El Centro (Calif.) Regional Medical Center, one of the last city-owned hospitals in the state, is in talks with Scripps Health to become the San Diego-based system's fifth hospital.
The deal would make it easier for the 165-bed medical center to borrow money and finance long-term projects, said Kathleen Pipkin, a spokeswoman for the hospital. Being a municipal hospital “hamstrings us and we're not able to do the things we need to do.”
The hospital is financially strong, she said, but its outlook is uncertain. “We don't know what's going to happen with Obamacare, but we do know there will be reimbursement cuts,” she said.
Scripps President and CEO Chris Van Gorder said the Imperial Valley is a farming region with a challenging payer mix and is largely served by community hospitals. Many residents go to San Diego for tertiary and quaternary care. “We already get a lot of their patients,” he said.
In May, the city of El Centro hired financial adviser Hammond Hanlon Camp to sell or lease the hospital. Although a financial report indicates that the hospital has enough cash on hand to pay its current obligations, El Centro Regional has been on a building spree in recent years that has increased its debt.
In its fiscal year ended June 2012, the medical center saw $6.2 million in new debt, a 33.1% increase in total liabilities. Most of the increase was related to a $4.5 million line of credit used to finance an outpatient center.
The medical center was also coming off a challenging year in fiscal 2011. But its operating income more than doubled in fiscal 2012, to $12.5 million from less than $6 million the previous year. Operating revenue increased 15.3% to $133.5 million.
El Centro talked to about 30 organizations before entering into exclusive negotiations with Scripps. The parties hope to close a deal before the end of the year.
Follow Beth Kutscher on Twitter: @MHbkutscher
