Fallbrook Hospital History

This page gives the history of the Fallbrook Hospital, and especially on its transition to the leasing arrangement in 1998. See Fallbrook Hospital for current information about the Hospital.

The original Hospital in Fallbrook was established in a private home in 1936. By 1948, it had threatened to close since it was having trouble getting nurses and raising money. Does this sound familiar?!

The Fallbrook Hospital District was established in 1950 to raise money. Citizens voted to support the hospital with a property tax assessment which yields $560,000 per year in 1998. In 1958, the Fallbrook Hospital District was granted $257,000 in federal and state funds, to pay two-thirds of the cost of a 20 bed hospital. In 1960 the current Fallbrook Hospital opened on Elder Street.

Like many hospitals, the Fallbrook Hospital has been losing money for years, so much that its future was in jeopardy. As a result, in early 1997 the Directors voted to let the nation's largest, for-profit hospital chain, Columbia/HCA Healthcare Corp., take it over. See the saga of the failed Columbia deal.

Fallbrook Hospital continued to hemorrhage money, losing $300,000 between July 1997 and February 1998, and continued operating only by borrowing money from the fund-raising Fallbrook Hospital Association ($200,000) and from its employees' pension fund ($1.32 million).

As a result, in early 1998 the Fallbrook Hospital District officials proposed seeking public approval of a $5 million bond which would be used to pay off the district's $4.4 million revenue bond debt, with the rest going for upgraded heating and air-conditioning that has long been planned. Each Fallbrook homeowner would pay $12 - $15 per year per $100,000 assessed value. This bond issue is now dead since Community Health Systems, Inc. is leasing the Hospital.

The Hospital reduced staff by about 25 employees in December and January, mostly via attrition, for an annual savings of $800,000. They have also switched to handling peaks in the patient load by using permanent employees on overtime instead of temporary help in the nursing and ancillary services areas. This is more cost-effective, but of course requires some employees to work overtime.

In March 1998, the Hospital Board formally cancelled the Columbia deal and quickly found a new suitor with what is said to be a better deal with Community Health Systems (CHS) of Brentwood, TN. CHS will pay $4.4 million in up-front lease payments for a 30 year lease. Community Health Systems also seems to be a better match for Fallbrook, since they specialize in operating small hospitals.

In April the Board signed a letter of intent to lease the hospital. By the end of May, a community negotiating committee worked out the details of the agreement to lease and the lease agreement. The committee recommended to the Board to proceed on 27 May 1998.

As a result of the furor created by the Columbia deal and other such hospital take-overs in California, in March 1998 California passed a law (SB460) that prohibits transfer of public hospital assets by sale or lease without a vote of the people. The Columbia deal would have closed before the law took effect, but with the failure of that deal, any future deal for the Fallbrook Hospital must be voted on.

Hence the Community Health Systems agreement was presented to the community on 1 June 1998, and on 3 June the Board voted to present the issue of lease affiliation to the voters. A mail ballot was sent out in mid-August, due 1 September, after the 3-month delay specified by that law. The ballot issue needed only majority approval, but the lease was approved by an unbelievable 95% of the votes.

The allocation of the Hospital District's $550 K Tax Revenues will be made by an elected Fallbrook board. The first year's tax revenue will likely be used to pay off any residual debts which may amount up to $500 K. Some revenues must be saved each year to "buy back" the undepreciated capital improvement assets that CHS puts in over the next thirty years. The remainder will probably be used for local health programs such as cancer screening programs, health education, efforts to reduce teen pregnancy, drug use, and well-baby care for poor.

The problems with the Fallbrook Hospital have created a lot of tensions and unhappiness in the community which simply mirror what is happening nationally. Our system of health care nationally is changing rapidly from nearly 100% "high cost freedom of physician choice" to nearly 100% "lower cost managed care". Whenever a major change like this occurs, unhappiness is bound to result despite well-intentioned people on both sides trying to do the right thing.

A takeover by an organization skilled in thriving in the current environment of managed care was inevitable, and life will go on after the deal takes place.

I thank Jim Landes, President, Fallbrook Hospital Governing Board, for providing some of the factual information above. The opinions expressed are of course only my own.

Other sources: VN 8/20/98; 9/3/98; Fallbrook 1869-1977, published by the Fallbrook Historical Society; and a few other NCT articles I failed to record.

Go to Fallbrook Information: History

Copyright © 1998-2000 by Tom Chester.
Permission is freely granted to reproduce any or all of this page as long as credit is given to me at this source:
Comments and feedback: Tom Chester
Last update: 28 December 2000.