The five-member Grossmont Healthcare District Board in La Mesa, Calif., last week unanimously rejected a new lease offer from Sharp HealthCare, increasing the chances the dispute will end up in court.
The board gave San Diego-based Sharp a July 16 deadline to come up with another offer or face a lawsuit.
"We'll afford Sharp one last opportunity to make a viable offer," said Jim Stieringer, the board's president.
If a settlement hasn't been reached by the deadline, Stieringer said the district will sue Sharp to break the system's lease of the district's 377-bed Grossmont Hospital in La Mesa, just north of San Diego.
Sharp has leased the hospital from the district since 1991, but last month the district board threatened to sue Sharp unless it renegotiated the terms of the 30-year deal (June 30, p. 2).
The district board said Sharp enjoyed extremely favorable lease terms because of improper negotiations. The board says two district employees who negotiated the lease later worked for Sharp. That, according to the board, violates a California law that bars officials of political jurisdictions from having a financial interest in any transactions involving the jurisdictions.
Sharp has denied that anything improper or illegal took place, but it did agree to renegotiate. Under the original terms, Sharp assumed the hospital's $45 million in debt and paid the district $1 per year.
After the district board threatened to sue, Sharp offered to pay another $32.5 million-$10 million cash upfront and $750,000 per year to fund community healthcare programs. The offer would extend the lease to 36 years-from 1991 to 2027. But last week, the board rejected the offer.
The board agreed to the new amounts offered by Sharp, and agreed that the money to pay for the new terms would come out of Grossmont Hospital's operating revenues. But the district disagreed on several points. Among them:
The district board says state law bars leases of longer than 30 years.
The board doesn't want to honor Sharp's request that it have the right of first refusal should the district seek another organization to buy or operate the hospital after the lease expires.
"I understand where they're coming from*.*.*.*but I feel strongly we should have the right of first refusal," said William Renert, M.D., chairman of the Grossmont Hospital Corporation Board, a Sharp-affiliated body that oversees day-to-day operations at the hospital.
"It would be one thing if there was evidence of mismanagement, but we've proven to be very good for the hospital," Renert said. "It's one of Sharp's most successful and profitable hospitals."
In the fiscal year ended Sept. 30, 1996, Grossmont Hospital earned $1.9 million on net patient revenues of $149.3 million. Between Oct. 1, 1996, and May 30, 1997, Grossmont's net income was $1.6 million on net patient revenues of $97.4 million.