You wouldn't think Tenet Healthcare Corp. would be willing to run through a brick wall to acquire two money-losing Roman Catholic hospitals.
But that's how the Santa Barbara, Calif.-based for-profit company characterized its decision last week to accept 21 conditions imposed by California Attorney General Bill Lockyer on its purchase of two Los Angeles-area hospitals. Tenet agreed in June to pay $55 million to Carondelet Health System, St. Louis, for the two hospitals: 345-bed Daniel Freeman Memorial Hospital, Inglewood, Calif., and 153-bed Daniel Freeman Marina Hospital, Marina del Rey, Calif.
"What we have been saying is that these are failing hospitals, losing $3 million a month, and we are taking on a substantial risk in taking them on," Tenet spokesman Harry Anderson said. "We don't like the conditions as a whole, but it's still a good opportunity."
In spite of the conditions, which Anderson described as "onerous," Tenet was willing to comply because the two hospitals add depth to the company's network in southwestern Los Angeles County, he said.
Lockyer, who was under pressure from community groups to maintain services, required Tenet to extend guarantees on emergency services and treatment of patients in California's Medicaid program, known as Medi-Cal, for seven years, up from the company's promise of five years. Tenet had originally promised to provide emergency services for only two years but then voluntarily upped its promise to five to sweeten its offer, although apparently not enough to satisfy the attorney general (Dec. 3, p. 18).
Lockyer also required Tenet to agree to provide about $2 million annually in charity care at Memorial, without shifting charity cases from Tenet's 384-bed Centinela Hospital Medical Center, also in Inglewood. Tenet also agreed that if it closes Marina within five years, the company will replace it with an urgent-care facility or provide free transportation to Medi-Cal and Medicare patients in the hospital's service area to other clinics.
Tenet's Anderson expected the deal to close this week. "Very shortly, we'll be appointing a new chief executive officer for the Freeman hospitals," Anderson said. "Our pattern (for acquired hospitals) is, we're going to want to get in there rather quickly to do some quick sprucing up to make the hospitals look fresh and make our presence known."
Long-term, he said, Tenet will need to re-establish the confidence of doctors, employees and the community in the two hospitals. Employee morale has been battered as the hospitals have shrunk to 900 from 1,500 employees, he said.
"They just have had a very difficult last five years or so," Anderson said. "The Freeman Memorial campus in Inglewood used to be one of the five-star hospitals in Southern California, so this has been a painful, painful downhill slide for them. We're quite excited about building these hospitals back up."