I remember many years ago when this hospital on Brookshire was built. The choice of this location and the people who were displaced, how it was to be paid for, the method of bonding, and finally the referendum and the bitterness of the election that followed, shows the difficult process all of us went through to have a hospital.
And now our hard won local community hospital says that in order to survive in the 21st century, it must change again and become an HMO. Supposedly, there will not be enough local private patients in the future to support the hospital’s evergrowing size. This is not an exclusive problem to Downey. It is happening all across the country.
University hospitals are holding on because they are usually affiliated with county facilities and also have research and teaching centers funded in part by grant and fellowship support. But on a local level the new buzz word is HMO and their funding is driven by insurance dollars.
This new status for the hospital will be a substantial change for the community and one that seems to have been in the making for a long time. It appears the purpose of the Hospital Foundation’s purchase of Rio Hondo Hospital was to handle MediCal and other community needs. Likewise, the elimination of the emergency base radio station now appears to have been part of a larger plan for conversion to an HMO.
I feel two questions need to be asked about these changes in the Hospital status. The nature of HMO development across the county has been one of acquisition—larger chains buying up smaller ones. This is an established pattern and one not likely to abate. The obvious conclusion is that the new Downey HMO also will eventually be sold. My first question is, if this should happen who gets the money—the Foundation or the City?
My second question is about the current City subsidy to the hospital operation. No one seems to question that the land under the main building, some 8 acres, belongs to the City of Downey, and after the 1983 referendum the hospital buildings belong to the Foundation. That relationship can best be described as a long term ground lease and as such has economic value. In today’s real estate market the land, being fully developed to its highest and best use, is worth about $22 - $28 a square foot, or about $8.7 million. Ground leases have an 8 - 10 percent return rate so that makes the annual subsidy by the people of Downey to the Hospital Foundation worth about a $780,000 a year, for which the Foundation now pays the City $1 per year. It is my understanding that all HMO’s are, by definition, for-profit organizations. My question is, in the future when the new HMO is sold to a national chain (once again in order to survive), is the buyer going to start paying the City rent on the land? Or will they continueto pay only one dollar, the amount the City now gets? Would that subsidy not be considered a gift of public funds?
Money was what the referendum was all about in 1983, and the changes going on now are about money. As long as the hospital is not paying fair market rent for the land, the subsidy problem is not going away. I suspect it will ultimately have to be arbitrated in court. Better there should be a full and open dialogue about the topic now rather than later.