February 21, 2013

Tenet strikes deal to buy Turlock's Emanuel Medical Center

Emanuel Medical Center of Turlock will be absorbed by Tenet Healthcare Corp., which owns Doctors Medical Center of Modesto and Doctors Hospital of Manteca.

Emanuel Medical Center of Turlock will be absorbed by Tenet Healthcare Corp., which owns Doctors Medical Center of Modesto and Doctors Hospital of Manteca.

Tenet announced Thursday it has a firm agreement to acquire Emanuel, an independent, church-owned hospital with deep roots in Turlock.

The 209-bed Emanuel will lose its nonprofit status when it becomes part of Tenet's for-profit health system — and it's name likely will change. An official with the Dallas-based company said Emanuel will be prominent in the name chosen. It will be the 50th hospital owned by Tenet, which has operations elsewhere in California and in other states.

Specific terms of the deal will be disclosed as it goes through an approval process with the state attorney general's office. Tenet said it expects to complete the purchase by June, which will give the company 680 licensed acute-care beds between Turlock and Manteca.

Emanuel, owned by the Evangelical Covenant Church, was established in 1917 in a building on Canal Drive. Today, the 209-bed center with 1,400 employees offers acute care, critical care, cancer treatment and cardiac services on its Delbon Avenue campus.

"The combination of Emanuel Medical Center with Tenet's existing hospitals represents the alignment of leading health care organizations with a long history of providing high-quality patient care in the Central Valley," said Jeff Koury, senior vice president for Tenet's California region.

Emanuel officials said last year they had been trying to merge the hospital with a large health care entity because of economic realities and health reform rules that make it difficult for independents to stand alone. Emanuel and Tenet have worked through a due-diligence process since September.

"It's been quite a journey for the last two years," said Jennifer Larson, chairwoman of Emanuel's board of directors. "This is a way we can ensure we have quality health care in our community."

In a conference call Thursday, Koury and Emanuel Chief Executive Officer John Sigsbury said they don't anticipate changes to health services, such as the cancer treatment center that's operated jointly with Stanford University. The same goes for its cardiac services program. Dr. Noel Concepcion and two other heart surgeons with Doctors Medical Center already do procedures at Emanuel, Sigsbury said.

Koury said Tenet has agreed to offer employment to Emanuel employees who are in good standing. More than 35 percent of physicians who treat patients at Emanuel also have privileges at Doctors of Modesto, officials said.

Sigsbury said proceeds from selling the hospital will be used to satisfy obligations to bondholders. The hospital has about $89 million in tax-exempt bonds outstanding, he said. The CEO said he couldn't tell whether excess funds would remain. Any extra proceeds would be given to a foundation created to benefit the community.

Emanuel will remain affiliated with the Evangelical Covenant Church and retain its faith-based culture and policies, said Tenet, adding that it has maintained the religious identities of Catholic and Baptist hospitals it acquired.

Emanuel, founded by pastors with a Christian movement that originated in Sweden, has enjoyed strong local fund-raising support and epitomized the concept of the community hospital.

Turlock Mayor John Lazar said Emanuel has served the community well for almost 100 years, but he realized that health care entities recently have faced challenges. "We are excited Tenet is coming to town to assume Emanuel's stewardship of health care in Turlock," he said.

An Emanuel employee suggested that many hospital workers are nervous about the change in ownership. An effort to unionize part of the work force surfaced in recent months. "The transition is going to be tough, and a lot of us have fears about it," said Mark Eusey, a nursing assistant. "Tenet is a big corporation and they are known for running a tight budget."

Koury released some details of the agreement, including a $600,000 contribution to Covenant Ministries of Benevolence, an outreach division of the church. The funds are supposed to be used for programs.

The purchase will result in the payment of $1.7 million in local, state and federal taxes, he added.

Tenet has agreements to serve patients covered by most insurance carriers, Koury said. A 10-year deal between Emanuel and Kaiser Permanente is set to expire in March, raising questions about future terms for Kaiser members to use the hospital for elective procedures. Sigsbury said those kinds of questions are for Kaiser to answer.

As it starts the transition to for-profit status, Emanuel has suspended its Legacy Circle fund raising, which raised millions of dollars for the hospital. The hospital will continue with its Festival of Trees gala held in December, Sigsbury said.

The deal with Tenet does not include the Brandel Manor nursing facility or the Cypress of Emanuel assisted-living center, which will continue to be run by the church.

The sale of Emanuel to a for-profit company requires an approval process with the state attorney general. Sigsbury said he expects an application will be sent to the state by month's end, triggering a review that will disclose details such as the purchase price. The review will involve holding a public forum.

The attorney general should decide within three to four months whether the community is getting the appropriate value from sale of the nonprofit hospital.

Emanuel Medical Center

825 Delbon Ave., Turlock

Facilities: 209-bed hospital, 145-bed skilled nursing center and 49-bed assisted-living facility

Status: Nonprofit

Employees: 1,400

Owned by: Evangelical Covenant Church


1914 — Two ministers from the Swedish Mission Church raise funds to build Turlock’s first hospital.

1917 — The two-story Emanuel Hospital opens on Canal Drive with room for 34 patients.

1918 — Hospital opens school of nursing.

1920 — First of many expansions increases capacity to 57 patients.

1934 — The state closes the nursing school because of laws restricting nurse training to large hospitals.

1963 — Fund drive for new hospital is launched, raising $517,000 for a $1.7 million center.

1966 — The new 90-bed hospital opens on 28-acre site on Delbon Avenue.

1974 — Name changed to Emanuel Medical Center.

2007 — Expansions include a three-story critical-care center and emergency department, plus cancer treatment services in the Stanford Emanuel Radiation Oncology Center.

2011 — Cardiovascular surgery team performs first open-heart surgery.

2012 — Emanuel and Tenet Healthcare Corp. announce they are engaged in exclusive negotiations.

Thursday, Feb. 21, 2013 — Tenet announces agreement to acquire Emanuel.

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