Feeling profit pressures, Tenet Healthcare Corp. is eyeing the consolidation of some of the eight Philadelphia hospitals it bought in 1998 for $345 million at the bankruptcy auction of Allegheny Health, Education and Research Foundation's assets.
A day after reporting that the AHERF hospitals have been a disappointment, Tenet announced that the senior vice president of its Pennsylvania region, Lee Domanico, would be returning to California to assume a new executive role within the company.
W. Randolph Smith, executive vice president of operations for Tenet's central-northeast division, will be replacing Domanico in overseeing the AHERF hospitals on an interim basis.
Before being tapped to lead the region in November 1998, Domanico, 47, had been vice president of Tenet's Los Angeles region and chief executive officer of Tenet's 285-bed USC University Hospital in Los Angeles.
Tenet's earnings rebounded in its second quarter ended Nov. 30, 1999, but the former AHERF hospitals remain a drag on the Santa Barbara, Calif.-based hospital chain's bottom line (See story, p. 21).
In a conference call with Wall Street analysts, Thomas Mackey, Tenet's chief operating officer, declined to specify how the company would rejigger its Philadelphia operations. But he confirmed what many Philadelphia healthcare executives have thought for some time: Tenet's retrenchment is not a question of if but when.
"We are looking at opportunities for consolidation in this market," Mackey said, acknowledging that some of its Philadelphia hospitals "are struggling."
Mackey told analysts that any public announcement on consolidation, including closures, is a month away. Tenet, several observers said, will have to weigh economic necessity against promises it made to local politicians in 1998 to keep the hospitals open.
"They need to operate a financially viable system in this market," said Dan Grauman, a healthcare consultant in Bala Cynwyd, Pa., "and I expect they will do what it takes to accomplish that goal."
-with Barbara Kirchheimer-