Pierce County’s decision to buy back a hospital it built more than half a century ago came as a surprise to many within the business community who didn’t realize government had a vested interest in assuring the facility remains in operation.

“The County has been paying Puget Sound Hospital about $1.7 million a year since the early 1970s to treat 100 or so behavioral health patients under a government funded program that provides mental health care for the poor,” explains County Human Services Director Fran Lewis.

Behavioral health patients include those with mental health problems, as well as those being treated for alcohol or substance abuse, she says.

Earlier this year, New American Healthcare Corp, the hospital’s parent company, filed for protection under Chapter 11 of the Federal Bankruptcy Act. Then in April, the state Department of Health cited the hospital for alleged sanitation and security problems and shut it down for a day.

Lewis says she became concerned over what would happen to County programs served by the hospital if an even more severe shutdown were to occur. The volume of people being served by the program made it impossible to transfer them to Western State Hospital without exceeding its capacity and threatening its state license.

Officials of MultiCare Health System also expressed alarm, she says, since local hospitals also would be hard-pressed to absorb the sudden influx.

“Other hospitals in the area aren’t equipped to provide the substance abuse and mental health care that Puget Sound Hospital provided,” says Lewis, who points out that the County’s behavioral health services programs accounted for nearly two thirds of the hospital’s activity last year.

MultiCare said it would provide any assistance it could if the County decided to explore options such as leasing a portion of Puget Sound Hospital or buying it outright. With MultiCare’s help, the County exercised the second of those options earlier this month.

“It is vitally important that these programs continue without interruption,” County Executive Doug Sutherland said in announcing the County would buy the hospital for $2.44 million.

The hospital has begun phasing out medical and surgical services and will be complete by the time the County takes over July 28.

The County plans to retain up to 250 of the hospital’s total staff of more than 300.

Within hours of the County’s announcement that it intended to buy the hospital, New American said the U.S. Bankruptcy Court had approved the transfer of the 160-bed facility. New American, which owned eight hospitals throughout the country at the time it filed for bankruptcy protection, has sold off some of its properties but reportedly has been unable to restore profitability.

In order to expedite the purchase and assure that the County acquires the property, MultiCare put up $2.4 million to guarantee another buyer doesn’t step in. MultiCare officials say, however, they have no interest in acquiring the two hospital buildings totaling 159,000 square feet, a medical office building and surrounding property.

They say they only are interested in seeing that the behavioral health services won’t be interrupted again. Yet MultiCare and other area hospitals also will benefit from the elimination of competition when medical and surgical services are discontinued at Puget Sound Hospital.

The County will purchase the hospital with state and federal funds, which will have to be allocated for that purpose by the Pierce County Council.

Pierce County built the hospital’s north building at South 36th Street and Pacific Avenue in 1926 and added the south building in 1952. The county operated both until the entire facility was sold to the Northern Pacific Beneficial Assn. in 1969 for $900,000.

By George Pica, Business Examiner staff