South Coast Medical Center has a “for sale” sign on it for the second time in three years, but hospital officials stress that the hospital will remain fully operational until it can be turned over to a new owner.
Adventist Health officials announced Sept. 12 that they were no longer willing to absorb the financial losses sustained by the center and were preparing to shuck it.
The announcement confirmed rumors that had bounced around town since the Laguna Beach City Council began holding closed sessions regarding the potential sale of properties with addresses that correspond to the four parcels that make up the hospital campus in South Laguna.
“As a system, we have carried hospitals that experience challenging times,” said Robert G. Carman, Adventist president and chief executive officer. “However, we cannot continue to sustain the magnitude of losses at SCMC indefinitely.”
Efforts to reach Adventist on Monday were unsuccessful.
This time there will be no reprieve, opined center President Bruce Christian.
“Adventist made the decision that they wanted to divest themselves of this facility because they are not going to expand in Orange County,” Christian said. “I made the recommendation that it was in their best interests.”
The center is the only Adventist-owned hospital in Orange County.
“This is a personal disappointment to me,” Christian said. “I am proud of the service we have provided over the years I have been here and will continue to provide until a change of ownership and that I anticipate will continue beyond that.”
On the heels of Adventist’s announcement, the city manager’s office issued a statement that the City Council has retained an attorney to advise the city on how best to advance the community’s interests in assuring the long-term sustainability of a high quality local hospital with emergency services during the sales process.
“I will do whatever it takes to keep a community hospital in our town,” Mayor Pro Tem Cheryl Kinsman said.
City leaders have been and will continue to participate in discussions with the medical center administration, Adventist and the California attorney general.
“The state attorney general must review and approve the sale of any hospital in California,” Christian said.
Hearings will be held locally, according to the city’s statement.
Christian discounted the notion that there would be no takers for the center, in spite of the manifest challenges that face the health care industry, which many believe needs a complete overhaul, according to Adventist.
“I am confident that a buyer will step up and acquire the hospital,” Christian said. “I believe under the right circumstances with the right operator the hospital can be successful.
In fact, three dependable sources, who did not want to be named, said separately that five viable entities are in the hunt.
The assets for sale include the 208-bed acute care hospital, a vacant parcel on Sunset Avenue that hospital officials wanted to develop as a senior assisted care facility, the office building and the parking lot in front of the hospital and a sliver of land at the north end of the lot.
Christian said the sale would be for the whole package, although the office building was purchased in 2003 with South Coast Medical Center Foundation funds, then a separate entity, using money that had been earmarked for a cancer center.
Adventist announced criteria for bid evaluations:
commitment to maintain services on the site, charity care, and to the community and the campus;
hospital operation experience;
input from the city;
Adventist’s determination on which offer is in the community’s interests; and
other unspecified factors affecting overall fairness and reasonableness of the transaction.
“Every community hospital needs the support of the community and this hospital belongs to this community,” Christian said.
Laguna Beach residents decided a hospital was needed here after a police officer died from a gunshot wound on the way to a distant medical facility. The first meeting of the Hospital Foundation of Laguna Beach was in May 1954, according to center records.
The Irvine Foundation deeded 22 acres in 1955 in South Laguna for the construction of South Coast Community Hospital.
Organizational and construction funds were raised by the community and by grants.
The first patient was admitted July 1, 1959.
Adventist bought the center in 1998. Efforts to peddle the center began in the summer of 2005, after attempts to move the facility out of town. Officials said they were daunted by the $70 million price tag for state-mandated seismic upgrades.
The center was abruptly pulled it off the market in December of the following year.
No reason was given for the decision not to sell other than a statement issued by Carman that Adventist was committed to the continuation of operations of SCMC and the knowledge that the hospital is important to Laguna.
Christian was brought on board after Adventist decided to hang on to the property.
Upgrades made during his tenure are a source of pride.
“We have put a tremendous amount of resources [read dollars] into the facility,” Christian said.
Money for the internal face lift was raised by the foundation, under the leadership of Councilwoman Elizabeth Pearson, who was recruited by Christian.
Fresh paint and flooring brighten the labyrinth of halls leading to different departments. Christian’s wife, Julie, directed the refurbishment, including the acquisition of art and resurfacing the gift shop cabinets.
“The facility was dated,” Christian said. “What we did was done to reflect what I felt was the image of Laguna Beach. It was not only done for the comfort of the patients, but to benefit their families and the employees.”
Jackie Gallagher, speaking at Tuesday’s council meeting on behalf of the South Laguna Civic Assn., said the community is concerned about the possible loss of the hospital, but also about expansion and possible development that would impact South Laguna.
“It is our hospital,” Gallagher said. “It is baffling to us how a community-based hospital can just be sold to outside organizations that may have many other agendas besides community service.
“We appreciate that the council appears to be taking an active role by hiring an attorney and a hospital expert. Yet the council and the community should be working as a team. A citizen task force would be one way for concerned citizens and the council to work together.”
Kinsman assured the public that no changes have been made in the hospital operations.
“Hospitals are bought and sold all the time,” Kinsman said. “This council is on top of it, but we must respect confidentiality.”
That means not sharing information exempted by the state Brown Act, which stipulates that government business must be conducted in public, with certain exceptions, which include consideration of legal action and negotiations for the sale of property. Final proposals from potential buyers are due Oct. 24. For information on how to participate in the bidding process, e-mail email@example.com or call (818) 956-1681.
Due to the complexities of the bidding process for and regulatory review, transfer of medical center ownership is not expected until at least the first quarter of 2009.