Doctor Group Plans Rival Bid for San Clemente Hospital
A group of doctors at San Clemente General Hospital said Wednesday that it plans to submit a rival, second proposal to buy the hospital from its current bankrupt owner, revealing a split of opinion among the hospital staff about how the hospital should be managed in the future.
The group, identifying itself as Physicians Committed to Excellence or Pace, is attempting to thwart a previously announced proposal by another group of about 40 San Clemente General Hospital physicians to buy and operate the hospital themselves for profit.
The Pace group, which claims to represent 58 of the 160 staff physicians and 80% of the patient admissions to San Clemente General Hospital, said it is studying the feasibility of purchasing the 116-bed facility.
As an alternative, the doctors said they are considering building a new and more modern 120-bed hospital that would be in direct competition with the existing facility.
Pace announced at a news conference that it has reached a tentative agreement with SamCor Inc., a Phoenix-based nonprofit health care corporation, to manage either the existing or a new hospital.
Problems Blamed on Bankrupt Owner
Both groups of physicians say they will improve the hospital, which they agree is woefully outmoded, ill equipped and understaffed. And both blame these problems on the hospital’s current owner, the bankrupt American Healthcare Management chain based in Dallas, which they fault for siphoning out profits from the San Clemente facility to shore up less solvent AHM hospitals.
However, physicians at Wednesday’s press conference expressed concern that under the first proposal, American Healthcare would retain a 49% ownership in the hospital, although it would forfeit its current management role to the doctors.
They contended that the physicians backing the original hospital acquisition proposal and their general partners--a real estate investor and a developer--are not qualified to run the hospital. Some also objected to the group’s plan to retain the existing hospital management team.
Dr. Dava Gerard, who chairs the Pace steering committee, said Pace has greater confidence in the management capability of SamCor, whose Samaritan Health Service division owns and operates four hospitals in the Phoenix metropolitan area and owns or manages five other hospitals in Arizona and California.
Several members of the Pace steering committee said after the news conference that they believe that the $28-million purchase price the other doctor group plans to offer for the hospital is far too high.
However, SamCor Executive Vice President Dan L. Dearen said his organization has not yet examined the hospital--nor even set foot in the facility--to determine a fair price.
Dearen conceded that the rival physician group “may beat us to the punch” and get its offer approved by the federal bankruptcy court that is overseeing American Healthcare Management’s debt restructuring before Pace is ready to make a counteroffer. In any case, he indicated that SamCor and Pace do not want to get into a bidding war.
Dearen estimated that the alternative option of constructing a 120-bed hospital, on four to seven acres of land and according to SamCor specifications, would cost $30 million. He said physicians and community leaders would own the hospital, which they would lease to SamCor to manage.
Whether SamCor decides to go ahead with either alternative, Dearen stressed, will depend on the outcome of the feasibility studies. “We will make sure we do not lead the physicians and the community down a primrose path on a plan that does not make sense,” he said.
Officials spearheading the earlier proposal to buy and operate San Clemente General Hospital for profit said Tuesday that they did not feel threatened by Pace’s challenge.
“Only one transaction has been accepted by the seller, and it is ours,” said Christopher Wheeler, a Dana Point real estate investor who is working with the opposing doctor group.
Dr. Ron McGee, a family doctor who presented the rival plan at a press conference last month, said Thursday that he formerly chaired the organization now known as Pace. But six months ago, he said, the group split when he and other members rejected a consultant study that recommended recruiting a health care corporation to operate the hospital.
McGee said he decided instead to join forces with Wheeler, who was already negotiating with American Healthcare Management. He said he felt it was prudent to allow American Healthcare Management to retain an ownership interest in San Clemente General Hospital under the acquisition plan, in order to win AHM’s support.
McGee observed that “they own the place. They are in Chapter 11 (reorganization bankruptcy) and they are a debtor in possession. They don’t have to sell. It is not a fire sale.”
David Huff, president of American Healthcare Management Inc., said Wednesday that he has had “absolutely no contact” with the Pace group. He said he does not want to discourage any offers. But meanwhile, he said, “we have an agreement with the other guy and we are moving forward with him.”
Most Uncommitted
While Pace contends that it represents the vast majority of active staff physicians at San Clemente General Hospital, Wheeler retorted that his group represents “over 40% of the current admissions to the hospital.”
Wheeler said he believes that while a small number of doctors are strongly committed to one acquisition plan or the other, “the vast majority of physicians are in the middle . . . they just want a good hospital.”
Wheeler said he doubted that the area could support another hospital, which he observed would face competition not only from San Clemente General but from Saddleback Hospital and Health Center and Mission Hospital Regional Medical Center. He estimated that it would take about three years for a new hospital to open.
Wheeler said Price Waterhouse soon will complete a feasibility report for his group’s prospective doctor-investors and for potential lenders. He said he expects to present the bankruptcy court with a purchase package, including a loan commitment, by March 31.
