Tenet Healthcare Corp. is sweetening its offer to buy two Los Angeles-area hospitals, but not with money.
Tenet is bolstering two service guarantees previously made to the community as the Santa Barbara, Calif.-based chain tries to overcome local fears about the money-losing Daniel Freeman Hospitals, Inglewood, Calif., converting to for-profit from not-for-profit status. Tenet has agreed to pay $55 million for the two hospitals, which are sponsored by Carondelet Health System, a Roman Catholic network based in St. Louis.
"Our intent is to add services, not take them away," Tenet spokesman Harry Anderson said. "We wouldn't be making an investment of this magnitude if we didn't think we could grow our network in this area (southwestern Los Angeles)."
Just as in some previous deals, Tenet is accepting certain mission-related conditions in the sale, something that it has been more willing than other for-profit chains to do in acquiring not-for-profit hospitals. For instance, Tenet follows the Ethical and Religious Directives for Catholic Health Care Services for at least eight of its hospitals, including two added to its ranks this year: 203-bed St. Alexius Hospital in St. Louis and 460-bed St. Mary's Hospital, West Palm Beach, Fla. Tenet has agreed to follow the directives at the two Freeman hospitals.
Those two hospitals are 360-bed Daniel Freeman Memorial Hospital, Inglewood, and 138-bed Daniel Freeman Marina Hospital, Marina del Rey. They lost $23.9 million on operations for the year ended June 30, 2001, on $183.8 million in revenue, according to a report prepared for the California attorney general's office.
Tenet agreed to maintain emergency services at Daniel Freeman Memorial for at least five years, up from a minimum guarantee of two years when it originally agreed to buy the hospitals in June. Tenet also said it would continue to provide obstetrical and neonatal intensive-care services in the Inglewood community for at least five years, up from a minimum guarantee of three years. The company also agreed to invest $50 million in the two hospitals during the next 10 years, Anderson said.
Some of the local concern over possible consolidation of services has to do with geography. Tenet's 384-bed Centinela Hospital Medical Center, Inglewood, and 244-bed Brotman Medical Center, Culver City, are near the two Daniel Freeman hospitals. Anderson said Centinela already is operating near capacity, but he did acknowledge that, outside of emergency and obstetrics services, Tenet would review the services offered at the four hospitals and determine whether to shift programs among the sites.
The office of California Attorney General Bill Lockyer has conducted two public hearings on the proposed sale, said Nathan Barankin, the attorney general's communications director. By California law, the office must complete its review by Dec. 10, or six months after the sale was proposed, Barankin said. Tenet's Anderson said the company has received approval from federal regulators and still hopes to close the deal by year-end.