City Council votes to change Community Hospital lease, ending requirement for emergency room

Community Hospital in East Long Beach could eventually become a general health care campus, but it will no longer be required to house an acute care facility under an amended lease approved by the City Council on Tuesday.

The lease change signifies the end of a failed effort to save the nearly 100-year-old hospital after it was shuttered in 2018 due to seismic compliance issues, leaving the East Long Beach area without an emergency room.

Molina Wu Network signed a lease to run the hospital in 2019 and reopened it in January 2021. But the company said it lost roughly $30 million and the hospital was closed less than a year later due to the mounting financial losses.

Under the lease agreement, the city, which owns the land at Pacific Coast Highway and Termino Avenue, is required to reimburse MWN for its operational losses. The city is now in negotiations to sell the property to MWN to satisfy the obligation.

The new contract unanimously approved by the council on Tuesday allows for the land to be used as a wellness campus for needs including behavioral health, recuperative care, social services, government offices and specialized services.

Councilwoman Suzie Price noted that while the loss of East Long Beach’s only emergency room is disappointing, the area could still offer health services to meet community needs, like a center for mental health and substance abuse treatment and a detox facility.

She said any planned project would first require community outreach and council approval.

“It has been everyone’s expectation that this was going to be an acute care facility and if that use is going to change, we’ve got to have appropriate outreach with all of the stakeholders,” she said.

MWN has said the company is committed to a plan to operate a mental wellness campus on the site, as well as possibly developing housing.

The transition away from acute care means the facility would not require more than $75 million state-mandated in seismic retrofits, as acute care medical facilities have the highest seismic standards in California.

The city is now working to asses the property’s worth, with a potential sale finalized by the spring, officials said.

If the property is valued at less than $30 million, the city would essentially “sell” the 8.7-acre site to MWN for $0 to fulfill the lease agreement. For example, if the property is assessed at $20 million, the city would not be required to cover the additional $10 million.

If it’s assessed at more than $30 million, MWN would be required to pay the difference. A previous assessment before the city’s contract with MWN valued the land at below $20 million in its current condition.

Facing millions of dollars in seismic retrofits, former operator MemorialCare closed the facility, which sits on a major fault line, claiming that the necessary upgrades were not feasible.

MWN stepped up to take over the hospital and ultimately was awarded a 45-year lease with virtually no liability.

After delays at the state level, the facility was issued its acute care license and opened its emergency room last May.

Operators were required under the lease agreement to foot the cost of the seismic retrofitting, but they abandoned the project at the end of last year after construction costs soared to 50% higher than anticipated – for a cost of more than $75 million.

They closed the ER at the end of last year, citing low demand, with only a 32% capacity and less than 24 emergency rooms visits per day.

Editor’s note: John Molina—of Molina Wu Network—is the primary investor in the parent company that owns the Long Beach Post. Read more about the Post’s ownership here.

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