Community Hospital likely to be sold as city seeks to pay operator millions in losses

Community Hospital may fall into private hands for the first time in its 98-year history, with a sale in the works to the company that most recently operated the facility.

Molina Wu Network lost roughly $30 million since assuming the lease for the East Long Beach hospital in 2019. The hospital reopened in January 2021, but less than a year later was shut down again due to mounting financial losses.

The lease agreement included a provision requiring the city to reimburse the MWN for operational losses if the lease was terminated early by either party.

Councilman Daryl Supernaw, who led the charge to reopen the hospital when MemorialCare closed it, said the lease didn’t expose the city for any losses beyond what the property is worth.

That figure is being assessed right now, with a potential sale to be finalized as soon as this spring, MWN spokesman Brandon Dowling said.

Both Supernaw and Councilwoman Suzie Price, whose district now includes Community, said the economic risks were worth taking to try and preserve the facility.

“This is what [my] constituents wanted,” Supernaw said of the lease agreement to reopen the hospital. “So that’s what we endeavored to do.”

Dowling said Monday the company is committed to its plan to operate a mental wellness campus on the site, which it announced in November—as well as possibly developing housing.

The transition away from acute care means the facility would not require the upward of $75 million investment in seismic retrofits, as acute care medical facilities have the highest seismic standards in the state.

Under the city’s Land Use Element, the Community Hospital property is zoned for neighborhood serving uses—such as health care—or moderate density residential, which is in line with the surrounding area. New buildings on the property can be developed up to six stories tall.

Appraisals underway

The key question now is what the property is worth.

Should the property be valued at less than $30 million, the city would essentially “sell” the 8.7-acre site to MWN for $0 and the lease agreement would be fulfilled. 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 have to pay the difference.

Separate appraisals are underway by the city and MWN, which will then be compared and a sales price agreed upon, Dowling said in a statement.

While negotiations for a sale to MWN are underway, Principal Deputy City Attorney Richard Anthony on Monday said there is a remote possibility the city could list the site on the open market for other potential buyers, but it would still be on the hook for MWN’s losses.

The city could also try to retain the property, Economic Development Director John Keisler said, though he did not elaborate on where the city would find millions to repay MWN.

A 2019 staff report stated the property could be worth up to $90 million, provided the seismic retrofit work was completed and it was licensed by the state for acute care. However, Supernaw said that a previous assessment conducted before the city and MWN entered into the lease agreement put the value of the land below $20 million in its current condition.

The future of the property

While Dowling said more detailed plans for the site will be released in coming weeks, he said the company wants to continue its legacy as a medical campus and hopes to open the campus later this year with various vendors and health care providers dedicated to mental health.

“We want to ensure that the property can continue to be used for healthcare-related purposes,” Dowling said. “In addition, we are looking into the feasibility of adding housing to the campus.”

Price said the neighborhood is supportive of MWN’s plan to make it a mental health care facility but it wants to know what kind of quality of life safeguards will be included. Price said she’s familiar with a similar concept in Orange County that provides services for substance abuse, detox and other mental health needs.

“I have seen those models work very well,” Price said. “My commitment was we’re going to have a robust conversation about what’s ultimately going to go there.”

Reality of the hospital’s future

In 2018, staring down the barrel of millions of dollars in seismic retrofits, Community Hospital operator MemorialCare shuttered the facility, claiming it was not feasible to make the necessary upgrades.

For months, city officials scrambled to identify a new operator. Multiple bids were made and subsequently pulled—except for the proposal by Molina Wu Network, which was ultimately awarded the 45-year lease with practically no liability.

MWN spent 18 months and millions of dollars to reopen the facility for emergency and acute care services. To date the city has paid $2.5 million toward the reopening in the form of reimbursements for costs related to seismic retrofit, according to Keisler.

After numerous delays at the state level, the facility was issued its acute care license and received its first patient in two years on Jan. 5, 2021. The behavioral health ward reopened two weeks later, followed by the emergency department on May 12.

Citing an average occupancy rate of only 32% and less than 24 emergency rooms visits per day, MWN later announced the hospital’s closure and future plans for its wellness campus. It surrendered its acute care license to the state on Dec. 31, Dowling said.

At the time, 328 employees were served Worker Adjustment and Retraining Notifications (WARN)—60 day notices of the termination of their employment. According to Dowling, about 298 employees had been terminated by Jan. 8.

About 30 people remain employed by MWN at the shuttered hospital, Dowling said, including accounting, security, facilities and a small number of health professionals who will continue working at the wellness campus.

While there are likely to be concerns about the city selling the property, Supernaw said people need to ask what this property really is, given the costs necessary to have it operate as it had for decades before being closed down by MemorialCare in 2018.

“We wouldn’t want to lose this property because it can function as a hospital?” Supernaw said. “Well that’s what we just went through.”

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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Brandon Richardson is a business reporter, covering everything from real estate and healthcare to the airport and port to city hall and the economy. He is a Long Beach native who has been with the Business Journal since graduating from Long Beach City College in spring 2016 with an associate’s degree in journalism. He is an avid record collector and concert goer.
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