San Diego General Hospital Owes $1 Million : Health Care: Its new administrator says nonprofit status by the end of the year is the best option for the troubled facility.
San Diego General Hospital is at least $1 million in debt to its suppliers and must be restructured as a nonprofit institution by the end of this year, the new administrator says.
Going nonprofit is “probably the best viable option that we have right now,” said Norm Martin, who took over recently as chief administrator and financial officer for the troubled hospital.
“We have to have something in place within 120 days to six months” of July 1, Martin said. “If we don’t, we have to look at some serious alternative action--plan B. There is a B plan, but I’m not at liberty to discuss it yet.”
However, he denied longstanding community fears that San Diego General--formerly Physicians & Surgeons Hospital--would be replaced with bay-view residences or offices.
Martin, who came to the Southeast San Diego hospital as a financial consultant in July, took over as administrator recently when Tom Hennessy accepted a job at Bay Harbor Hospital in Harbor City, just north of San Pedro.
Martin said he was called in after a year of steadily worsening fortunes at the hospital, which was bought by a small, for-profit investment firm in 1989.
The firm, whose majority owners are Benjamin Davis Jr. of Coronado and John Motte of Riverside County, bought it from National Medical Enterprises, one of the country’s biggest hospital firms, even though the facility has lost money since opening as a community hospital in 1972.
After an optimistic start by the new owners, the hospital was in trouble again within two months of the sale, Martin says.
Martin said he feels the hospital’s condition has stabilized in the past couple of months. But its financial affairs are in such a mess that he has resorted to paying vendors in cash, partly because some are angry about not being paid and also because it makes it easier to sort out past debts, he said.
“I would say that we have a tight cash-flow problem,” Martin said. “We are getting a better handle around what we owe our vendors, including physicians. Most of those we’re working out. But it’s safe to say we owe more than $1 million.”
Martin, a certified public accountant whose specialty is helping to save troubled hospitals, said San Diego General suffers from the same problems he has seen at other facilities.
“Almost every one I’ve been in, the major problem with the institution has nothing to do with fraud. It’s mostly to do with sloppy record-keeping, with not keeping the documents appropriately laid out so you can tell what your true cost is,” he said.
Martin says he began pushing Davis and Motte to take the corporation nonprofit as soon as he was called in this summer, and received the go-ahead soon afterward.
The change would make the hospital eligible for publicly funded support programs for which it could not otherwise qualify.
In addition, it would assuage concern in the community and among doctors that the new owners are less financially stable and less worthy of trust than National Medical Enterprises, said Jim Lott, executive director of the Hospital Assn. of San Diego and Imperial Counties. Lott himself began pushing the nonprofit idea vocally this summer.
“The credibility of the owners of San Diego General Hospital is seriously low,” Lott said. “The physician community does not feel or believe that the owners of the facility have the interest of the community in mind.
“We can plan, build and pour all the money we want to into the place, but unless they restore the confidence of the community, and unless they convert that into a nonprofit institution, San Diego General as it is today is doomed,” Lott said.
Taking the corporation to nonprofit status will not be an easy task, however, and would be marked by more of the complicated financial transactions that have characterized the hospital over the years.
A nonprofit corporation would have to buy the hospital from Davis and Motte, in effect paying off the more than $6 million they owe to National Medical Enterprises, Martin said. One possibility being considered would be to apply for state-backed Cal Mortgage bonds to finance the purchase.
However, an earlier effort to gain federal money, through the U.S. Department of Housing and Urban Development, failed because San Diego General did not qualify.
Physicians & Surgeons changed its name to San Diego General in July, and administrator Hennessy announced ambitious plans for a new maternity unit as a way to increase revenues for the inner-city hospital.
The plans rely on about $750,000 in state funds for remodeling and equipping an obstetrics unit.
But that and other revenue-generating programs likely would require the cooperation of other community facilities, such as UC San Diego Medical Center--something that won’t happen without nonprofit status, Lott predicted.
“In order for a true community, county-like hospital to work, you have to have motivated support by the physician community, by the community clinic community and by all the forces that operate in a medically under-served area,” he said.
“This new (investors) group is not and has not been received well by the community,” Lott said.
The move toward nonprofit status would take the hospital full circle, back to the status it had when it was built in 1972 as Community Hospital of San Diego to serve low-income residents in Southeast San Diego. Since then it has repeatedly been pulled from the brink of death by new buyers.
