As the hubbub subsides over the auction of Allegheny Health, Education and Research Foundation's Philadelphia operations to Tenet Healthcare Corp., the behind-the-scenes work to complete the deal has moved into high gear.
Both Tenet and AHERF expect to close the $345 million transaction by the Oct. 21 deadline imposed by U.S. Bankruptcy Court in Pittsburgh.
In the meantime, Tenet must clear regulatory hurdles as well as transfer to Drexel University management responsibility for Allegheny University of the Health Sciences.
Tenet best manages academic hospitals, not medical schools, company officials say. That's why the Santa Barbara, Calif.-based chain has linked the sale of AHERF's Philadelphia operations to Drexel management of Allegheny University of Health Sciences and its schools of medicine, nursing, public health and allied health professions.
Drexel is a healthcare industry newcomer best known for its school of engineering and a work-study program for undergraduates. Its campus is adjacent to the University of Pennsylvania in downtown Philadelphia.
The 11,000-student university came forward late in negotiations and at Tenet's invitation, according to Drexel. Discussions to forge a definitive agreement to run AUHS continued last week, Tenet said.
Upon the close of the AHERF sale, Tenet will move the university's assets into a new not-for-profit organization overseen by a board selected by the faculty, Drexel and Tenet.
According to a post-auction statement released by Drexel President Constantine Papadakis, a non-negotiable precondition for Drexel to assume AUHS management is that Drexel "will not assume any financial risk nor make any future funding commitments" for the healthcare university.
The Drexel board of trustees is slated to vote Oct. 13 on a service agreement with Tenet, under which 107-year-old Drexel would earn a fee plus expenses to operate AUHS.
Meanwhile, as the first for-profit chain to enter Pennsylvania, Tenet is getting fast-track treatment from the state's health department, which must approve the transfer of licenses for the eight hospitals to Tenet from AHERF.
Under state law, license transfer applications must be filed a minimum of 30 days before the change in hospital ownership. The AHERF sale would be completed in 23 days. However, given the Philadelphia operation's fragile financial state, U.S. Bankruptcy Court Judge Bruce McCullough declined to make state approval a condition for completing the sale.
Health department spokeswoman Megan Neuhard said the state is working diligently to assure a seamless transition of ownership by the court's deadline and is conducting a thorough review.
Tenet executives met with state officials last week to discuss the matter, Neuhard said. The company, she added, has been "very cooperative" and has supplied all requested information.
A day after submitting its winning bid for the AHERF assets, Tenet named Lee Domanico, 44, its senior vice president to head the company's newly established Pennsylvania region, which runs its Philadelphia operations.
Previously, Domanico was vice president of Tenet's 12-hospital Los Angeles region and chief executive officer of 247-bed USC University Hospital, a Tenet-owned teaching hospital for the University of Southern California School of Medicine.
Before joining Tenet in 1996, Domanico was CEO of not-for-profit Columbus-Cabrini Health System in Chicago.