Hospitals pinch to avoid bankruptcy

By: CHRIS BAGLEY - Staff Writer
District lays off 41 employees and moves to cancel contracts; cuts in service loom | Tuesday, November 20, 2007 11:29 PM PST ∞

Menifee Valley Medical Center and two other hospitals in the region will trim their staffs and attempt to renegotiate contracts in an effort to stem financial losses that threaten to put them into bankruptcy, the hospitals' new managers said Tuesday.

Valley Health System, the public health-care district that owns the hospitals, plans to lay off 41 of its 2,000 employees, including about 10 people at Menifee Valley on McCall Boulevard in Sun City, chief executive Fred Harder said.

The district cancelled its contract with the previous management company, run by Hemet surgeon Kali Chaudhuri, and hired Quorum Health Group Inc., Harder's employer, shortly before a watershed vote Nov. 7.

Voters in central Riverside County rejected Measure G, which would have approved the sale of the hospitals to a consortium of private investors. Opponents of the measure, who were concentrated in Hemet and San Jacinto, argued that the sale would keep the hospitals stuck in a web of contracts that were responsible for the continued red ink. Directors of the district's board said it has been bleeding about $1 million per week.

Harder said in an interview Tuesday that he doesn't foresee cutting services at the Sun City hospital, though a press release from the district stated it would "begin seriously evaluating the closure of underutilized services" at one or more of its facilities.

"Then, there's the renegotiation of other contracts wherever we might have them," Harder said, declining to go into specifics.

The press release from the district mentioned unspecified managed care contracts.

The leader of the opposition to Measure G had singled out a doctors' group run by Chaudhuri. The opponent, Hemet general practitioner Neal Simpson, alleged that Chaudhuri used his control of the management company to steer sweetheart contracts to his own medical practice and drive the district to the brink of bankruptcy.

The district might have begun closing hospitals as soon as January, Board Chairman Patrick Searl said in the press release.

"The voters have spoken," Searl said in the statement. "This means we need to take immediate, strong action to stave off financial peril for the entire system. Our choice is clear."

Searl didn't return a call seeking comment Tuesday afternoon.

Measure G failed by a vote of 18,500 to 16,200, the board's second defeat in a year. Voters favored a $485 million bond last year by 56 percent to 44 percent, but it fell short of the two-thirds supermajority necessary for it to pass.

-- Contact staff writer Chris Bagley at (951) 676-4315, Ext. 2615, or cbagley@californian.com.