El Camino Hospital officials say they hope to restore "financial integrity" at Community Hospital of Los Gatos when they take over operations and ownership of the buildings in June. But they note that it will be challenging, especially since the hospital needs to be seismically retrofitted.

El Camino is still in negotiations to buy the land and facilities for $45 million from Healthcare Properties, a real estate investor. The two parties had been discussing the purchase for months, and made the announcement on Dec. 17.

In the announcement, El Camino officials said they will officially buy the land and take over management starting June 1, with Dr. Eric Pifer, the current chief medical officer at El Camino Hospital, serving as Community Hospital's newest president.

"We are aware of the current economic situation" at Community Hospital, said Jon Friedenberg, an El Camino executive and president of the El Camino Hospital Foundation. "If we thought we could do better, we wouldn't have done this."

Tenet Healthcare Corporation, which has managed the Los Gatos hospital since 1962, decided in July to not renew its lease when it ends in May. According to Tenet Corps spokesperson Beth Lyons, the decision was partly due to the age of the hospital's 10 buildings and the cost of repairs. The state has mandated that all hospitals upgrade their facilities to meet new seismic safety standards by 2013; such an upgrade will cost many millions of dollars for the 143-bed hospital.

"The age of the physical plant and the requisite capital improvements was a factor in the decision not to renew the lease at Los Gatos," said Dr. Stephen Newman, Tenet's chief operating officer, in a press release.

Meanwhile, increased medical costs have taken a toll as well. Tenet reportedly laid off 28 full-time Los Gatos hospital employees in 2005.

El Camino Hospital officials said none of the money going into the acquisition -- including the $45 million purchase price and the undisclosed amount need to retrofit the Los Gatos facilities is coming from taxpayers. Taxpayer funds, collected from property owners in the El Camino Hospital District, are intended only for long-term capital equipment and community health programs within the district, which does not include Los Gatos.

Instead, Friedenberg said, the money for the acquisition is coming from revenue from hospital operations.

"Some of our services generate net revenue and we have been saving up funds," he said.

In the long term, he said, it will be profitable for El Camino to revive the Los Gatos hospital. The reputation of Community Hospital had slipped under its current management, he noted, and El Camino intends to restore it.

Friedenberg also said El Camino has become "intimately familiar" with the costs of seismic retrofitting, since the hospital is currently building a brand-new $452 million facility on Grant Road to meet the state's new guidelines.

Healthcare Properties had originally discussed the lease and purchase with other medical care providers, but those organizations apparently backed down. Friedenberg said he does not know why they did. But by buying and managing the hospital, El Camino is now "in a position to address these issues."

Since El Camino is still in negotiations, hospital officials refused to discuss terms of the purchase in any detail, including cost of retrofits and exchange of hospital equipment. Hospital spokesperson Judy Twitchell directed all questions to Friedenberg, calling him an expert on the issue.