Medical Group’s Plans for Lake View Hospital Include Research Facility

A medical group that has the inside track to buy the bankrupt Lake View Medical Center plans to turn part of the facility into a research institute for troublesome infectious diseases, including acquired immune deficiency syndrome, a surgeon representing the group said Thursday.

The medical group, Doctors Service Group, submitted a $7.5-million bid late Wednesday to the medical center’s court-appointed trustee and asked that it be accepted at a May 31 hearing in U.S. bankruptcy court.

Phoenix House, a drug services agency that wants to turn the hospital into a drug rehabilitation high school named for First Lady Nancy Reagan, told trustee Gilbert Robinson Thursday that it would pay $7.7 million for the Lake View Terrace hospital site.

Even though the drug agency’s bid is slightly higher, Robinson said the first offer has an edge because its provisions have been negotiated for more than a year.

“You never know whether or not the new bidder is willing to comply with those conditions,” he said. “And there isn’t much time to figure that out.”

Phyllis Hines, president of the Lake View Terrace Improvement Assn., predicted that residents will be concerned about the effects on the neighborhood of an infectious-disease institute. She said residents will be especially worried about how such a facility might affect property values.

But Hines said the need for a nearby hospital might outweigh those concerns.

“It’ll get a reaction, that’s for sure,” Hines said of the medical group’s plan. “But if it’s a package deal and we have to accept the other in order to get a regular hospital, I have a hunch they’d be willing to go along with it.”

Residents of the community have already expressed opposition to the hospital being taken over by the Nancy Reagan Center because they believe it would bring crime and drugs to their neighborhoods.

The Doctors Service Group spokesman, Dr. Jerry D. Nilsson of Santa Ana, said an international group of doctors and researchers wants to use the main hospital building as a regular, 182-bed facility and use some of the adjacent three buildings for a 145-bed nonprofit research institute for infectious diseases.

“This is the result of the medical profession being terribly anxious about the inactivity on certain diseases that are becoming a threat to the world,” Nilsson said. “It would be specifically pointing to a solution to the AIDS virus, but would also include others. It’s not just a one-disease thing.”

The Lake View Terrace institute would be just “one cog . . . in a very complex, far-reaching” project, Nilsson said, with related facilities in England, Germany, Italy and Africa.

Phoenix House wants to operate a boarding school for 150 adolescents in the main medical center building. Nearby buildings would be used for live-in treatment for 60 young adults and for research, staff training and after-school drug-counseling programs.

A federal bankruptcy judge will make the final ruling on the two offers after reviewing a recommendation from the trustee. Robinson said a key factor is which group can most expeditiously come up with the money.

Phoenix House is counting on getting $5 million from the donations of guests at a fund-raiser hosted earlier this month by entertainer-producer Merv Griffin. That money would be used as collateral to borrow the $2.7-million balance necessary to buy the property, plus at least $2 million needed to convert the medical center into a school, said Phoenix House Vice President Larraine Mohr.

Nilsson declined to detail Doctors Service Group’s financing plans, but stressed that the organization has the money to buy the property.

The bid from the Nilsson’s group promises full payment in cash at the close of escrow. Robinson said he thought the Phoenix House offer contained a longer-term payment plan, although he said he had not had time to thoroughly review it.

“My understanding is that it’s not cash on the barrel head,” he said.

Mohr said she could not comment on the contents of the bid until she had more time to discuss its provisions with her attorneys.

“All I can say is there is a bid being submitted,” Mohr said. “We would not do that if we did not believe we had a fair chance at the property.”

In addition, Robinson said the Doctors Service Group bid is “pretty clean” of conditions and restrictions, while Phoenix House made its offer contingent on receiving a city conditional-use permit required to operate a drug-treatment center on the hospital property. Obtaining such a permit involves several months of public hearings.

The 145-bed Lake View Medical Center, at 11600 Eldridge Ave., closed two years ago after its administrators filed for protection from creditors under federal bankruptcy laws.