The Long Beach City Council on Tuesday unanimously approved the land transfer of its Community Hospital property, paving the way for new ownership for the first time in nearly a century.

The action on Tuesday was the culmination of a risky lease agreement inked by city leaders in a failed attempt to save East Long Beach’s only emergency room from closing due to seismic structural issues. The repairs were ultimately determined to be too costly and the hospital was closed for good last year.

Under terms of the deal, the city will “sell” the 8.7-acre property for $0 to operator MWN Community Hospital LLC to cover the company’s operating losses.

MWN reported roughly $26.65 million in losses during its roughly four-year effort to save the hospital. The hospital was open for 11 months but shuttered in December due to the mounting seismic construction costs and lack of demand for services.

The city and leaseholder agreed to a fair market sale price of $17.71 million, according to a staff report.

Under the lease agreement, the property will be transferred to MWN for the $0 price tag because the company’s losses exceeded the market value.

MWN has said it is committed to its plans to move forward with a wellness campus with an emphasis on behavioral health on the property—a plan that would not require the same stringent seismic requirements as a hospital. The property would also offer varied medical and health services for the community, for which MWN would serve as the landlord. 

Speaking to the city council on Tuesday, John Molina, of MWN, said his company has been working with the Long Beach Health Department and has determined that mental health services are the biggest unmet need in the community.

Molina said he is in various talks with mental health providers for both adults and adolescents, as well as programs with sliding-scale costs for low-income patients.

“We tried to transform this from an acute care hospital into something that could continue to benefit the community,” he said.

An East Long Beach fixture, Community Hospital opened its doors at Termino Avenue and Pacific Coast Highway in 1923, overseeing the births of multiple generations of Long Beach residents.

Community members and city leaders had rallied to save the hospital starting in 2017 when it was in danger of closing due to an active earthquake fault line running through the campus.

In response to what officials said was major public demand to save the hospital’s emergency room services, city leaders inked an unprecedented deal with MWN that included substantial risk for Long Beach.

Under the lease agreement with MWN, Long Beach, which owns the property, would assume liability and would be required to reimburse the group for operational losses if the 45-year lease was terminated early by either party. In return, MWN would operate the hospital and split the costs with the city for the tens of millions of dollars needed for earthquake safety upgrades.

The agreement was so rare for the city that staffers at the time candidly stated the concerns in city reports. In the “most likely” scenario, they noted, the lease could be terminated at some point due to “roadblocks,” such as possibly higher-than-expected costs for seismic retrofits and challenges with state regulations.

Despite dire warnings in the staff reports, the City Council voted unanimously in favor of the agreement, noting concerns over the health risks to the community if the hospital remained closed.

After being closed for three years, the hospital’s emergency room reopened early last year to much fanfare. But MWN said it struggled due to a lack of demand for services and the skyrocketing costs of seismic construction during the pandemic, estimating an $80 million cost to bring the facility up to seismic standards.

City Councilwoman Suzie Price, whose 3rd District includes the hospital, on Tuesday acknowledged that the city took on risk when it inked the deal with MWN but said it was what the residents wanted.

“At the time that the city took the risk to enter into this agreement, all of our residents were overwhelmingly asking us to do anything they could to save the hospital to provide acute care facilities in east Long Beach,” she said.

Price said the city will be involved in the planning of the wellness campus and that any future proposals will involve robust discussion. No plans have been approved at this point, but deed restrictions on the property require it to be used for some kind of health care or community wellness purpose.

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.

To save Community Hospital, Long Beach leaders took a risky gamble—and lost