Tenet Agrees to Sale of Three Los Angeles-Area Hospitals; Receives Federal Subpoena
Santa Barbara-based Tenet Healthcare on Aug. 31 agreed to sell three of its Los Angeles-area hospitals to Centinela Freeman HealthSystems, a private group of investors led by the CEOs of the hospitals, the Los Angeles Times reports. The prospective new owners, led by Centinela Hospital CEO Michael Rembis and Harris Koenig, CEO of Daniel Freeman Memorial Hospital and Daniel Freeman Marina Hospital in Marina del Rey, said acute care centers and emergency departments would remain open at all three facilities.
Michael Finnigan, a former chief financial officer of Hollywood Park who will chair the for-profit Centinela Freeman HealthSystems, said he believes the company will operate the hospitals more efficiently than Tenet. "We will be exploiting the strengths of each of these properties," he said. Finnigan expects the deal to be finalized by early November.
The new company, backed by private equity firm Westridge Capital, will invite the 1,400 physicians who practice at the hospitals and some community members to invest in the group. The three hospitals are among 27 -- including 19 in California -- that Tenet in January announced it would sell in an effort to recoup some of its losses from federal investigations into its Medicare billings, physician recruitment and other practices (Girion, Los Angeles Times, 9/1).
In other Tenet news, the U.S. attorney's office in San Francisco issued a subpoena to the hospital chain requesting documents about terms of medical directorships since 2000 and a "small number" of physician relocation agreements from its San Ramon Regional Medical Center, the Contra Costa Times reports (Silber, Contra Costa Times, 9/2). In the past, the federal government has accused Tenet and its doctors of abusing physician relocation agreements, which offer doctors incentives to move to areas facing shortages by giving relocation money to established doctors in exchange for referrals to its hospitals (Wall Street Journal, 9/2). Tenet administrators have denied any wrongdoing and said their physician relocation policy is legal.
"We believe this subpoena is consistent with previously disclosed federal reviews of Tenet's physician relationships and medical directorships at a number of its hospitals in several states," E. Peter Urbanowicz, Tenet's general counsel, said. Urbanowicz said Tenet is continuing negotiations with government agencies to resolve the physician relocation investigations as well as governmental investigations into Medicare bills, medical procedures and other issues.
Some sources close to the issue said the federal government might ask Tenet to pay as much as $1.6 billion to settle the investigations, the Los Angeles Times reports (Girion, Los Angeles Times, 9/2).