Proposed sale of East Los Angeles hospital given boost. (Up Front).

The proposed sale of Santa Marta Hospital in East Los Angeles from its non-profit Catholic owner to a new for-profit operator based in Newport Beach was given the thumbs up last week in a key report to the state Attorney General's Office.

The report, conducted by a consulting firm, found that Star Healthcare Group had agreed to provide adequate emergency and charity care as part of its deal to buy the hospital from Carondolet Health System Inc.

While the report is not the final word on whether the state will approve the sale, the so-called "health effects" study provides the basis for the decision by the attorney general, which reviews hospital sales under state law.

"The report indicates that they have addressed the two major issues that usually arise from sale of a hospital, which is emergency care and charity care--and that they are on the right track," said Deputy Attorney General Mark Urban, who is conducting the review for the state.

The report, by The Camden Group of El Segundo, concluded that Star's commitment to provide at least $2 million in charity care annually will ensure such care is not cut back to the community.

It also said Star's commitment of keeping its emergency room open for at least five years was appropriate--and that the only other option aside from the sale of the money-losing 110-bed hospital appeared to be closure.

"It's very positive," said Peter Spiers, who formed Star last year with two other veteran health care executives. "We think we pass muster."

Star was formed to acquire 100 to 300 bed non-profit community hospitals, and then employ for-profit management techniques to turn them around. It agreed to purchase Santa Marta, which has lost $20.6 million over the last five years, for $4.5 million, according to the report.

Santa Marta Hospital is the last hospital owned by Carondolet in Los Angeles County. Last year, it sold Daniel Freeman Memorial Hospital and Daniel Freeman Marina Hospital to Tenet Healthcare Corp. for $57 million.

Star signed a separate management agreement with Carondolet and has been operating the hospital for about two months. In that time, the number of in-patients treated each day has increased from less than 30 to over 50.

Spiers said that was accomplished by meeting with doctors and letting them know the hospital would not be closed.