State, County Officials Investigating Tenet Healthcare Sale of Orange County Hospitals
State regulators, legislators and Orange County supervisors are placing "hurdles" in front of the sale of four Tenet Healthcare hospitals in the county to Integrated Healthcare Holdings by raising questions and seeking hearings into the business history of Kali Chaudhuri, the potential lead investor in the deal, the Orange County Register reports (Wolfson, Orange County Register, 1/7).
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 Medical Center-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 rehire most of the current employees.
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, 11/24/04).
The Department of Health Services, which must approve the deal, on Thursday "made clear" that it is taking "a hard -- and not necessarily favorable look at Chaudhuri's past and present dealings," the Register reports.
DHS spokesperson Lea Brooks said, "The department has some concerns about whether the clinics operated by this doctor have been operated in compliance with licensing law, and more generally about the applicant's reputable and responsible character."
According to the Register, Sens. Joseph Dunn (D-Garden Grove) and Deborah Ortiz (D-Sacramento) also have "expressed serious reservations" about Chaudhuri and plan to hold a hearing on the matter Jan. 20.
Dunn and Ortiz last month sent a letter to DHS Director Sandra Shewry stating that they were "deeply concerned" about Chaudhuri's involvement in the venture, adding, "We cannot stand by and watch this happen to patients in Orange County again."
Dunn said, "This legislator is very concerned about Dr. Chaudhuri's involvement in the deal, and I want to make sure that my constituents are not at risk of losing access to these four hospitals based on his involvement." Dunn said that he has been working "to hammer out a written agreement that would give the staff [at Western Medical-Santa Ana] more assurances that Dr. Chaudhuri's role would not result in the hospital going the KPC route." He added that both sides remain "optimistic" about reaching an agreement.
DHS stated in a December letter to Dunn that it would investigate Chaudhuri's KPC history, his "former and current" medical practices and a $13 million loan made by Tenet to KPC in 2001. DHS also stated that it was concerned about the licensing compliance of Chaudhuri's medical clinics. Although IHH said it has fully cooperated with DHS' requests for records, the department said it is still unsure if it has obtained all the necessary information.
The Orange County Board of Supervisors is scheduled to hold a hearing on the matter on Jan. 25. However, the board, as well as the Senate, has no jurisdiction over the deal.
Bill Campbell, a spokesperson for the board, said, "I think we could do more damage to the community by blocking it than not. But I also think we need to get on the public record exactly what their plans are so they couldn't suddenly change them after that."
Larry Anderson, president of IHI, said he has repeatedly assured critics that Chaudhuri would have no role in the daily operations of the facilities, although he would have a seat on the IHH board.
Tenet spokesperson Steve Campanini said, "We're continuing to attempt to resolve all the issues that will enable the transaction to be completed," adding that the company continues "to operate the hospitals during this period. We have no plans to close the hospitals or close any services" (Orange County Register, 1/7).