Hospital Accused of ‘Hostile Takeover’ Bid

Ventura County Supervisor John Flynn said Tuesday that Community Memorial Hospital’s plan to strip the county of a $260-million tobacco settlement is just one lever in the private hospital’s strategy for a “hostile takeover” of the county health-care system.

A second lever, Flynn contended, is Community Memorial’s possible construction of a new hospital in east Ventura that the private hospital would offer to run jointly with the county.

Community Memorial hopes those two bargaining chips--the county’s loss of tobacco money and a new jointly run hospital that meets stringent new state earthquake standards--will push the Board of Supervisors to merge the county hospital with its private rival, Flynn said.

At the supervisors’ meeting Tuesday, Flynn said he would set a hearing later this month to discuss Community Memorial’s strategy.

“Community Memorial is conducting a hostile takeover of the county public health clinics and the county hospital,” he declared.

For years, Community Memorial has proposed merging with Ventura County Medical Center, the public hospital just two blocks away.

“Now they’ve got a gun to the county’s head,” Flynn said. “They perceive they have that leverage.”

But Michael Bakst, executive director at Community Memorial, said Flynn’s theory is not supported by the facts.

“There could be nothing further from the truth,” Bakst said. “If he has any proof, I’d like to see it. It’s not our intent or desire to take over the county hospital but rather to continue to work together.”

Bakst said Community Memorial’s plan to turn the tobacco settlement over to private hospitals through a November ballot initiative has nothing to do with a merger or a new hospital in east Ventura.

Although he still thinks a merger “might be intriguing,” Bakst said no merger plan is on the table. And a new hospital miles from the existing one is not Community Memorial’s favorite option, he said.

Instead, Community Memorial hopes to meet new earthquake standards either by retrofitting its current facility or building a new hospital at the same location in mid-Ventura, he said.

He said no land has been donated for a new facility, and he has not talked with any landowners about such a donation.

“As of now there is no land,” he said. “And that phenomenon has nothing to do with the initiative whatsoever.”

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But doctors affiliated with the hospital told The Times that the possibility of building a new hospital was broached early this year. In a staff meeting, Bakst laid out Community Memorial’s options for meeting earthquake safety standards by a 2008 deadline.

“They said we’d been given some land out on the east end and that it could conceivably be a hospital,” said Ventura gynecologist Patrick Diesfeld, whose office adjoins Community Memorial. “I called Bakst up and he said it could happen that way . . . it could be ready for 2008.”

Diesfeld said he was concerned about the costs of moving across town and called Bakst to get more details.

“He said it would be an equivalent deal to what we have now,” the doctor said.

Bakst said doctors must have misunderstood the discussion.

“What I said to a few of my doctors is, ‘If we had to build a new facility, where would you like to see it?’ ” Bakst said. “They said the east end of town seems to be where the population is going. . . . We’d need to get donated land to make it feasible.”

Precisely where a new hospital would be located and who the land donor might be has been a topic of discussion for Community Memorial doctors for months, Diesfeld said. Physicians have speculated about what the prospect of a new hospital, combined with the tobacco initiative, might do for Community Memorial’s bargaining position with the county.

“The big question is: If Bakst is successful with this tobacco deal, would he be able to roll that into one hospital with the county?” Diesfeld said.

The merger idea dates back several years.

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Most recently, in October 1998, Bakst proposed the merger to save both hospitals money on earthquake readiness.

He estimated it would cost Community Memorial $35 million to $55 million to retrofit.

“My approach is to start with a clean slate and to end these hospital wars,” he said. “We have two facilities spending $70 [million] or $80 million, or we can have one [joint] facility spending $50 million and giving the community what it really needs.”

County officials disagreed, saying county hospital retrofitting would cost only $2 million to $5 million.

County supervisors--put off by Community Hospital’s 1996 campaign that killed a $56-million county hospital expansion--were skeptical. Talks went nowhere.

Then six weeks ago, Community Memorial fired another shot, announcing that it would push a ballot measure giving the tobacco settlement to seven private hospitals and specifically denying any of the money to the county hospital and its clinics.

Despite Bakst’s assurances that the initiative is not related to merger efforts, Flynn said he thinks the two are linked. Both are tools in the money-losing hospital’s plans to save itself, Flynn said.

The seeds of the takeover bid date to 1993, when then-hospital trustee Donald Benton said in a letter to the hospital staff that Community Memorial needed a strategy to fight off competition from the county and the new St. John’s Regional Medical Center in Oxnard, Flynn said.

Benton, an attorney, said that “to prevent havoc from being wreaked on CMH” the hospital had several options. One was to sell out to another hospital group; another was to create a new operating structure using Community Memorial facilities and staff “augmented by county staff and facilities.”

“I do not believe [CMH] trustees can do their duty by drifting along to probable oblivion,” Benton wrote, according to a letter provided by Flynn to county attorneys.

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County officials contend Bakst, whose hospital has struggled to remain profitable, took that letter to heart and is trying to run the county’s health-care system out of business.

Bakst said the 7-year-old letter in no way reflects Community Memorial’s current plans.

“Supervisor Flynn is trying to make everybody see ghosts when they don’t exist, problems when they aren’t there,” Bakst said.

While Bakst has acknowledged the financial difficulties his and other private hospitals are facing in this age of cost-cutting managed care, he also has maintained that he is merely trying to ensure that the tobacco settlement is spent on health care rather than roads, parks or payments of fines. The initiative will ensure that the tobacco money goes to “address the health-care needs of the elderly, the working poor, the indigent and children.”

County supervisors have set aside the first $11 million of the settlement for purposes other than health care: $3.1 million to pay off a federal fine for Medicare overbilling and $7.5 million to cover a budget shortfall. They have yet to dedicate any of the settlement to health-care programs.

Flynn acknowledges that supervisors should spend the money on health care and said he is sure that will happen when the board approves next year’s budget in the coming weeks. But he said the intent of the initiative is to see “the county system so weakened that it has to give in” and join the majority of California counties, which no longer operate hospitals.

While Flynn does not favor merging operations, he said the threat of the initiative could force the county to make concessions.

“They’re going after the source of the money,” Flynn said. “If they’re legally successful, they’ve got their long arm into the county treasury.”