TOP STORY OF THE YEAR: Hospital sale draws ire

Editor’s Note: The sale of South Coast Medical Center is 2008 Top Story of the Year in Laguna Beach. Other major stories will be detailed next week.

Accusations that Adventist Health had plundered South Coast Medical Center Foundation assets erupted on the heels of an announcement that negotiations were underway with a qualified buyer of the hospital.

The sale and conditions of the sale are subject to the approval of the state attorney general. City officials, who lauded the choice of the not-for-profit St. Joseph Health System as successor to Adventist Health, declined to comment on the pre-sale dissolution of the foundation and assumption of its assets. Members of the public were less inhibited.

“I am here to lend my voice to concerns reported in local newspapers about the disposition of assets owned by the recently dissolved local hospital foundation,” former Mayor Paul Freeman announced at the Dec. 2 council meeting. “Let me say at the outset I share such concerns.”

Adventist Health spokeswoman Alicia Gonzalez denied any wrong doing in the dissolution of the foundation. She warned that critical public statements could harm the negotiations.

“It would be a shame if some public statements, although they may mean well, have the untended consequences of delaying or endangering the transfer of South Coast Medical Center to a qualified buyer,” Gonzalez said.

Adventist Health, which announced plans to sell the medical center in September, dissolved the foundation at a meeting of the board held Nov. 15 and presented documents that authorized the assumption of foundation assets.

Foundation board member Susan Morrison blew the whistle on the takeover at the Nov. 21 council meeting. Her position subsequently hardened.

“I feel more strongly than ever,” Morrison said the day after Freeman’s denunciation.

According to Morrison and confirmed by Gonzalez, the document presented to the foundation board at the dissolution meeting asserted that assets of the foundation can legally be distributed to the medical center upon dissolution of the foundation to cover losses.

Morrison said Adventist claims to have lost a total of $44,735,000 since taking over the hospital in 1998 could be accounted for by the $500,000 monthly fees paid to Adventist, which about equals the stated annual losses, and the salaries paid center officials, which Adventist declined to confirm.

According to Morrison, center Executive Officer Bruce Christian was paid $360,000 a year, the chief financial office was knocking down $300,000 a year and the center Chaplin received a salary of $200,000 a year.

In an economic climate where executive salaries are being scrutinized, Freeman said Adventist has lost sight of the difference between rules and ethics.

“Rules are something imposed,” Freeman said. “We follow them or face consequences. Ethics are something we should embrace ourselves: heads and hearts in equal measure.

“Fundamental to the business of philanthropy is the donor’s expectation that charitable gifts and especially restricted funds given for specific purposes be used accordingly.”

The document presented at the dissolution meeting stated that if contributions to a not-for-profit organization are donated for a specific project, the contribution is considered only temporarily restricted and that portion of the organization’s assets are restricted until the donor’s purpose has been met.

Foundation funds for the down payment on the medical building were specified for the establishment of a cancer center that has not taken place, which led Morrison to believe that the building hijacked by Adventist’s actions may be legal, but still outrageous, according to Freeman.

Once terms of the negotiation are forwarded to the attorney general’s office, the public will have the opportunity to comment on the sale and conditions.