Hotel Company Proceeding with Purchase of Shuttered Hospital Property

After finding a dearth of options for a health care facility to replace a shuttered San Pablo hospital, the board governing the property decided last month to proceed with a proposal to sell it to a boutique hotel company. Selling the former location of Doctors Medical Center for a proposed $13.5 million to Royal Guest Hotels, along with a recent sale of equipment, is hoped to help solve a $15 million debt that haunts the long-financially beleaguered hospital.

West Contra Costa Healthcare District board chairman Eric Zell said the deal with the Davis-based company, which has not been finalized, was identified at a Jan. 11 meeting as the most viable option for the 8.3-acre property’s sale. There is currently a four-month due diligence before the sale would be completed, Zell said. He said the board’s priority was finding a sustainable proposal for a health care facility to replace Doctors Medical Center, which operated for 60 years until the board voted to close it on April 21, 2014.

The hospital was running on an annual deficit of $18 million to $20 million, which officials said was caused by low reimbursement rates for patients who were on Medi-Cal, Medicaid or uninsured -- categories that 90 percent of the hospital’s patients fell into. Officials took actions to try and prevent the closure, including selling off medical office buildings and a parking lot for $7.5 million, but it wasn’t enough to make up for the mounting debt. Even after closing, Zell said the hospital still has about $15 million in debt to pay off, as well as employees’ pensions and other continuing expenses.

“We have to meet our obligations to former medical staff,” Zell said. “So, short of having an offer for a (new hospital), we had to choose the most viable proposal that has the greatest chance of closing.” To help address some of its expenses and long-term debt, Zell said a large amount of the former hospital’s equipment was liquidated to a purchaser for about $750,000.

“That was important, because we had a check written to us immediately,” Zell said. “We need the cash flow ... We don’t have revenue coming in.”

“We’re trying to minimize expenses as much as possible. We’re down to a staff of 7 from 1,000 that worked at the hospital,” he said.

Zell said he is hoping for another infusion of funds from the sale of the property to Royal Guest Hotels. But around $750,000 in debt remains even if the company, which operates five hotels, bought the property.

“We do have some other equipment that could bring in money,” Zell said. “We’re getting close.”

Royal Guest Hotels officials were not immediately available to provide a comment on the proposed sale.

By Bay City News

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