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DOWNEY – PIH Health is still awaiting approval from the California Attorney General to take over Downey Regional Medical Center but in the meantime it has reached a deal to purchase the city-owned land for $9.85 million.
The City Council gave its consent to the sale on Tuesday.
Downey Regional currently operates the hospital at 11500 Brookshire Avenue, which is owned by the city of Downey. The hospital pays Downey only $1 per year under terms of a lease that does not expire until February 2082.
According to the deal between PIH Health and the city of Downey, PIH Health will pay the fair market value of $9.85 million.
The purchase agreement requires PIH Health to operate a hospital on the site until 2030. After 2030, PIH Health must operate a hospital or medical-related uses until at least 2063.
City officials, however, sounded confident that a hospital will remain on the site long past 2030.
“The fact is they’re investing millions and millions of dollars into the hospital. From a business perspective, they wouldn’t invest so much money if they didn’t plan to keep it a hospital,” Councilman Alex Saab said Wednesday, while also noting that the city maintains zoning regulations. “PIH has a strong record of well-managed hospitals and I think residents will benefit. I think it’s a win-win.”
Downey Regional has leased the land since 1967 under generous terms offered by the city to ensure a community hospital remained in Downey. But the hospital was beset by financial difficulties and filed for bankruptcy in 2011.
The hospital also suffered from disorganized medical billing, unfavorable insurance contracts and a less than stellar reputation in the community.
“We all live in the city. If we call 911, chances are we’re going to that hospital,” said Councilman Roger Brossmer. “I’ll be honest, I’ve been concerned.”
PIH Health, operators of Presbyterian Intercommunity Hospital in Whittier, agreed to acquire the hospital earlier this year and took over day-to-day operations in June. Chief executive officer Ken Strople was fired and chief operating officer Rob Fuller departed voluntarily.
Downey Regional operates one of two emergency rooms in Downey, the other being Kaiser Permanente Downey Medical Center.
“Having a second hospital is very important to us,” Councilman Luis Marquez said.
Brossmer agreed that two emergency rooms is critical for a city the size of Downey.
“A second viable hospital has been our top priority,” he said.
Proceeds from the sale will be deposited into the city’s general fund although it remains to be seen how the money will be spent. Two council members – Saab and Mayor Mario Guerra – said at least some of the revenue should be squirreled away for a rainy day.
Saab recommended depositing a “significant portion” of the sale proceeds into reserves and using the rest to upgrade Downey’s parks and infrastructure.
Guerra and mayor pro tem Fernando Vasquez did not vote on the purchase agreement due to potential conflicts of interest (Guerra is partner in a firm that previously handled insurance for Downey Regional and Vasquez owns a medical waste company) but in a private interview Guerra praised the transaction.
“As a resident first and foremost, it looks like a good deal to me because it puts money back in the public coffers,” he said.
Guerra proposed putting half of the $9.85 million in city reserves and hiring 3-4 police officers. He also wants to see improvements to local parks and roads.
Escrow is expected to close in September. PIH’s takeover of Downey Regional requires consent from Attorney General Kamala Harris, who is expected to rule by the end of this month.
Published: Aug. 15, 2013 – Volume 12 – Issue 18