Community Hospital, City of Long Beach reach long-term lease agreement
October 16, 2019
The pulse of the Long Beach Community Hospital beats on as the Long Beach City Council approved a lease agreement with Molina, Wu, Network, LLC (MWN) during Tuesday night’s council meeting to run daily operations of the hospital.
John Keisler, Long Beach director of Economic and Property Development, said that the council voting to pass the lease agreement assures MWN that a long-term plan with the City is in place as the company retrofits the hospital to pass a seismic inspection scheduled sometime by the end of this month.
“That [seismic inspection] approval is needed before they can actually open their doors to the public again,” Keisler said.
The lease agreement states that the City would reimburse up to $1 million per year for the first five years, and up to $2 million per year for years six through 15 to assist with seismic retrofit-construction costs of the hospital facility.
The new lease agreement gives MWN ownership of the site for up to 65 years, which will allow them to justify the large investment that the company will need to make in order to run the hospital. MWN estimated that it will cost approximately $30 million to restart the hospital.
“That’s for hiring staff as well as purchasing equipment and systems and things,” Keisler said, “but they also will begin what’s called the seismic construction planning. We have approval from the Office of Statewide Hospital Planning and Development (OSHPD). We have approval to submit construction plans by June of 2020.”
Community Hospital can continue to operate all the way through Jan. 1 2025, but they need to reach certain seismic-compliance deadlines with OSHPD, according to Keisler.
In regards to the lease agreement reimbursements, Keisler said that it will only cover seismic-compliance construction. The City would pay MWN up to 50% of the costs capped at $25 million over 15 years.
The City estimated that those seismic projects would amount to $50 million, and that the cost was to be split evenly with MWN, but this agreement will only take effect if the hospital maintains operations, keeps its permits and completes seismic construction.
To offset the reimbursement costs, Keisler said other City services would have to undergo budget costs. That decision ultimately falls to the council and the various department heads.
“The city manager will discuss this with all department heads,” Keisler said. “So, that could be anyone from the economic development director to the chief of police–– [to see] where each of the departments might be able to take a budget reduction to create the million dollars of appropriation needed to make the Community Hospital segment payments.”
During Tuesday’s city council meeting, 4th District Councilmember Daryl Supernaw spoke about the risk factor that MWN and the City took when they agreed to reopen Community Hospital.
As previously reported in the Signal Tribune, Community Hospital announced in 2018 that it was going to close its doors to the public because the hospital’s structure would not be able to meet the state’s seismic requirements. It was also discovered that a fault line was located beneath the hospital building. Residents were quickly alarmed to hear the news, as the City reported that emergency response times rose by 10%, and in some cases 20% as a result of the hospital shutting down emergency services.
“I don’t know of any real estate transaction that occurs without an element of risk,” Supernaw said. “What I will say about the risk in this deal is that whatever the risk ends up being, it pales in comparison to the risk our residents are at for not having an [emergency room].”