Both Sides in San Pedro Hospital Dispute Begin Feverish Campaigning

Breaking nearly a month of official silence, San Pedro Peninsula Hospital this week launched a campaign to block an attempt by dissident members of the hospital’s parent corporation to replace the 15-member board.

The hospital began its public defense with a press conference Monday, eight days before the special board election that was forced by the dissident group.

“We are concerned about the takeover. We consider it a possibility,” Dr. Larry Orosz said. “For the past month, the hostile group as been telling its side. We want our side told.”

Orosz, hospital board chairman and a physician in the emergency department, used the forum to label Tuesday’s special election a “hostile takeover” attempt that could destroy the 64-year-old community hospital.

The press conference began a week of feverish activity by both sides, aimed at winning the votes of the 350-member community corporation that elects the hospital board.

In the days before the election, the hospital has planned a community open house, has taken an advertisement in the local newspaper, has circulated several written defenses and has hired a public relations firm.

The dissident group--the Committee to Save San Pedro Hospital--is holding two public meetings and has continued an active campaign to arouse community opinion. It has circulated a newsletter and a detailed statement on how it believes the hospital should be run.

The election, which will be closed to the public, was called after 22 members of the community corporation petitioned for it.

The committee asserts that the board has failed to solve problems that contributed to $8 million in losses during 1987 and 1988.

On Tuesday, the committee will attempt to remove board members and replace them. The group has not announced its slate.

Hospital officials said that steps are being taken to put the troubled hospital back in the black and, at the press conference, said removal of the board could scuttle the recovery.

John Wilson, acting chief executive officer of the hospital, said Monday that the board is “doing the job” to revamp operations, which includes following recommendations in a $50,000 study by the national accounting firm of Ernst & Whinney.

Wilson--who acknowledged that the hospital expects to show a $6-million loss for 1988--said a $500,000 profit is expected this year. A profit of $2 million to $3 million a year is expected in 1990 and after, Wilson said.

The hospital has a $95-million budget for 1989.

Wilson said replacing the board would be “the end of San Pedro Hospital,” and would lead to an “internal upheaval” because a new board would not be supported by the hospital staff.

Orosz said an ouster would cause First Interstate Bank to “call in the note,” a reference to $18 million in hospital bonds that are guaranteed by the bank. The hospital’s sharp financial losses put it in technical default on the bonds, which require a level of profitability, and led to the Ernst & Whinney study.

Orosz’s alarm, however, was blunted by bank spokesman John Popovich, who said First Interstate has no plans to “pull the loan.” He said the bank is concerned about the so-called takeover action but does “not need to enter that fracas, or intend to.”

He said that even if a new board is elected, he “cannot imagine that a new board would ignore” the financial recovery plan under way.

He said the bank approves of what the hospital has done so far, and is looking forward to the final plan, which is expected to include complete reorganization of the hospital and changes in services.

At the press conference, Wilson and Orosz speculated that the dissident group may be planning to sell the hospital or bring back the former president, Rodney Aymond, who was forced by the board to resign Jan. 25.

“We want to save the hospital, not sell it,” responded Robert L. Hansen, chairman of the citizens committee. Earlier, the group asserted that alleged failures of the board could lead the hospital to bankruptcy or a takeover by a profit-making hospital chain.

But Orosz said: “There are no negotiations for a takeover, we will never consider a takeover or sale of this hospital.”

Anonymous Letter

In the case of a sale, the proceeds would go to bondholders and creditors, with any remainder to charitable groups in San Pedro, said Don Olden, hospital vice president for finance.

Hansen also denied that the group wants to bring Aymond back as president.

An anonymous nine-page document, circulated in San Pedro, asserts that the hospital pays too much money for services performed under contracts with local physicians, who provide radiology, laboratory, pulmonary and cardiology services. The document says costs are from one to eight times in excess of market value and cost the hospital about $1.25 million a year more than it should.

Although the dissidents have denied authorship,the committee agrees with the document, Hansen said. He said Aymond was attempting to reduce these contract costs when he ran afoul of a “power group” of contract physicians who benefit from the contracts.

At the press conference, hospital leaders said contract costs were reduced by 20% last year. Orosz said the present contract physicians are doctors who have been in the community for years and have served the hospital well.

Hansen has also criticized the presence on the board of Orosz, who works for a medical group that contracts with the hospital.

Wilson, who praised Orosz’s professionalism and called him an excellent manager, said Orosz does not vote on his group’s contract.

In a lengthy statement, physicians Bruce Goldreyer and David Campisi, hospital chief of staff and chief-elect, respectively, defended the contract system and blamed Aymond for mismanagement. Among other things, they blamed Aymond for medical insurance misclassifications that contributed heavily to the financial losses.

In an earlier interview, Aymond acknowledged the serious problem and said he had solved it.

Despite contentions by hospital leaders that they have the support of the staff in the battle for the board, Hansen said that may not be true. “We’ve heard from people who are pleased with what we’re doing,” he said. “We have employees who back us, nurses and medical assistants.”

The hospital will conduct a community open house Sunday from 1 to 3 p.m.

Promises Responsive Board

For its part, the committee pushing for a new board will conduct its first public meeting tonight from 7 to 9 at the San Pedro Peninsula YMCA. The second meeting will be Sunday from 2 to 4 p.m., at the Y.

In written statements, the committee is promising a board that is responsive to community needs and medical service contracts that do not result in “excessive payments to select physicians.”

In his letter to corporate members, Orosz called the committee a “hostile takeover group,” adding, “the board, administration and medical staff are all working hard to ensure the future of an institution that has served your community for more than 60 years.”