Emanuel Medical Center, Tenet working to close $131M sale of Turlock hospital

01/23/2014 8:00 PM

01/23/2014 10:57 PM

Emanuel Medical Center and Tenet Healthcare Corp. are working to close a $131 million purchase of the 209-bed hospital, having won state approval of the acquisition.

The state attorney general gave approval this month for sale of the nonprofit, church-owned hospital to Tenet, a Dallas-based company that owns Doctors Medical Center of Modesto and Doctors Hospital of Manteca. The state signed off on condition that health care services are maintained and expanded within Emanuel’s service territory in southern Stanislaus County and northern Merced County.

The buyer and seller are working on numerous details of closing the sale and will say only that the deal is expected to close before March 31.

“The attorney general has approved the transaction with conditions,” said Emanuel Chief Executive Officer John Sigsbury. “The team is working through the conditions. This is such a complex operation, and there are a lot of details and moving parts that need to be perfectly executed.”

Tenet announced in February that it had negotiated a firm agreement to buy Emanuel from Evangelical Covenant Church, based in Chicago. An attorney general review was required before Tenet could absorb the nonprofit hospital. The conditions of approval require Tenet to operate the Delbon Avenue facility as an acute-care hospital for at least five years, while maintaining the following services:

• A 24-hour emergency department with at least 32 beds
• A 10-bed birthing center and neonatal intensive care unit with at least six beds
• The cardiac program, including a catheterization and interventional lab, with open-heart surgery available for at least three years
• The Emanuel Cancer Center, including the Stanford Emanuel Radiation Oncology Center and Ruby Bergman Women’s Diagnostic Center
• Participation in the Medi-Cal and Medicare programs
• Continued agreements with Stanislaus County to provide care for the indigent and uninsured

In addition, women’s health and reproductive services must be provided for at least 10 years after the ownership change. For six years, Tenet is required to provide a minimum of $3.2 million in charity care annually at the hospital, though it’s recognized that federal health reform could reduce the need for free care.

Another condition requires that $6 million in donations from Tenet to Covenant Ministries of Benevolence be spent to “expand and support” health care for seniors within Emanuel’s service territory, including improvements to the 145-bed Brandel Manor nursing facility and 49-bed Cypress of Emanuel assisted living. Brandel Manor and Cypress are not included in the hospital purchase.

Tenet plans to rename the hospital “Emanuel Medical Center, a campus of Doctors Medical Center.” The hospital serves an area including Turlock, Delhi, Livingston, Hilmar, Ceres, Hughson, Patterson and Newman.

Terms of the purchase agreement disclosed last year called for Tenet to spend $30 million on investments in expansion, improved health services, equipment and medical staff development.

“I think one thing that needs to happen in the not-too-distant future is a comprehensive needs assessment,” Sigsbury said. “We need a better picture of what the community looks like and what can be done to invest in services to improve the overall health of the community.”

The attorney general will require the Legacy Health Endowment, created in April to distribute proceeds of the hospital sale, to change its status from a nonprofit religious entity to a public benefit corporation.

Emanuel was established in 1917 in a building on Canal Drive and was moved to the Delbon Avenue campus in 1966. Tenet has offered jobs to the hospital’s 1,400 employees.

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