The pending sale of 262-bed Greater Southeast Community Hospital in the District of Columbia to Doctors Community Healthcare Corp. will cap the institution's plunge from a model of a working inner-city hospital to a model of healthcare woes nationwide.
Executives of the hospital-which in 1989 won the American Hospital Association's Foster G. McGaw Prize for Excellence in Community Service-blame the facility's declining finances on its dependence on Medicare and Medicaid revenues and a loss of market share in a shrinking inpatient market.
Indeed, Medicare and Medicaid enrollees represented more than two-thirds of Greater Southeast's discharges in 1998. Yet despite Greater Southeast's location in one of Washington's most impoverished inner-city neighborhoods, indigent care appeared to be less of a factor in the hospital's pains. Nearly 92% of its discharges were covered by government or private insurance programs.
But hospital officials also blame D.C. Medicaid for providing low reimbursement and say that two other local safety-net hospitals-District of Columbia General Hospital and Howard University Hospital-have received government appropriations, ensuring their survival.
Outside observers also cite management missteps as one reason the not-for-profit hospital needs to find a for-profit buyer. Those missteps included purchases of money-losing apartments in its neighborhood and nonmedical office buildings in suburban Maryland.
Observers also said hospital leaders were unwilling to make the drastic changes necessary to survive in a tough marketplace.
"They looked up one day and there wasn't enough money coming in to pay their bills," said Thomas Chapman, who was a top executive at Greater Southeast from 1984 to 1994 and left as president and chief executive officer in 1994.
Chapman is now president and CEO of HSC Health System in Washington.
Dalton Tong, who followed Chapman as president and CEO until he resigned abruptly in June 1998, did not return telephone calls seeking comment.
Hospital board members include Carolyn Lewis, AHA chairwoman-elect (See story, this page).
On Nov. 13, a federal bankruptcy judge approved the sale of Greater Southeast to Doctors Community, a five-hospital for-profit system based in Scottsdale, Ariz., for $21.3 million. In approving the sale, the judge prevented Greater Southeast from being liquidated.
Doctors Community originally offered $39 million for Greater Southeast plus a nursing home and 37-bed Fort Washington (Md.) Hospital. Those two institutions were excluded from the final deal.
The sale caps Greater Southeast's tumultuous 1999, during which it cut costs by $16 million and laid off 300 workers after a series of bond-rating downgrades and bad financial news.
Only a year ago, hospital executives gave the board of trustees a turnaround plan that assumed 1998 losses of $6 million to $8 million, said Paul Porter, vice president of corporate planning and development with the hospital's parent, Greater Southeast Healthcare System.
But the losses were much greater, reaching $33.9 million for the nine months ended Sept. 30, 1998.
This year, the hospital has shown marked improvement, losing only $5.7 million on revenues of $68.2 million through Sept. 30.
In 1997, the hospital posted a small profit. Net income was $2.6 million on gross patient revenues of $131.4 million in 1997, according to American Hospital Directory.
But the hospital also is $70 million in debt. It filed for Chapter 11 protection in May in return for an offer of $8.5 million in financial aid from the district government.
"We think they should focus on outpatient (care) and prevention," said Patrick Canavan, special assistant for health and human services for the District of Columbia. "We do hope they refocus on how they deliver healthcare."
In buying Greater Southeast, Doctors Community is expanding its presence in the district, where it also owns 148-bed Hadley Memorial Hospital.