South Coast Medical Center not being sold

Adventist Health has decided not to sell South Coast Medical Center, putting to rest a year of worry in town about the hospital’s future.

City officials applauded the Monday decision, made public two days later after center employees were told that the Adventist Health Board of Directors had voted to cut off negotiations with a prospective out-of-state buyer and continue to operate the hospital on a not-for-profit basis.

“This is excellent news for the people of Laguna and nearby coastal communities,” said City Councilwoman Cheryl Kinsman, whose top priority as a city official was to keep the hospital in Laguna.

Adventist had begun to peddle the center after attempts to move the facility out of town were abandoned in mid-2005.

DSI Holding Co. Inc. in Tennessee, headed by Dr. Jerry Tannenbaum, was the only known suitor.

As of Monday, negotiations were still under way and progress was being made, DSI Executive Vice President Steve Harrison said, just hours before the Adventist board determined the terms of the sale were not advantageous.

Tannenbaum did not return calls seeking comment. City officials were quick to praise the news.

“We look forward to working with Adventist Health to keep existing medical services and to expand them to further meet community needs,” said Assistant City Manager John Pietig.

Pietig and Councilwomen Kinsman and Jane Egly served on a joint city/hospital task force created to ensure the hospital stayed in town.

“I am very proud of our city staff, particularly John Pieti, and Cheryl, who have really pursued this issue,” Egly said. “And the good news is that Adventist is staying. We are all thrilled.”

Adventist, which bought the medical center in the late 1990s, put it on the market last summer. Hospital administrator Gary Irish said then that the cost of seismic retrofitting the facility, at an estimated $70 million, and the need to attract more patients had prompted the decision to sell after an attempt to relocate was abandoned.

Irish said any deal would probably hinge on Adventist recouping its long-term debt of about $15 million and another $13 million spent on operations.

The hospital’s operating budget is about $72 million a year.

“We hope to have a new owner by January of ‘06,” Irish said last July.

City officials said a new owner was preferable to losing the hospital altogether, but not knowing much about the buyer has been unsettling.

A year later, a deal was still pending, and Adventist did a 180.

“Adventist Health is committed to the continued operations of SCMC,” said Robert G. Carman, Adventist chief operating officer and board chair for the medical center. “We know that the hospital is an important part of the Laguna Beach community.”

Efficient operations, new services and alternatives to comply with the state Seismic Safety Act will be pursued, Carmen added.

A brighter financial future helped turn the sales tide.

“A lot of credit for Adventist’s decision not to sell goes to Martha Farrington and Bruce Christian, who have turned the financial picture around,” Kinsman said. “I am happy that Adventist has realized that good management can make the hospital financially viable.”

Christian replaced Irish as chief executive officer and president of the center eight months ago. Farrington replaced Joe Orsak as head of the center’s independent fund-raising foundation.

“It’s been a demoralizing time for the employees not knowing whether they would have a job or not,” Farrington said. “There have been a lot rumors flying that the sale was close to closing, so I think the employees were surprised at the announcement.

“The foundation is certainly happy that after having been on hold for a whole year, we can get back to business. Fund raising has been hard when donors are waiting to see what the future is, but I know the community will now continue to support us generously.”

Christian was unavailable for comment Wednesday.