SPMH: City’s 65-page report outlines potential City Council actions

April 30, 2004
Santa Paula City Council

Monday is D-Day for the City Council, which will discuss options regarding the now-shuttered Santa Paula Memorial Hospital, and the report shows that the city is ready for a bare-knuckle fight.

By Peggy KellySanta Paula TimesMonday is D-Day for the City Council, which will discuss options regarding the now-shuttered Santa Paula Memorial Hospital, and the report shows that the city is ready for a bare-knuckle fight.Council members will be presented with a list of options by City Manager Wally Bobkiewicz and City Attorney Karl Berger at the May 3 meeting, the deadline imposed by Mayor Gabino Aguirre for the hospital to partner for reopening with Ventura County or another medical provider. . .or else.Or else includes eminent domain proceedings for the community-built hospital property and removing the current board of directors. Creating a new non-profit organization for hospital operations would include a new board of directors and the creation of a joint powers authority. A detailed complaint to the state Attorney General is included to the report that also addresses a complaint to the Ventura County Grand Jury.At root of the possible actions is that the “current SPMH Board of Directors is apparently reluctant to act in a reasonable and good faith matter to keep the hospital open,” according to the 65-page city report.The report notes that any action taken by the City Council is “without limitation” and ranges from approving the joint powers agreement – which could include Fillmore and the county - and creating an authority named the Santa Paula Community Health Care Authority and file same with the state Attorney General. An organizational meeting would follow on May 11 and the city has already crafted draft articles of incorporation and by-laws for the new non-profit corporation.Eminent domain of the property could only follow a rejected purchase offer and the council will also consider launching an environmental impact review on the 30-acre Hospital on the Hill site.A complaint to the Grand Jury is an option as is a complaint to the state Attorney General and court action to remove the board of directors for lack of fiduciary duty and for failing to negotiate an affiliation with the County of Ventura in good faith.
The court filing document, prepared in November 2003, notes that the city believes that the SPMH board “desires to maintain local control over the hospital at the expense of the Santa Clara River Valley community,” and that the hospital’s estimated $12-million endowment was depleted without prior notice to the community that SPMH – one of three in the state built entirely with community donations – was in deep financial trouble. The board had obtained a $1-million dollar line of credit and, subsequent to the announcement of the financial crisis, received a $1.8-millon dollar loan using hospital property as collateral.The complaint also targets Mark Gregson, the former SPMH CEO, and a contract employee working for management provider Quorum Health Resources, owned by Triad Hospitals. SPMH was paying Quorum about $500,000 annually for the services of Gregson and the CFO, according to the complaint.In spite of several instances where SPMH directors addressed the council and said negotiations with the county for reopening were to be finalized within months, such action never occurred.The complaint also notes that the hospital operation suffered from board fiscal mismanagement, that the board refused to replace Gregson and did not negotiate in good faith with any potential partner.The complaint also states that creditors were told on October 30 by Gregson and a team of SPMH accounting and legal consultants that hospital trade debt was $3.5-million.The hospital closed on Dec. 19 and filed for bankruptcy three days later declaring $8-million in debt, not including the still to be determined employee pension obligation.The City Council meeting will start at 6:30 p.m. on May 3.

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