$50-Million Health Fund Sits Idle as Inglewood Waits

In Inglewood, having an extra $50 million to spend on health care seems like a present--not a problem. With more than their share of uninsured patients and one in five children living in poverty, the neighborhoods could use the range of medical services that money could buy.

Yet a $50-million charitable fund, earmarked for health care, has sat untapped for a year, and critics say little progress has been made even in planning what to do with it.

Not that no one wants the money. Community activists and health care advocates insist that it is needed for everything from cancer screening to job development, and that it should not be squandered. But even before the first community meeting to air the issue takes place next month, a not-so-charitable brawl has erupted over how the money should be spent.

The dilemma arose in August of last year, when nonprofit Centinela Hospital Medical Center was sold to a for-profit chain--and the proceeds were set aside, as required by state law, for a $50-million health care charity.

Since then, even the nonprofit hospital’s 91-year-old former president, whose marble bust stands in the lobby and whose giant oil-painted portrait graces its pavilion, has come out swinging against the board of trustees charged with developing a plan for the money.

“They’re jerks,” Ira Kaufman said of the Centinela Valley Health Services trustees, who make up the former nonprofit’s parent board but who have nothing to do with the current ownership.

At issue, among other things, are the board’s preliminary moves to allow the City of Hope, a hospital giant 32 miles away, to manage the money and perhaps claim a chunk of it for its own programs.

Recently, the California attorney general’s office has quashed the budding courtship between the Centinela and City of Hope boards, and has invited community input on the spending plan. But local feelings are bruised.

Kaufman accuses the Centinela trustees--only one of whom lives in the area--of caring more about their “golf games at the country club” than they do about poor people. Some vocal community members share his ire. Others have questioned the board’s ethnic makeup (two of 11 board members are minorities compared to nine in 10 residents).

“There will be a substantial commitment to the community,” promised board of trustees President William C. Miller, a former longtime Inglewood resident who now lives in Bel-Air. “If [Kaufman] thinks there isn’t, he’s wrong.”

Restrictions on Such Proceeds

How to spend such windfalls is becoming an increasingly common quandary nationwide. Between 1980 and 1993, 270 nonprofit hospitals converted to for-profit status. Fueled by grueling competition in health care, an additional 140 nonprofit hospitals converted to for-profit or public hospitals between 1994 and 1996. Two recent California conversions involved hospitals in Riverside and San Jose.

Money freed up by such transactions tends to stir strong emotions. During the recent conversion of Good Samaritan Health Systems in San Jose, local politicians threatened to take hold of the kitty by “eminent domain.” By law, the proceeds--minus debts--are to be spent in a manner that honors the nonprofit’s charitable mission. The question is: What does that mean? In Inglewood and elsewhere, it is not so simple as spending the money where it is needed.

“It seems like it should be a slam dunk,” said Paul Torrens, a professor of health services at UCLA. “But it isn’t.”

To the attorney general’s office, which must review the spending plan before it is submitted to a judge for approval, the money comes with tight strings.

“It’s not free money,” said Deputy Atty. Gen. James Schwartz. “It’s trust money”-- generally restricted to areas in which the former nonprofit hospital has a track record.

Schwartz would not discuss specifics of the Centinela board’s plan but has indicated that he would favor a blueprint that benefited other local nonprofit hospitals providing charitable services, such as indigent care. In fact, he launched a time-consuming effort to build a consortium of six area hospitals--including the Daniel Freeman and Robert F. Kennedy medical centers--to advise the Centinela board.

Meanwhile, irked by rumors of City of Hope’s role, community activists, business people and politicians in and around Inglewood say they are feeling left out.

“‘Where does the community become involved? . . . [The planning process] is almost like the best-kept secret there is,” said activist Lynette Lewis, an advocate for women’s health care.

Schwartz hopes that the public will become involved Oct. 28, when trustees are expected to present a preliminary spending plan--still being drafted--at the Inglewood Public Library.

“We’ll see if we can get an agreement that meets everybody’s needs,” he said. “I’m actually optimistic. . . . These are things we just have to work through.”

Just in case, gloves are being donned. “[We] are prepared to fight for what’s right,” said Inglewood Councilman Jerome Horton. Last week, he introduced a council resolution, approved unanimously, to urge the appointment of a more representative board and keep the money in the Inglewood area.

Despite community members’ sense of proprietorship and their support of the hospital over 70 years, the money is not theirs to spend. It rests in the hands of the 11-member board of trustees, the core of the former hospital’s board plus some new appointees.

That worries some critics, who complain that Centinela, as a nonprofit, devoted itself more to promoting the hospital as a sports medicine center--as the “official” hospital for the 1984 Olympics, the Lakers, the Kings and others--than caring for the indigent. (The current for-profit owner, Tenet Healthcare Corp., has no official say in how the charity money is spent.)

The community’s hopes are colliding with legal realities. Already, Schwartz said, he is being asked for impossibilities--Inglewood’s request for $25 million for the city’s paramedic services, for example. He says the law won’t abide such a direct allocation to the city because it is not consistent with Centinela’s past role.

It is a difficult concept to grasp in an area with such widespread non-hospital needs, many of them in outpatient services and prevention. Doctors say diabetes, hypertension, heart disease, breast cancer and complex problems of the elderly all require attention in Inglewood’s neighborhoods.

Other states have taken a looser approach to charitable spending plans. In one well-publicized case in Tennessee, hospital conversion proceeds were used to pay for youngsters’ flying lessons. Even within California, some attorneys and health care experts favor a more flexible reading of the law, or a change in legislation that would allow spending more consistent with trends toward outpatient and home-based care.

“We don’t want to be mired back in the 1950s,” said Douglas Mancino, an attorney for a charitable trust in San Jose.

But Schwartz says he cannot make public policy, only enforce what exists. And he warns against unrealistic expectations: The $50 million would yield only $3 million to $4 million a year if it is set up as an endowment--not enough to make more than a dent in local needs.

Links to City of Hope Spark Outcry

While Schwartz has struggled to calm everyone, the actions of the Centinela trustees have riled community critics.

Last year, around the time of the hospital’s sale--to OrNda Healthcare, later taken over by Tenet Healthcare Corp.--the board quietly met with representatives of the City of Hope, and later invited that internationally known cancer center to manage the charity fund. Schwartz said the board told him of its intention to name City of Hope as a “principal beneficiary” of the money--a plan he has since nixed.

Later, four members of the City of Hope’s board were named to the Centinela board, and five Centinela board members joined the City of Hope’s board.

Adding to community suspicion, documents from the secretary of state’s office--now circulating in Inglewood--indicate that the Centinela board’s mailing address is at City of Hope in Duarte. Other documents show that the Centinela Health Care Foundation, a separate fund-raising arm of the hospital with $2 million in assets, has changed its articles of incorporation so that it would be dedicated to fund-raising for the City of Hope.

Schwartz recently asked the two hospital boards to dismantle the interlocking memberships, which he termed “inappropriate.” They immediately agreed.

City of Hope attorney Glenn Krinsky insisted that his hospital was “minding its own business” when it was invited by the Centinela board to make a “presentation.”

One idea that was discussed, he said, was to use some of the money for pediatric cancer treatment at the Duarte hospital. He said that if the community or the attorney general objects, City of Hope will walk away with “no hard feelings.”

“We are trying to be a helpful, willing, neighborly participant. This was something that was brought to us, not something we went out and sought. If through our expertise in treating pediatric cancer, and our historic charitable mission, we can be helpful . . . we are delighted.”

Schwartz did not rule out City of Hope receiving some of the money, but said it cannot, in his view, be the principal beneficiary or have interlocking board memberships with Centinela.

Some community members were irate that the Centinela board looked outside for guidance.

“What do [City of Hope officials] have in this community other than a political connection?” asked Dr. Allan Orenstein, an oncologist who sits on the board of Daniel Freeman. “When it comes to health care, we really need to use every dollar to benefit the community.”

Most disconcerting to some was what they perceived as a conflict of interest. The lawyer for the Centinela board, Sherwin Memel, had worked for years as an attorney for City of Hope.

Memel, who is recovering from an illness, could not be reached for comment. But his partners and City of Hope’s Krinsky denied any conflict. Miller said asking City of Hope for help in managing the money was not Memel’s idea.

“We needed someone [with charity experience] to do the paperwork,” Miller said. He said there was no intention of giving City of Hope a leg up as a beneficiary.

“I think the community is jumping to some conclusions that aren’t warranted,” said Gordon Bava, an attorney with Memel’s firm.

Meanwhile, a wide rift has opened between the board and Kaufman, the former nonprofit hospital’s largest donor, described under his bust in the lobby as “Mr. Centinela.”

“I don’t talk to them,” said Kaufman of the board members. He stormed out of a meeting a year ago in a disagreement over who should control the money and has since asked Schwartz to appoint a new board composed of nonprofit hospital representatives.

Kaufman, who is not seeking a seat himself, said the money belongs to those in the community who need medical services but cannot pay for them. That, he said, should be Centinela’s legacy.

“I’m very disappointed. I’ve never been so disappointed in the 50 years I’ve been there,” he said.