as an acute-care facility with an emergency room and is contemplating expanding services.

Refused to Cede Interest

The city has been trying to keep the financially troubled facility open, and in late June refused to relinquish its financial interest in the hospital without a guarantee that it would remain a full-service institution with emergency services.

Under the terms of the bonds used to build Physicians & Surgeons in 1972, the hospital and the land it occupies will revert to city ownership in 2002. Before the hospital could be sold by National Medical Enterprises, title to the property would have to be cleared, Thayer said. That original agreement also requires that the hospital be operated as a full-service, acute-care facility until then.

“We have signed a letter of intent to sell the hospital to NMS, now we need to gain clear title to the property from the city,” Thayer said.

Terms Not Disclosed

He would not disclose terms of the letter or the proposed purchase price of the hospital, but said that NMS requires the title to the property as a condition of final sale.

City officials will be involved in negotiations between the two companies in an effort to ensure that Physicians & Surgeons remain a full-service hospital with an emergency room.

“The city is looking for a sound commitment from Nationwide that this facility will remain a full-service, acute-care hospital,” said Jennifer Adams-Brooks, aide to vacationing council member Wes Pratt, who represents Southeast San Diego.

Deputy City Atty. Hal Valderhaug said he will advise the council to relinquish its reversionary interest in the facility in return for such a commitment, but declined to say how many years NMS’ promise should cover.

“The longer the better, from our standpoint,” Valderhaug said. “Nobody is going to go into an operation and guarantee that they’re going to operate regardless of whether they lose money.”

Officials at NMS--a privately held, for-profit company, the owners of which operate the 36-bed Christian Hospital Medical Center in Perris, Calif., were not available for comment. The firm is headquartered in the Riverside County community of Perris and, in addition to the hospital, operates a chain of pharmacies in the Los Angeles area and in San Antonio.

The firm is making an effort to short-circuit foreclosure by selling now, Thayer said, adding that if the city does not release its interest, there will be no other choice but to foreclose.

“We have done everything we can with the facility,” he said. “Now the city must cooperate in providing clear title to ensure that the hospital will continue to provide quality medical services to the community.”

Commitment Sought

City officials will attempt to obtain a written commitment from NMS in time for review by a closed session of the San Diego City Council Sept. 6, Adams-Brooks said.

National Medical Enterprises, the nation’s second largest health care services company, has operated Physicians & Surgeons since February, 1982, at a loss of about $1.5 million each year because of the many poor patients.

According to Paul Simms, deputy director for physical health services in San Diego, 58% of the patients at Physicians & Surgeons in the first half of 1986 were uninsured or covered by government programs that didn’t compensate the hospital fully.

Profit Foreseen

Thayer said that, despite his company’s failure, he believes a hospital can be operated at a profit in the Southeast San Diego if residents who have insurance and can otherwise afford hospital care use it.

“The (right) people of that community are not using Physicians & Surgeons,” he said. Otherwise, he added, the operators would be able to turn a profit.

A 1987 report by a Medicare watchdog group said Christian Hospital had the highest death rate in the state among elderly stroke patients. The rate was 27%, contrasted with a 15.6% rate statewide. However, health care officials cautioned at the time that special circumstances could make such unusually high rates misleading.