In an unusual move, City Council officials in Santa Paula, Calif., plan to ask the state attorney general to force the area's only hospital to complete a long-delayed merger intended to rescue the financially troubled facility.
The five-member council alleges that the board of Santa Paula Memorial Hospital has failed to take appropriate action to preserve the 49-bed facility, which is about $3.5 million in debt. Negotiations to merge the private, not-for-profit hospital with Ventura County's public healthcare system-considered by most as the facility's best chance to stay afloat-have stalled after four months of wrangling over details such as lease terms, staffing, insurance and taxes.
To force the merger along, the City Council voted unanimously last week to file a complaint with California Attorney General Bill Lockyer over possible violations of state law governing not-for-profits. Forty-two-year-old Santa Paula Memorial, which provides the closest emergency room for more than 50,000 mostly low-income residents, is one of just three California hospitals built solely on community donations.
"We don't believe the hospital board has shown the sense of urgency needed to protect this charitable asset," said Santa Paula Councilwoman Mary Ann Krause, adding that hospital directors have delayed filing crucial financial information and canceled four recent meetings with county officials. "The attorney general is the only person with the legal authority to intercede, and we're going to appeal to him to do so."
The cash-strapped hospital has been plagued by staff and supply shortages, which city and county officials fear could ultimately compromise patient care. On Oct. 10, county officials sent Santa Paula Memorial a letter urging the hospital to temporarily shut its doors until merger talks were completed.
The council plans to file its complaint as early as this week. If Lockyer declines to step in, it will request state authorization to sue the hospital and pursue its own enforcement actions to keep the facility open, Krause said.
Hospital officials have denied any quality-of-care issues. Neither hospital Chairman Phillip Romney nor Chief Executive Officer Mark Gregson returned phone calls seeking comment last week.
The stalled merger has been compounded by the hospital board's decision this month to renew merger talks with Community Memorial Hospital, Ventura, Calif. The 242-bed facility sent a letter to Santa Paula Memorial officials in January suggesting a possible merger. But it withdrew the proposal a few months later partly because of its own internal struggles, which resulted in the Oct. 2 resignation of its executive director, Michael Bakst.
Some of Santa Paula Memorial's directors view Community Memorial as a better match because both hospitals are private, not-for-profit facilities. But the City Council believes the tiny rural facility, which treats a large number of Medicaid patients, would thrive more as a county hospital. That's because the state, under its disproportionate-share program, pays higher reimbursements to hospitals that treat large numbers of Medicaid patients. Community Memorial caters more to privately insured patients.
Krause said she fears that Santa Paula Memorial's board is jeopardizing the hospital's survival and "burning bridges with the county" by entertaining new suitors so late in the game. The county already has said that because of the stalled talks, it likely would not be able to assume management of the hospital until the first quarter of 2004, leaving the facility in financial limbo for several more months.
"They've been able to scrimp by all these months by borrowing money from the community," Krause said. "But I don't think they can weather the storm for too much longer."
Santa Paula Memorial has not been profitable since 1988, but its predicament has worsened in recent years as admissions have dwindled and debts have piled up. The hospital has been losing about $3 million per year on $12 million to $13 million in annual revenue.
Its problems culminated in December 2002, when the hospital's board told city officials that it needed to raise $600,000 in emergency funds within 90 days to avoid possible closure. The community, which had scrambled to support the hospital in past years, responded with $134,000, raised within the first 30 days of the plea.
The hospital has secured a $2.5 million bridge loan to cover its financial obligations, using its 25 acres of property as collateral. But it's still struggling to meet its payroll, even after laying off 20 employees, or about 10% of its staff, in recent months.