Saving Physicians & Surgeons Hospital Is Financially Impossible, Report Finds

San Diego County can’t afford to bail out Physicians & Surgeons Hospital, and neither can any other public institution, a report to the board of supervisors concludes.

Scheduled to be presented formally next Tuesday, the report dismisses as financially impossible one of the last hopes for saving the only hospital in San Diego’s poor Southeast.

The hospital’s owner is trying to sell the hospital because of losses estimated at $1 million a year.

“The sad reality of all this is that, were the county to have an aggressive policy regarding indigent care, our already tenuous fiscal picture would be exacerbated by attempting to own and operate a county hospital,” says the report signed by Dr. J. William Cox, director of the county Department of Health Services.

“Unfortunately, we don’t envision any other institution or individual on the horizon who will resolve their current problems,” the report says.

Agreed in 1968 to Sell

The county got out of the public hospital business in 1968, when it entered into an agreement to sell what is now UCSD Medical Center to the university.

The report comes on the heels of an ultimatum to the city Friday by the hospital’s owner and operator, National Medical Enterprises. The firm gave the city 30 days to pay $8.6 million or forfeit all control over the hospital’s fate.

Since the city has indicated that it is unlikely to pay the money, the move could clear the way for Physicians & Surgeons to be closed or sold for some more profitable use.

The report, prepared for Cox by Paul B. Simms, deputy director in charge of physical health services, paints a grim picture of the human cost of losing the hospital. It also gives the most detailed figures available to date on the hospital’s financial picture.

In human terms, the report says, closure would reduce access to health care for an impoverished community whose residents will have difficulty finding transportation to hospitals farther away--and who, consequently, might put off getting care until their condition has deteriorated.

The hospital treated 13,109 emergency patients and 8,555 outpatients in 1987, it says.

By sampling a 10-day period in January, Simms concluded that 55% of the hospital’s patients came from the ZIP code area southeast of Balboa Park, between Imperial Avenue and California 94. The figure jumps to 87% when the areas immediately south of that and downtown are added.

The patient mix during that 10 days exhibited the lopsided characteristics that have been blamed for Physicians & Surgeons’ red ink of up to $2 million a year: 83% of the patients represented clear financial losses for the hospital. (This contrasts with about 23% countywide during the first half of 1986, the report says.)

Of the total patients, 31% had no medical coverage at all. Another 24% were covered by the state’s Medi-Cal program for indigents, and 28% by the county’s program for the working poor. Since both of those programs do not pay the full cost of caring for those patients, they also result in losses for the hospitals.

Even if a longer period is considered--the first half of 1986--nearly 59% of Physicians & Surgeons’ patients were in those three money-losing categories, the report says.

“Any acute hospital would face financial problems given the current payer mix of the immediately surrounding area,” the report says.

If Physicians & Surgeons closes, the report says, the greatest impact can be expected at UCSD Medical Center and Mercy Hospital in Hillcrest. Paradise Valley Hospital and, to a lesser extent, Harbor View Medical Center downtown also could be expected to receive some of the patients.

For outpatients, care could be provided at two Southeast clinics, the Comprehensive Health Care Center and Logan Heights Family Medical Center, the report says.

Financial Shortfalls

But people who have been using the hospital for non-emergency medical care already have access to those clinics--which raises the difficult questions of why they haven’t used them and whether they will do so if the hospital closes, Simms said in an interview.

In the report, Simms listed a variety of possibilities for public use of the hospital, then quashed them by pointing out the financial shortfalls that have plagued public health care in recent years.

For instance, the hospital could provide space to house chronically mentally ill adults, who now clog the county’s system for caring for the mentally ill. It also might be a good site for long-term nursing care, or for a satellite hospital operated by UCSD Medical Center.

But money just isn’t available, the report says.

The study was requested in April by Supervisor Leon Williams, in whose district Physicians & Surgeons is situated, because of talk that the hospital was up for sale. A spokeswoman for Williams said Tuesday that he had not yet reviewed the report.

Asking $10.6 Million

Simms says in the report that National Medical Enterprises is asking $10.6 million for the hospital, a figure that NME spokesmen would not confirm. Given NME’s disastrous six years of trying to operate the facility as a hospital for a profit, it is considered unlikely that a private buyer would maintain that use.

Indeed, NME’s notice last Friday to the city that it must pay $8.6 million or forfeit its control over the hospital is a key step in assuring the facility’s potential for conversion to other uses.

When the hospital was built in 1972, its original owner received the city’s blessing--and access to better bond funding--on condition that the building would remain an acute-care hospital. The agreement gave the city ultimate ownership of the building in the year 2002.

Both those provisions have made it difficult for NME to extricate itself from Physicians & Surgeons, NME officials said last week.

After the original construction bonds were defaulted on, NME acquired a lease to operate the hospital. Three months ago, after four years of red ink, NME quietly bought up the defaulted bonds--thus making itself the owner of the hospital for the first time. This also gave it the power to order the city to pay up or relinquish its interest in the property.

The city is studying whether it has any legal recourse to block the maneuver, said Coleman Conrad, deputy city manager. The complicated financing, as well as the subsequent bankruptcy of the original owner, make the situation murky, he said.

“There’s a strong desire to have the hospital continue to provide services in the community,” Conrad said. “We’d like to do whatever we legally can to see that that comes about.”