Hospital Rescue Talks Approved

Ventura County supervisors voted Tuesday to enter negotiations to absorb struggling Santa Paula Memorial Hospital into the county health-care system, a move aimed at saving the only emergency room for 45 miles between Santa Clarita and Ventura.

The Santa Paula City Council also bolstered the tiny medical center’s chances of survival Monday evening by backing away from possible legal action against the hospital and endorsing its potential partnership with the county system.

“There are a lot of questions to be answered. This by no stretch means we will have an agreement in five days ... ,” county board Chairwoman Judy Mikels said. “But I have a great amount of faith in the people involved. And if it can be done, it will be done.”

In voting 5 to 0 to pursue the deal, the supervisors appointed a negotiating team headed by Health Care Agency Director Pierre Durand, under the direct supervision of County Executive Officer Johnny Johnston. Former county hospital administrator Samuel Edwards is a consultant.

Durand has a track record in rescuing money-losing operations, pulling the county’s own hospital out of enormous debt after taking over the aging facility in the mid-1980s and ending discussions on closing the facility. Many other counties have since closed their public hospitals.

Supervisor Kathy Long, whose district includes the Santa Clara Valley, thanked colleagues for supporting efforts to save the 42-year-old Santa Paula hospital, one of only three in California built solely with community donations.

“Let’s get to work,” Long said.

From the deal, the county would gain a stronger foothold in a Santa Clara Valley health-care market worth $50 million a year, but dominated by Community Memorial Hospital in Ventura and St. John’s Regional Medical Center in Oxnard, studies have indicated. Santa Paula Memorial Hospital’s annual revenues are about $12 million to $13 million a year.

The county has already met informally with hospital officials seven times since January, as the hospital tried to find a partner that would respect its traditions but also have financial pockets deep enough to help restructure the hospital’s mounting debt.

It has not made a profit since 1988. And officials acknowledge debts of $3.7 million, including overdue bills that have prompted some vendors to withhold medical supplies and made it difficult for the 39-bed facility to stay open until the county deal is done.

“There’s a lot of work to be done,” hospital Chairman Phillip Romney said after the supervisors’ vote. “My hope is that we will have some sort of [agreement] in four to six weeks. We are willing to discuss all the options.”

Romney said the hospital would be responsible for its own debts, but would seek county help to bolster cash flow to pay them off.

Whether the hospital can stay out of bankruptcy until a deal is struck is another question.

Hospital officials say they are struggling to meet their $200,000 payroll every two weeks, even laying off the equivalent of 20 full-time employees out of a force of 240 part- and full-time workers.

And for the first time they admitted at Monday’s council hearing that since October they have missed regular monthly payments to their employee retirement plan. The $350,000 annual obligation, however, is not considered overdue until September, they said.

The overall debt has accumulated over the past 18 months after the hospital spent about $15 million in gifts and endowments to make up for a generation of operating deficits.

On Monday the City Council considered three legal means to intervene in the hospital’s business to try to force it to stay open: seizing control of the hospital through condemnation; asking the state attorney general to take control, or give the city authority to take control of the facility; or requesting a criminal investigation of the hospital administration by county prosecutors.

But after more than two hours of discussion and comments by nearly a dozen community members, the council voted to delay any action against the hospital for at least two weeks so the city would not undercut merger negotiations.

“I don’t want this to be misinterpreted as some kind of witch hunt,” Mayor John Procter said.

The hospital is pursuing a short-term loan while negotiating with the county, hospital trustee spokesman Rodney Fernandez assured the council. Still, it is possible that a creditor could file a legal claim against the hospital, forcing it to seek bankruptcy protection, he said, and the hospital could remain open during bankruptcy.

Romney said G. E. Capital Corp., the hospital’s biggest lender at $1 million, is the only creditor with secured debts guaranteed by receipts due to the hospital.

The hospital owns free and clear the 25 hilltop acres, donated by descendants of Santa Clara Valley pioneers, on which the medical center was built. It also has a valuable asset in city approvals to build a 62-unit nursing home on another part of the property, Romney said. There has been no recent appraisal, but analysts say the real estate is worth many millions of dollars.

The second-leading creditor is Tennessee-based Quorum Health Group, which has run the hospital under contract since 1994. Mark Gregson, hospital chief executive, said Quorum is owed about $450,000 in past management fees, which amounts to nearly a year’s pay under its contract. Quorum was notified last month that its contract will be terminated when a deal is reached with the county and it takes over administration.

This week’s events cap six months of anxiety, prompted by the hospital’s announcement in December that it needed to raise $600,000 in 90 days to avoid possible closure or downsizing.

Conditions improved in the first 4 1/2 months of the year, peaking at about 30 patients a day. But they took a sharp downturn three weeks ago, plummeting from 22 patients on May 18 to just eight last week. It was back to 19 on Monday. The hospital needs about 21 patients a day to break even, officials say.

And city and county officials made it clear this week they intend to keep it afloat.

“If this hospital were to close up we could expect a lot more people coming into our [county hospital] ER,” Flynn said. “It’s something that a regional government should do.”