Stanislaus County CEO doubts corporate shakeup will affect Doctors Medical Center or Emanuel

Wall Street analysts are debating what will happen with Tenet Healthcare Corp., the Dallas-based company that owns Doctors Medical Center of Modesto and two other hospitals in Stanislaus and San Joaquin counties.

Here in the semi-rural Northern San Joaquin Valley, the brain trust is assuming that Doctors Medical Center will remain in Tenet's fold as the parent company is pared down. Doctors has been a profitable hospital in a Central Valley market coveted by the investor-owned hospital chain.

Tenet is under pressure from its largest shareholder to explore options including the sale of assets or divisions of the company or sale of the entire company.

Doctors Medical Center, along with Tenet-owned Emanuel Medical Center in Turlock and Doctors Hospital of Manteca, could conceivably have a new owner if Tenet is acquired by a rival such as Hospital Corporation of America, though there are reasons to doubt that sale of the entire company will happen.

Jody Hayes, chief executive officer of Stanislaus County, said he talked with Doctors' top administrator, Warren Kirk, about the shakeup at the hospital's parent company. Hayes wouldn't share details of the conversation.

The county has "the same curiosity as anyone else in the community," Hayes said. "We are curious to see where it all goes. We don't have any information to suggest we should be concerned."

Representatives of Doctors and Tenet have declined to comment.

Doctors plays a major role in the region with its trauma center, cardiac services, residency programs that train family practice doctors and orthopedists, and hospital services for people of all income levels.

Tenet is a national company with 70-plus hospitals, hundreds of outpatient and surgical centers and 130,000 employees. According to published reports, the value of its stock has dropped more than 70 percent in the past three years as the company deals with fewer patient admissions, its $15 billion in debt and the uncertain future of the Affordable Care Act.

Tenet's largest shareholder is the Glenview Capital Management hedge fund, which has pressured the company to improve its financial performance and stock value. The New York Times reported this month that Glenview invested heavily in for-profit hospital owners five years ago, thinking that federal health reforms would be a boon for the hospital industry.

Those investments have not paid off for Glenview. As a national trend, patient admissions are down at hospitals due to a number of factors: More people have insurance plans with high deductibles and out-of-pocket costs, which makes it costly for them to seek elective treatments at hospitals. In addition, patients more often receive care in medical clinics, outpatient centers, nursing facilities or at home.

Tenet's financial report for the quarter ending June 30 showed a decline in hospital admissions and a net loss of $56 million.

Tenet has executed a divestiture plan to sell lower-performing hospitals in Houston and Philadelphia, but the plan hasn't included the company's Central Valley hospitals.

Tenet's longtime chief executive officer, Trevor Fetter, resigned Aug. 31 and will step down when a new leader for the company is hired.

Despite its for-profit status, Doctors Medical Center is enmeshed in the local health care safety net and has close ties to county health services. Its executives have often said the hospital doors are open to patients in the Medi-Cal program, even though the program's reimbursements don't nearly cover the costs of services.

The county has maintained a long-term contract with Doctors for people eligible for indigent health services, though the agreement is less important today after those patients enrolled in Medi-Cal through the Affordable Care Act's Medicaid expansion.

“We have worked well with (Doctors),” Hayes said. “You learn that health care is largely a local business even though there are these mergers and acquisitions. Our perception at the moment is that DMC and their affiliated hospitals have a good model and it’s working well for them.”

A plan to sell the entire company has seemed less likely given the state of hospital admissions and Tenet's $15 billion in debt. If Tenet is forced to sell assets, the populations served by Doctors and Emanuel don't have the "payer mix" often sought by hospital owners.

The population includes a large number of Medi-Cal and Medicare patients, with a smaller percentage of people who have insurance to pay for medical bills.

Paul Brown, who teaches health care economics at UC Merced, said he believes the Modesto hospital would still serve Medi-Cal patients if it's sold to another organization.

"The same business model is probably going to exist," Brown said. "In this region, you are pretty much going to take Medi-Cal patients."

This story was originally published September 23, 2017 at 5:48 PM with the headline "Stanislaus County CEO doubts corporate shakeup will affect Doctors Medical Center or Emanuel."