Court Trustee Wants Cold Cash in Heated Bid for Hospital Site
The doctors’ group that wants to turn Lake View Medical Center into a private hospital and infectious-disease research institute has lost its edge in competition to buy the bankrupt property, a bankruptcy sale official said Thursday.
Gilbert Robinson, court-appointed trustee for the medical center, said Doctors Service Group Inc. is out of the running for the property unless it brings a check equal to its $7.5-million offer for the property to a hearing Tuesday in federal bankruptcy court.
“Right now, the DSG is not viable as far as I know,” Robinson said. “They have not come up with the financing.”
Still in the running for the property are Phoenix House, the drug-services agency proposing to pay $7.7 million to turn the site into a 210-bed Nancy Reagan Center for drug-abuse treatment, and a third unidentified group that made a lower bid last week.
Doctors Service Group administrator Jerry Lea said that Phoenix House’s widely publicized interest in the property has “forced us into a situation where we’re not ready yet.” Lea confirmed that one of the company’s funding sources had fallen through, but she expects several others to make up the difference.
“We understand that if we don’t show up with a $7.5-million check, we’re out,” she said. “We intend to do just that.”
Phoenix House officials were enthusiastic about the news that the doctors’ group was having a hard time raising money.
“They’ve been shaky from the beginning . . . I’m very encouraged,” said Larraine Mohr, Phoenix House vice president.
This newest turn of events prompted a difference of opinion among Lake View Terrace residents, who have strongly opposed the drug-treatment center because they believe it would bring crime and drugs to their neighborhood and reduce property values. They have been adamant in wanting a hospital to again occupy the site, and have tentatively thrown their support behind the Doctors Service Group project.
‘No Ifs, No Ands, No Buts’
The fight against Phoenix House will continue, regardless of the outcome of Tuesday’s bankruptcy hearing, said Lewis Snow, president of the Lake View Terrace Home Owners Assn. Inc.
“This community does not want Phoenix House there. No ifs, no ands, no buts,” he said.
But Phyllis Hines, president of the Lake View Terrace Improvement Assn., said some people have expressed concern about Doctors Service Group’s solvency.
“If these guys are legitimate, well, fine. But if they’re some kind of flakes, we don’t need that,” Hines said. “Now I’m even hearing some people saying maybe Phoenix House wouldn’t be so bad after all.”
Representatives of both companies were vague about their financing.
Lea said Doctors Service Group’s financial support for the 182-bed hospital will come from a wide range of investors, including “union people, consumer activists, insurance people.” Earlier this week, its chief spokesman, Santa Ana surgeon Jerry D. Nilsson, said doctors from around the nation had pledged money for the purchase. But Nilsson would not reveal the identities of the doctors because, he said, they would be viewed as traitors at their current hospitals.
Phoenix House also must rely on pledges as proof that it can afford the property. Lea speculated that Phoenix House may have trouble backing their bid with cash by Tuesday.
Mohr said Phoenix House’s fund-raising campaign is going “very well,” but she refused to disclose how much money has been amassed for purchase of the property.
Phoenix House’s problem is not its financing, she said, but whether it can get a conditional-use permit to operate the drug-treatment center. If the neighborhood opposition continues, she said, it could stymie the permit process.
Robinson said he did not know how the bankruptcy judge would view financial pledges and contingencies, but his recommendation to the court would be based solely on who can come up with the most money.
“I’m not interested in guarantees,” he said. “I’m interested in cash.”
Robinson would not elaborate on why Doctors Service Group did not appear to be solvent. But a review of information provided by Nilsson about Doctors Service Group’s close associations with national and international infectious-disease experts turned up a string of denials.
After a meeting with Lake View Terrace residents Monday night, Nilsson named the International Infectious Disease Society as one of the group’s closest allies in its quest to start a 145-bed institute and research center. He said society members were anxiously awaiting word of community response to the proposal.
Lea said he had spoken to the society three months ago in Munich.
But Harvard University-based scientist Edward Kass, past president and executive committee member of the International Infectious Disease Society, said: “I don’t know anything about this outfit . . . They should not be using the name of our society in vain.”
