Tenet Healthcare Corp. is shutting down two unprofitable hospitals, including one operated by a joint venture with a not-for-profit system.
In New Orleans, the Santa Barbara, Calif.-based chain has set May 31 as the closing date for Jo Ellen Smith Medical Center, a 186-bed rehabilitation hospital that also provides emergency services.
Just outside Dallas, for-profit Tenet and Texas Health System, a subsidiary of not-for-profit Texas Health Resources, have abandoned a partnership that operated the Presbyterian Medical Center of Wylie, a small hospital northeast of Dallas that was bleeding money. It closed March 31.
Tenet spokesman Harry Anderson said the two closures are unrelated and the two hospitals are not among 20 that the chain hopes to sell this year (March 8, p. 8).
The daily patient census at Jo Ellen Smith dropped into the low teens last year, resulting in an average occupancy rate of about 10%. The hospital was projected to post a loss of $2.3 million on $22 million in revenues for the fiscal year ending May 31, said hospital spokeswoman Roberta Musa.
"We just recently came to the decision that our only viable option was to close the acute-care facility," she said.
The hospital opened under physician ownership in 1975, but Tenet and its predecessor, National Medical Enterprises, have owned the facility since 1977.
At the root of the problem was an overabundance of beds and lack of population growth in New Orleans, Musa said. The rehabilitative services will be moved to Tenet's five other hospitals in the New Orleans area.
In Texas, 16-bed Presbyterian Medical Center was losing $500,000 a month for the six months it was open under the Tenet-Texas Health System partnership. The hospital had been closed when the two companies came together in October 1998, and Tenet provided an initial $6 million to renovate it.
"I think the factor of the facility being a joint venture was the thing that everybody saw as the biggest asset," said Brandon Edwards, another Tenet spokesman. "It turned out to be the biggest liability."
Because the partners were also competitors in the Dallas market, and because one was for-profit and the other was not-for-profit, their structures hampered their ability to jointly conduct business.
Under the partnership, Tenet owned the facility and the equipment, the two partners split the cost of renovations, and a joint board split control of the hospital. The hospital itself was considered for-profit.
"Tenet and Texas Health System could be viewed as competitors," said Kirk King, the hospital's executive director and a Tenet employee. "If one saw the other one's managed-care rates, it could be viewed as not good for competition."
Both parties entered the partnership with the understanding that the arrangement met all state and federal regulatory requirements, he said. But the barriers to sharing information made it difficult for them to enter managed-care contracts. Physician recruitment also suffered, leading to low patient volumes.