Sale of Turlock's Emanuel Medical Center must clear unexpected hurdle

kcarlson@modbee.comJuly 10, 2013 

DN Emanuel MC

Debbie Noda/dnoda@modbee.com Emanuel Medical Center in Turlock, Sept. 27, 2012.

DEBBIE NODA — Modesto Bee Buy Photo

  • ABOUT THE REPORTER
    alternate textKen Carlson
    Title: Staff writer
    Coverage areas: County government, health and medicine, air quality, the environment and public pension systems
    Bio: Ken Carlson has worked 13 years for The Bee, covering local government agencies in Stanislaus and San Joaquin counties. His in-depth reporting has focused on access to health care and public employee pensions.
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    E-mail: kcarlson@modbee.com

— The sale of Turlock's Emanuel Medical Center to Dallas-based Tenet Healthcare Corp. will have to clear a review by a federal consumer protection agency.

The parties had expected the deal would receive approval from the California Attorney General's Office by last Friday, but officials extended the review for an unspecified time period, an AG spokeswoman said this week.

John Sigsbury, chief executive officer for Emanuel, confirmed Wednesday that a possible reason for the delay is that the Federal Trade Commission is reviewing the proposed agreement to merge Tenet-owned Doctors Medical Center of Modesto with Emanuel.

It's customary for the FTC to make sure hospital mergers don't lead to unfair competition and higher health care costs for patients.

Tenet and Emanuel announced in February they had reached an agreement for Tenet to purchase the independent church-owned hospital in Turlock for $131 million. The deal was contingent on regulatory approval from agencies such as the FTC and attorney general. Approval from the attorney general is required before a nonprofit hospital can be acquired by a for-profit entity; the agency gave no explanation for delaying its decision.

With the acquisition, Doctors Medical Center in Modesto would have a sister hospital only 17 miles away in Turlock, and it's already aligned with Tenet-owned Doctors Hospital of Manteca, about the same distance away in the opposite direction.

FTC spokesman Peter Kaplan said the commission does not divulge whether it is reviewing a specific merger or acquisition. According to its website, the FTC and Department of Justice review most of the transactions that affect commerce in the United States and often look at deals valued at more than $66 million.

The FTC regularly looks at hospital mergers because of its expertise in understanding the health care industry.

"I think Emanuel and Tenet are doing whatever is needed to cooperate with the FTC and Attorney General, and we are diligently pursuing the transaction with a goal to see it though as quickly as possible," Sigsbury said. "You have to appreciate these agencies are in place to provide protections to patients in the community and the consumers of health care services."

Doctors Medical Center issued a statement saying the leadership teams for Tenet and Emanuel are working to complete the acquisition. "This includes continuing to work through the required regulatory review," the statement said. "Tenet remains fully committed to building a strong, high-quality health care network for the Central Valley, with Doctors Medical Center and Emanuel Medical Center at its heart."

Sigsbury said he believes competition in the local health care marketplace will remain strong if Emanuel is absorbed by Tenet. Taking Emanuel out of the equation would leave three of the largest health systems in California — Kaiser Permanente, Sutter Health and Tenet — offering health care services to consumers in the area, he said.

The deal received a positive critique from a state-hired consulting firm, which concluded that the merger likely would maintain the availability and accessibility of health care services in the Turlock area and would not change access to services for the uninsured or patients in government health programs.

 

Locals favored merger

Speakers at a May 31 public hearing in Turlock said they favored the merger as a way to maintain hospital services for Turlock and nearby communities.

Tenet has agreed to maintain cardiac care and cancer treatment at 209-bed Emanuel, as well as core services such as the birthing center, intensive care and emergency department, for at least 10 years. In addition, Tenet has promised to spend $30 million in the next five years on investments in expansion, improved services, equipment and medical staff development.

The timing of the FTC's review of the transaction is not known. A preliminary assessment usually requires the parties to wait at least 30 days before closing the deal. If competition issues are raised by the merger, the agency asks for more information from the parties and does a more thorough analysis.

While the vast majority of transactions are allowed to proceed, the FTC sometimes enters a settlement with companies. The most serious concerns about anti-competitive situations can result in the FTC taking action in federal court to block a merger.

Bee staff writer Ken Carlson can be reached at kcarlson@modbee.com or (209) 578-2321.

 

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