City Won’t Give Up Stake in Troubled Southeast Hospital

In a symbolic stand to keep Physicians & Surgeons Hospital open and operating as a full-service medical facility, the City Council on Thursday refused to relinquish its financial interest in the Southeast San Diego hospital.

The decision is a last-ditch move in a city effort to keep the hospital’s operator, National Medical Enterprises, from selling the financially troubled facility without a guarantee that it will remain a full-service hospital with emergency services.

However, the move is largely symbolic because preliminary research indicates that NME is correct in asserting that the city’s interest in the hospital ends if it fails to redeem the hospital’s defaulted bonds, said Hal Valderhaug, deputy city attorney.

City officials acknowledged that they have little power to influence the fate of the hospital, but said they could not voluntarily give up the city’s interest.

“We simply could not in good conscience give up our only legal tool to assure that there is a full medical hospital with emergency services in that community,” said Councilman Wes Pratt, who represents Southeast San Diego.

Under the terms of the bonds used to build Physicians & Surgeons in 1972, the hospital and the land it is on will revert to city ownership in 2002. The agreement also requires that the hospital be operated as a full-service, acute-care facility until then. NME asked the city to give up that “reversionary interest” to allow it to sell the facility to an unnamed buyer without restrictions on its use.