A public hospital in the San Francisco area has agreed to be acquired by Tenet Healthcare Corp. in an attempt to stem losses from indigent care and Medicaid patients.
Tenet, the nation's second-largest investor-owned hospital company, will lease 326-bed Brookside Hospital in San Pablo, Calif., for 30 years in exchange for repaying the hospital's $18 million in bond debt.
The hospital is owned by the West Contra Costa Healthcare District. Board members said they would like to have a referendum so voters can have a say on leasing the public hospital, yet time and money are running short.
"It is very clear to us that we do not have the time to go through a referendum process," said Jim Beaver, a spokesman for the hospital.
For the fiscal year ended June 30, the hospital lost $5 million on revenues of $85 million. Although the hospital hadn't missed any payments on its debt, it was in technical default because it hadn't met certain financial ratios required by bondholders.
That brought the attention of Cal Mortgage, the state agency that insures Brookside's bonds. State officials there appointed an "observer team" earlier this year to review the hospital's operation and strategic direction. That team had recommended the hospital search for an affiliation partner, Beaver said.
"Without an affiliation we would be looking very soon at closing the hospital," said Jane Beam Wood, the district's board chair.
Tenet, a 75-hospital chain based in Santa Barbara, Calif., also owns Doctors Hospital of Pinole (Calif.), located about five miles away. Beaver said Brookside is expected to make money under Tenet's operation through purchasing contracts, consolidation of some services and attracting more insured patients. About 80% of Brookside's physicians also practice at Doctors, he noted.
According to other terms of the agreement, Tenet will:
Assume a medical office building and its $1.3 million in debt.
Underwrite the costs of a community clinic for $100,000 a year for five years.
Maintain the levels of charity care and discounted services Brookside provided in the previous 24-month period.
Operate the hospital as the primary tertiary-care facility within the hospital district's boundaries.
When for-profit chains purchase public hospitals, a typical outcome is tax relief for area residents. However, that apparently won't be the case in San Pablo. In an unusual twist, taxpayers will continue to fund the hospital district at its current level of $1.5 million a year. However, instead of the proceeds flowing to the hospital, the money will fund charitable and indigent care, Beaver said.