Hospital May Be Sold to New York Group : Health Care: Possibility of transaction raises hope that San Diego General can remain open.

Mired in financial trouble that threatens its existence, San Diego General Hospital might be sold to an investment group headed by Towers Financial Corp. of New York.

The investment group signed a letter of intent this week to buy the ailing Southeast San Diego hospital, which treats mostly indigent patients. Details of the sale were not known Friday, but the hospital’s financial consultant said no cash was to be exchanged in the transaction.

Towers Financial, a debt-collection and insurance company, made an unsuccessful bid in 1987 to take over Pan American World Airways, and it was charged the following year by the Securities and Exchange Commission with failing to register $20 million in securities before selling them publicly.

News about a possible sale raised hope that the 187-bed facility could remain open. Some speculated that a change in ownership could eventually lead to making San Diego General a nonprofit facility that could solicit grants and seek tax-exempt donations.

The hospital had to satisfy nearly 200 liens placed against it last month by the Internal Revenue Service. Because of the action, the hospital could not meet its $250,000 payroll, which delayed most hospital employees’ pay for three days.

Meanwhile, the hospital is under scrutiny by state Department of Health Services’ hospital-licensing inspectors, who have spent the week examining the hospital’s financial and staff shortages.

“The financial situation is very grave,” said Ernie Trujillo, head of the state’s hospital licensing office in San Diego. “On a scale of 1 to 10, with 1 being the worst, this hospital rates a 1.”

The inspection, sparked by an anonymous complaint filed more than a week ago claiming that the hospital cafeteria was being closed because of a food shortage, also focused on a lack of supplies.

Trujillo said he has forwarded the inspection findings to Sacramento, which could include a recommendation that the hospital be closed immediately or that its license be revoked.

State officials in Sacramento are expected to make a decision this week on Trujillo’s recommendation.

San Diego General has had problems meeting expenses for a number of reasons, including the inability last summer of the state Legislature and governor to come to terms on a state budget.

Because of the budget impasse, reimbursements through Medi-Cal and Medicaid were stalled for several months, said Norman Martin, the hospital’s financial consultant.

As it is, Martin says, the hospital gets 40 cents to 50 cents for every dollar it bills through Medi-Cal and 30 cents per dollar through Medicaid. Two other major hospital contracts, one through the county’s medical services and one that provides care for jail prisoners, bring the hospital about 25 cents on the dollar.

“It doesn’t take a rocket scientist to figure out, from a business standpoint, that, if we pay out $5 and we take in $3, we’re not going to be in business very long,” Martin said.

Because of the money problems, the hospital downgraded its emergency room Thursday to a first-aid station, requiring trauma patients, such as those with gunshot wounds, to be diverted to other hospitals. Others with less-serious injuries could be treated.

Hospital administrators said they could not afford to pay the staff to run the emergency room.

Of the hospital’s annual $29-million operating budget, $6 million to $9 million is spent to operate the emergency room, Martin said.

San Diego General, formerly known as San Diego Physicians and Surgeons Hospital, was purchased in August, 1989, by two Riverside County businessmen from National Medical Enterprises of Los Angeles, which holds the mortgage.

Martin said he had developed a plan for the hospital to turn nonprofit last October, when problems with the IRS first surfaced.