Tenet negotiating to buy Emanuel Medical Center in Turlock

09/27/2012 12:13 PM

09/27/2012 10:05 PM

Emanuel Medical Center and Dallas-based Tenet Healthcare Corp. are engaged in exclusive negotiations that could result in the for-profit company buying the 209-bed church-owned hospital, officials confirmed Thursday.

Emanuel made the announcement some 2½ months after its leaders said they were exploring affiliations with larger health care organizations, with options including sale of the hospital.

An independent hospital founded in 1917, Emanuel faces increasing difficulties in the turbulent health care arena. An affiliation with Tenet would give Emanuel access to larger insurance networks, advanced technology and the capital resources of a multibillion-dollar corporation, said John Sigsbury, the hospital's chief executive officer.

An affiliation would allow Tenet to expand its base in the Northern San Joaquin Valley. Eleven of the company's 49 hospitals are in California, including Doctors Medical Center in Modesto and Doctors Hospital of Manteca.

"It is important to note that we are engaged in a due diligence process only and no final agreements to partner together have been reached," Sigsbury said in a news release. Emanuel could provide an update on the talks in November, but not likely before then, he said.

Emanuel is owned by the Evangelical Covenant Church, which owns a second hospital in Chicago.

Sigsbury said the two organizations started sharing records and information about 30 days ago. He said he wanted to inform the public about the talks because of rumors and questions about the hospital's future, he said.

Tenet, whose stock is traded on the New York Stock Exchange, gave the go-ahead to make the announcement this week and released a brief statement.

"As is consistent in nearly all of our markets, we routinely engage in discussions to explore opportunities that can expand services, enhance patient access and improve patient care in our communities," Tenet spokesman Rick Black said. "We are in discussions with Emanuel Medical Center to evaluate if there is a mutual fit for our organizations that would expand our regional network."

The discussions do not include the 145-bed Brandel Manor nursing home and a 49-bed assisted living center with ties to Emanuel. The church would continue operating those centers if it strikes a deal to sell Emanuel to Tenet.

The hospital also is open to other types of partnerships with Tenet, Sigsbury said.

He said he expects key services would continue at Emanuel, such as the maternity center, a cancer treatment center operated in partnership with Stanford University and a more recently developed cardiac services program.

The Stanford-Emanuel Radiation Oncology Center is a major asset that would enable Tenet to expand outpatient cancer treatment services in the area, Sigsbury noted. The talks are not halting construction of two hybrid surgery rooms for open-heart procedures, he added.

Another question concerns a contract that allows Kaiser Permanente subscribers to use Emanuel. That contract runs out March 31, but the sale of the hospital would not preclude a new contract with Kaiser, Sigsbury said.

A spokesman said Kaiser was reserving comment until it knows more about the Emanuel-Tenet talks.

Tenet was rocked 10 years ago by charges of unnecessary heart surgeries at a Redding hospital, which it later sold. Following state and federal investigations, Tenet agreed to set aside $395 million to settle patient lawsuits.

It also has paid settlements to the federal government to resolve lawsuits concerning Medicare overbilling.

Sigsbury said he is satisfied with Tenet's more recent commitments to ethical practices.

"We have met with their senior leadership and I am very impressed with their patient-focused approach," he said. "From the top down, they are dedicated to do what is right for patients."

Turlock Mayor John Lazar said that if Tenet takes over Emanuel, he doubted there would be a reduction in services for local residents. He noted that Emanuel draws patients from throughout southern Stanislaus County and northern Merced County.

"The region is growing," he said. "With the health care plans of the president, we're going to need to have all kinds of health care available."

Scott Seamons, a regional president with the Hospital Council of Northern and Central California, said he believes Emanuel and Tenet would mutually benefit from an affiliation.

"It makes a lot of sense for Tenet to do this in Turlock, with their presence in Manteca and Modesto," he said. "Emanuel is the only game in town in Turlock and has managed its finances well. The capital Tenet has to invest in the hospital would be a strength for the community."

Bee staff writer Patty Guerra contributed to this report.

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

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