Hospital Officials Ask Orange County Board of Supervisors To Investigate Proposed Sale of Four Hospitals
Officials from Western Medical Center-Santa Ana on Tuesday asked the Orange County Board of Supervisors to investigate the sale to Integrated Healthcare Holdings of four Orange County hospitals by Santa Barbara-based Tenet Healthcare, the Los Angeles Times reports (Pasco/Gottlieb, Los Angeles Times, 11/24).
Tenet in late September announced that it would sell four of its nine Orange County hospitals for $70 million to IHH. Under the original proposal, IHH would acquire a total of 760 beds and more than 2,000 employees from Western-Santa Ana, Western Medical Center-Anaheim, Chapman Medical Center in Orange and Coastal Communities Hospital.
IHH officials said they planned to keep all four hospitals open and hire most of the current employees (California Healthline, 10/1).
Michael Fitzgibbons, former chief of staff at Western Medical, asked county CEO Tom Mauk and county counsel Ben De Mayo to investigate the deal, the Orange County Register reports (Wolfson, Orange County Register, 11/24).
According to the Times, it is not clear whether the board will review the sale or whether the board has authority over the private sale of a hospital.
County Supervisor Chuck Smith asked county attorneys to research whether the board of supervisors had jurisdiction over a private sale of a hospital. He said, "There are questions about the people buying [the hospitals], but this is a private transaction."
Fitzgibbons told board members that if mismanagement of Western Medical led to its closure, only one trauma center would remain in Orange County. He said, "As one of the 800 physicians of Western Medical Center, I ask you to hold hearings (on the sale) to protect the people of the community."
Kali Chaudhuri, IHH's lead investor, said he was interested in purchasing the Tenet hospitals "to redeem myself and get involved again. If I felt that I'd done anything wrong, I wouldn't go back to the same place again" (Los Angeles Times, 11/24).
Some people have attributed the November 2000 closure of Chaudhuri-owned KPC Medical Management -- then the largest physician management group in the county -- to his mismanagement.
KPC incurred more than $50 million in debt and filed for bankruptcy, initially leaving 2,000 health care professionals unemployed and affecting access to care for 300,000 people (California Healthline, 10/1).
In related news, IHH on Tuesday announced that an Orange County doctors group has agreed to invest as much as $20 million toward the purchase of the hospitals, the Register reports (Orange County Register, 11/24).
Chaudhuri originally planned to provide $20.5 million in cash, loans and guarantees to IHH in exchange for an 88.8% stake in the company (California Healthline, 10/1). Under the new agreement, the doctors group, led by Santa Ana cardiologist Anil Shah, will make the $20 million investment "in stages," according to the Register.
The group plans to pay 30 cents a share for the first $17.5 million shares and 25 cents a share for the last $2.5 million shares of the company. Upon investment of the full amount, the doctors group would own 19.3% of the company and 49% of the hospitals' real estate. Under the new agreement, Chaudhuri's stake would decrease to 74% -- still a controlling interest -- if he agrees to purchase an equal number of shares at the same price (Orange County Register, 11/24).