Tenet To Sell 27 Hospitals, Including 19 in California
As expected, Santa Barbara-based Tenet Healthcare on Wednesday announced plans to sell 27 of its 100 hospitals, including 19 in its core California market, the Philadelphia Inquirer reports (Goldstein, Philadelphia Inquirer, 1/29). Tenet, the nation's second-largest for-profit hospital chain, began downsizing last year when it announced plans to sell or divest 14 facilities as part of an ongoing cost-cutting effort. However, unlike last year's sales, which focused largely on noncore markets, the hospitals in the upcoming sales will include several in larger markets, including California, Louisiana, Massachusetts, Missouri and Texas (California Healthline, 1/28). Trevor Fetter, Tenet's president and CEO, said, "We have made the strategic decision to concentrate our efforts on a core group of hospitals in order to produce tangible benefits in quality and service for the communities we serve" (Philadelphia Inquirer, 1/29). Fetter said the hospitals that will be sold are the company's poorly-performing facilities, which are expected to post significant losses this year. The best-performing hospitals, which Tenet will keep, are expected to break even. The company said it expects to net $600 million from the sales -- largely from tax benefits that will not be realized until 2005 -- and will take a $1.4 billion pretax charge for the transactions (Girion/Vrana, Los Angeles Times, 1/29).
Tenet also announced that its profit for fourth quarter 2003 will be below analysts' expectations of 11 cents per share and that 2004 per-share profit would be less than the 50 cents projected by analysts. Tenet shares declined 18% to $13.18 on the New York Stock Exchange following the announcement (Snider, Bloomberg News/Detroit News, 1/29). Standard & Poor's Rating Service lowered its rating on Tenet's $4 billion debt to a speculative "B+" and put the company on its CreditWatch list with negative implications (Philadelphia Inquirer, 1/29). Analysts said the downgrade was attributable to concerns about the prospects for Tenet's turnaround because of ongoing pricing problems, government investigations and cash-flow difficulties (Girion/Vrana, Los Angeles Times, 1/29).
Fourteen of the 19 hospitals slated for closure in California are in Los Angeles County, and officials there are worried that the sale or possible closure of the facilities "could punch a gaping hole in the region's health care system," the Los Angeles Times reports. Tenet spokesperson Harry Anderson said Wednesday that the company has no plans to close any of the hospitals. However, Los Angeles County officials estimate that a third of the hospitals for sale in the county will not find buyers because of their finances, location and aging facilities and that they will be forced to close, according to Supervisor Zev Yaroslavsky (Hyman, Los Angeles Times, 1/29). Tenet officials said one of the main reasons that they are selling many of their hospitals in the area is the "enormous cost of retrofitting to improve seismic safety," the San Luis Obispo Tribune reports (Rowlands, San Luis Obispo Tribune, 1/29). The Los Angeles Times reports that health care officials are concerned that the area's remaining hospitals, which are already "strapped because of the high number of uninsured residents," will be "inundated with patients" if the Tenet facilities close. According to the Los Angeles Times, health care officials' "foremost concern" is the "potential loss of emergency rooms." Dr. Marcy Zwelling-Aamot, president of the Los Angeles County Medical Association, said, "If patients are already waiting hours to be seen, should they bring a sleeping bag? Where are they going to go? The system is crashing." Doctors in Orange County, where hospitals also face high numbers of uninsured patients, also say that they are concerned about the impact of possible closures of Tenet facilities. "We're not in a position to take up a lot of slack here," Dr. Ralph Cygan, chief executive of University of California-Irvine Medical Center, said. Attorney General Bill Lockyer (D) said in a statement that he will review the proposed sales to "ensure that Tenet abided by agreements it made to keep open some of its hospitals" when the company purchased them, the Los Angeles Times reports (Hymon, Los Angeles Times, 1/29).
As part of the plan, Tenet will stop operating Doctors Medical Center San Pablo/Pinole, which the company leases form the West Contra Costa Healthcare District. The decision, which comes as the hospital works to recover from a costly year-long nurses strike, "leaving the fate of [the] vital community hospital in doubt," the Contra Costa Times reports (Silber/Krupnick, Contra Costa Times, 1/29). Jim Beaver, executive director of the health care district, said, "The district is absolutely committed to keeping this hospital open and operating" (Colliver, San Francisco Chronicle, 1/29). According to the Contra Costa Times, health care analysts say "there's at least a fair chance" that the district will find a buyer for Doctors," but local health care officials remain worried about the possibility of closure and the impact it would have on emergency and charity care in the area (Contra Costa Times, 1/29). Tenet will continue to operate the facility until July 31 (San Francisco Chronicle, 1/29).
The following broadcast programs reported on Tenet's announcement of plans to sell 19 hospitals in California:
- KCRW's "Which Way, L.A.?": The segment includes comments from Dr. Steven Asch, health policy analyst for Rand (Olney, "Which Way, L.A.?," KCRW, 1/28). The complete segment is available online in RealPlayer.
- KPCC's "Air Talk": The segment includes comments from Cygan; Steve Newman, CEO of Tenet California; Orange County Supervisor Chris Norby; and Yaroslavsky (Mantle, "Air Talk," KPCC, 1/28). The complete segment is available online in RealPlayer.
- KPCC's "Talk of the City": KPCC's John Rabe discusses the announcement (Rabe, "Talk of the City," KPCC, 1/28). The complete segment is available online in RealPlayer.
- KQED's "California Report": KQED's John Rabe reports on the announcement (Rabe, "California Report," KQED, 1/29). The complete segment will be available online in RealPlayer after the broadcast.