Physicians & Surgeons Has 3 Offers; Hopes to Retain Acute-Care Status

National Medical Enterprises, owner of the ailing San Diego Physicians & Surgeons Hospital, intends to sell the hospital to a company that would maintain it as a full-service, acute-care facility with an emergency room, San Diego City Councilman Wes Pratt said Thursday.

Pratt, buoyed by a meeting with a top NME official in Los Angeles Wednesday, said that the giant medical corporation is negotiating with three groups, all of which would keep Southeast’s only full-service hospital as an acute-care facility after buying it.

After meeting with Donald W. Thayer, vice president for development of NME’s hospital group, Pratt said that he expects a deal for sale of the hospital to be sealed within a month.

Thayer “pledged to me that it was their intent that the hospital continue to operate as an acute-care facility with an emergency room,” Pratt said, adding that NME hopes to sell the hospital to a group that will “hopefully expand the services.”

Although the assurance is a good sign for the hospital’s future, it is far from an ironclad guarantee. NME can’t require a buyer to keep the hospital operating as it is, Thayer said.

“That’s pretty hard to do. Their best efforts and indicated intent is going to have to be good enough. That’s about as far as you can go,” Thayer said.

Concern Would Lose Hospital

With financial losses at Physicians & Surgeons estimated at $1 million to $2 million annually, NME has been maneuvering to sell it, prompting widespread concern that Southeast San Diego could find itself without a full-service hospital or an emergency room.

Health officials have also worried that a closure would have a domino effect on nearby hospitals, particularly Paradise Valley Hospital in National City, which would probably be forced to serve Physicians & Surgeons’ predominantly low-income clientele.

Figures gathered by Paul Simms, San Diego County’s deputy director for physical health services, show that, in the first half of 1986, 58% of Physicians & Surgeons clients were uninsured or covered by government programs that didn’t fully compensate the hospital.

Pratt’s statements are the first indication that NME, which has so far refused public comment on the situation, will ask buyers to pledge continuing acute care for the residents of the community surrounding the 78-bed facility.

“I’m confident the hospital is going to continue to operate as a full-service emergency facility,” Pratt said Thursday.

Pratt asked for the meeting with Thayer after he was approached by one of the hospital groups, whose officials told him that they could operate Physicians & Surgeons as a full-service hospital. Upon meeting with Thayer, Pratt said that he learned that the hospital was negotiating with two other groups who had made the same commitment.

Pratt refused to identify the three bidders, but the Times has learned that one is a for-profit company whose owners run Christian Hospital Medical Center, a 36-bed hospital in Perris, Calif.

Pratt said all three groups intend to improve Physicians & Surgeons’ patient mix by adding programs which would bring in more patients who are insured or could pay for their services.

Tough Act to Follow

But NME itself has had limited success at achieving that same goal, and a hospital industry analyst questioned whether any for-profit firm could do better at operating the hospital than industry giant NME has.

“Maybe the buyers are just saying that, and then when they buy it they (will) change their mind. I don’t know,” said industry analyst Ted Gomoll, a portfolio manager at GT Capital Management in San Francisco. “What I do know about NME is that if they can’t make a go of it, it would probably be pretty tough for someone else.”

Only a nonprofit corporation would stand much of a chance of doing better than NME did at running the hospital, because of the tax breaks the firm would have, Gomoll suggested.

Nevertheless, Thayer said NME has three firm offers for Physicians & Surgeons. He would not give any information about them.

Don Davis, corporate counsel for one of the firms, Nationwide Medical Systems Inc., confirmed that it wants to buy the hospital. The firm is privately held by the same principals who operate Christian Hospital in Perris, but that nondenominational hospital is run under a separate corporate entity, Davis said.

Davis said the group’s members think they can turn Physicians & Surgeons around because they are not part of a corporate giant.

“When you take a small group of 15 people, each of whom have their own expertise and experience, and they’re putting their own capital and skills into it, you have a very different environment. You have a very different esprit de corps. It’s an entirely different approach from a company that has 30 or 40 or 50 or 100 hospitals and tries to operate them all from afar,” Davis said.

He noted that these same people rescued Christian Hospital after acquiring it in 1984. The president of Nationwide is Davis’s uncle, Benjamin Davis Jr., of Coronado, he said.

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 27.8%, compared to a 15.6% rate statewide. However, health care officials cautioned at the time that special circumstances could make such unusually high rates misleading.