Long Beach leaders on Tuesday will consider selling the historic Community Hospital property, which the city has owned for nearly a century, to its current leaseholder after the hospital closed for the third time last year, mostly due to seismic costs and a lack of demand for its services.
After years of trying and failing to keep the East Long Beach facility open, the City Council will vote on whether to sell the property for $0 to operator MWN Community Hospital LLC in order to satisfy the requirements of a risky lease deal that required the city to cover operational losses.
According to a staff report released Monday, the city and leaseholder agreed to a fair market sale price of $17.71 million.
MWN, however, reported roughly $26.65 million in operational losses, which the city verified through a third-party.
Losses exceeding the market value of the property resulted in the nonexistent price tag.
If approved, $50,000 in escrow fees and costs would be shared between MWN and the city, according to the staff report. MWN also would reimburse the city for $715,554 in maintenance costs, while the city must refund a portion of cash reserves in the amount of $75,930.
MWN will lose a total of $9.58 million in the four-year-long effort to open the hospital, a timeframe that included navigating the pandemic and trying to figure a way to pay an estimated $80 million it would have cost to bring the facility up to seismic standards.
Community Hospital did open for 11 months, but the company announced nearly a year ago its decision to close acute care in favor of outpatient services, which don’t require the same seismic investments.
In an interview Tuesday, MWN officials reaffirmed plans to convert the property to a wellness campus with an emphasis on behavioral health should the sale be approved.
“The ownership of this property potentially could be changing but the campus’s focus on serving the community won’t,” spokesperson Brandon Dowling told the Post.
MWN plans to transform the property into a campus offering numerous medical and health services provided by various vendors. MWN, for its part, would simply be the landlord of the property.
Dowling and MWN’s John Molina said the company is in talks with “very well-known local providers of behavioral health and other related services” to expand into the facility. They said MWN is seeking eight to 10 service providers, including behavior health, substance abuse, senior care and urgent care, among others.
Before companies can move in and begin offering their services, Molina said portions of the building must be brought up to code, including some ADA improvements. The cost for construction is still being determined, but Dowling said the company is seeking grant funding from local, state and federal agencies.
Dowling said the build-out process would take at least a year, with services hopefully starting to come online before the end of 2023.
The sale agreement with the city includes a condition that MWN use the property for non-acute health care services for community benefit. Allowable uses include “behavioral health, recuperative care, social services, education, government offices, housing for health care students, specialized services and other health and wellness operations.”
Molina said the construction of housing, be it for assisted living or health care students, is on the table but that further seismic study would be needed.
“We know from talking with Long Beach City College and Cal State Long Beach that they have a housing problem for their students,” Molina said. “We’re not doing a luxury apartment complex.”
The company’s priority, however, remains bringing services into the former hospital, Molina said.
The hospital buildings are receiving much of MWN’s attention, but Molina said the company also intends to renovate the medical office that is located on the property. The building is partially leased and MWN is seeking additional tenants.
Negotiations between the city and MWN have been ongoing for months, even after the potential sale was contested by the state, which initially said the 8.7-acre property legally must be offered first to affordable housing developers. After a city appeal, the state determined the property is exempt from the California law.
The Oct. 4 council vote will be held 11 months to the day from when operator MWN announced it would shutter the acute-care facility—less than 11 months after it reopened.
How we got here
Even before its final closure at the end of 2021, the hospital struggled for decades; it’s had seven operators in its 98-year history. In 2000, Catholic HealthCare West shuttered the facility, but it was quickly reopened on a smaller scale by a group of doctors and residents.
MemorialCare Medical Group stepped in and took over operations in 2011, but a 2017 seismic study by the health care provider led the company to determine continued operation of an acute care facility was not feasible due to the high cost of retrofits to comply with state regulations.
MemorialCare proposed converting the facility into a mental health campus but was turned down by the city after a vocal public outcry of the continued need of an acute care hospital with an emergency room on the east side.
MemorialCare shuttered the hospital in July 2018.
MWN immediately began negotiating with the city and officially took over operation of the hospital in March 2019 with a short-term lease agreement before it signed its 45-year lease with the city later that year.
The company faced numerous delays in reopening the hospital, held up by state inspections amid the COVID-19 pandemic. Finally, the facility accepted its first patient in over two years in January 2021.
After much fanfare, including multiple celebratory ceremonies and ribbon cuttings, MWN struggled under a lack of demand for services at the facility and skyrocketing seismic-related costs. After recording millions of dollars in losses, the company announced in November that the facility would close.
Despite the challenges throughout its operation of the facility, Molina said the company remains committed to its promise to the city and its residents.
“We could have walked away from this,” Molina said. “But we are in a position now that we are going to be able to carry through on the commitment to have an asset based in the heart of East Long Beach that’s going to benefit the health and well-being of the citizens.”
Editor’s note: John Molina is the primary investor in the parent company that owns the Long Beach Post. Read more about the Post’s ownership here.