Plan to Sell Physicians & Surgeons Unveiled; Saving Emergency Care Key

National Medical Enterprises announced an agreement Tuesday to sell Southeast San Diego’s ailing Physicians & Surgeons Hospital to a Perris, Calif.-based medical firm that has pledged to keep it open as an acute-care facility with an emergency room.

Benjamin F. Davis Jr., president of Nationwide Medical Systems, said his company intends to buy the hospital for about $7.5 million and cancel plans to shut its critically needed emergency room. The deal is subject to both sides meeting certain conditions.

Some Details Unsettled

Davis said that, if his company takes the hospital over, it will keep the emergency room open, but that it may have to work out arrangements with the county and UC San Diego Medical Center about reimbursements for the indigent patients.

“I’m not going to go into it unless we have a plan to make it work,” Davis said. “I don’t want to go into a failure.”

The announcement culminated more than seven months of on-again, off-again negotiations between NME and Nationwide over the ownership of Physicians & Surgeons, the only acute-care hospital in impoverished Southeast San Diego.

With losses estimated as high as $2 million a year--primarily, NME claims, because the hospital is not adequately reimbursed by government programs for the large number of indigents it serves--Physicians & Surgeons has faced an uncertain future in recent years.

Last month, NME announced plans to close the hospital’s emergency room March 28. With nearby Paradise Valley Hospital’s emergency room scheduled to close in May, Southeast San Diego residents faced the prospect of traveling to UCSD Medical Center or Mercy Hospital for emergency care.

But Tuesday’s deal does not seal Physicians & Surgeons’ future. Under the agreement, Davis has 30 days to provide NME with a letter of credit showing sufficient financial backing for the purchase.

Concession From City Needed

In return, NME must obtain clear title from the nonprofit corporation that owns the hospital and must convince the city to give up its “reversionary interest” in the facility. Under the terms of the bonds used to build Physicians & Surgeons in 1972, the city would take title to the hospital in 2002.

The council has refused to give up that interest without assurances that the hospital remain a full-service institution with an emergency room.

On Tuesday, San Diego City Councilman Wes Pratt, who represents the area but has not been privy to the latest round of negotiations, said, “I’ll wait and see what they have and reserve judgment until then.”

NME could take control of the hospital through foreclosure, but Donald Thayer, NME’s vice president for development, said Tuesday that he hopes to avoid that route. Thayer said he will meet with Pratt this week to discuss the deal.

Nationwide owns just one hospital, the 36-bed Christian Hospital Medical Center in Perris, and runs pharmacies in the Los Angeles area and in San Antonio.

The company first surfaced as a potential buyer of the 187-bed Physicians & Surgeons last July. In the fall, the company asked San Diego to help buy the hospital but was rejected.

Thayer said the current agreement calls for NME to lend Nationwide part of the purchase price. The balance would be paid in cash and through a loan from another creditor. Thayer declined to discuss the size of the loans or confirm the purchase price.

$200,000 a Month Sought

Davis said he needs to increase Physicians & Surgeons’ revenue by $200,000 a month to rescue the hospital. A critical need, he said, is a higher rate of reimbursement for emergency-room physicians.

Davis said he plans to raise revenues by seeking an increase in payments under the County Medical Services program for low-income hospital users who are not getting any other government aid.

According to county figures for the first half of 1986, 58% of the hospital’s patients were uninsured or covered by government programs that did not fully compensate the hospital.

But, according to an official at UCSD Medical Center, which runs the indigent-care payment program in central San Diego, there is no money for an increase.