Financial Problems Cited : Chula Vista to Consider Private Firm for Hospital

The City Council tonight will consider a plan to turn the operation of financially troubled, nonprofit Bay Hospital Medical Center over to a private corporation.

The hospital’s troubles stem from its inability to pay off about $15 million in tax-exempt bonds and revenue notes, sponsored by the City of Chula Vista.

Under the plan, National Medical Enterprises, a Los Angeles-based corporation that owns or operates hospitals nationwide, including six in San Diego County, would provide money to pay off the bonds and notes in return for a 30-year lease to operate the hospital.

The corporation would also provide an estimated $15 million to build a 30- to 50-bed addition to the 159-bed hospital, which is the second largest in the South Bay after the 210-bed Paradise Valley Hospital in National City.

Bay Hospital President Robert Larson said it needed more beds because “all critical-care hospital beds in South Bay are currently full. . . . People are having to be transferred to San Diego.”

In a memo to the City Council, Paul G. Desrochers, community development director, said the city is not liable should the hospital default on its bonds, but warned that failure of the city to adopt a plan to aid the troubled hospital could result in a default that would lower the city’s credit rating and possibly close the hospital.

Bay Hospital Medical Center is in financial difficulty despite the fact that its 72.6% occupancy rate is second in San Diego only to Children’s Hospital.

Larson said that most of the hospital’s difficulties stem from a more competitive bond market resulting from President Reagan’s tax-reform proposal.

“That reform severely restricted the amount of financing available,” he said.

“Because of the projected changes in the law, we felt we had to find another way to pay those bonds off,” which is why they turned to National Medical Enterprises, he said.

Larson said that the hospital negotiated with several other medical organizations before deciding. Those organizations included Los Angeles-based Health West, Dallas-based Public Health Corp., Los Angeles-based American Medical International and San Diego’s Mercy Hospital.

The six hospitals already operated in San Diego County by National Medical Enterprises are Physician’s & Surgeon’s Hospital, Alvarado Hospital and Medical Center, Alvarado Convalescent Rehabilitation Hospital, Alvarado Parkway Institute, Southwood Psychiatric Residential Treatment Center and National Medical Homecare.

In a meeting late last week between representatives from Bay Hospital, National Medical Enterprises and the city, some council members expressed concern about what was happening to the hospital and wanted assurances from the agency that the quality of services would not be changed.

“As a council member, we all view this as more than a simple transaction to clear some books,” Councilwoman Gayle McCandliss said.

Mayor Greg Cox expressed some concerns about the proposed agreement and asked that a consultant evaluate the hospital’s indigent care program.

However, the mayor seemed pleased with the selection of the agency. “I think they’re a good outfit that would provide good quality care to the community.”