Emanuel and Tenet Explain Hospital Sale, Possible Changes

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Emanuel Medical Center has reached an agreement to be sold, hospital officials announced Thursday.

Tenet Healthcare Corporation, a Dallas-based investor-owned healthcare company, will purchase Turlock's only hospital. The purchase price was not disclosed, but the sale will see Tenet own the hospital “outright,” according to Jeff Koury, senior vice president for Tenet’s California region.

“Emanuel Medical Center is a natural fit for Tenet’s expanding network in the Central Valley to provide the community and our patients coordinated care that is close to home,” Koury said. “We are excited to work with the dedicated and talented employees and physicians of Emanuel Medical Center who provide exemplary medical care within the community.”

Tenet owns and operates 49 hospitals in 11 states, including Modesto's Doctors Medical Center and Manteca's Doctors Hospital. According to Tenet, the purchase will improve the corporation's Central Valley healthcare network, leading to improved efficiency of healthcare delivery.

The efficiency will come from many areas, including integrating physician organizations. Already, Emanuel and Doctors Medical Center have a clinical relationship. About 35 to 40 percent of Emanuel staff serve as members of Doctors Medical Center's staff as well, while some major Doctors Medical Center cardiac surgeons have worked at Emanuel.

“The combination of Emanuel Medical Center with Tenet’s existing hospitals represents the alignment of leading healthcare organizations with a long history of providing high-quality patient care in the Central Valley region,” Koury said. “We all share the same deep commitment to meeting the community’s healthcare needs and providing patients with expanded choices for care as part of an integrated healthcare network.”

Emanuel will remain affiliated with the Evangelical Covenant Church, and will retain its focus on faith-based care. Tenet owns other faith-based hospitals, including some previously owned by Catholic and Baptist churches; it last purchased a faith-based hospital in Florida in 2001.

Emanuel officials first announced in September 2012 that the hospital was in talks with Tenet Healthcare Corporation for “a possible collaboration in the delivery of hospital services.” Emanuel President and CEO John Sigsbury then pointed to the increased demands of the Affordable Care Act, also known as Obamacare, as a driver for the negotiations.

“(Meeting the demands of the ACA) takes tremendous size and scale, and a level of sophisticated integration that's difficult for a single small hospital provider to accomplish,” Sigsbury said.

But Tenet is a major national healthcare provider, with all the power and resources that entails. Emanuel officials said that Tenet's top-notch information technology, integrated healthcare system, and physician networks would allow Emanuel to meet the demands of the ACA.

“This is a way we can ensure we have healthcare in our community,” Emanuel Board Chair Jennifer Larson said.

Only Hospital Sold

The purchase comprises only Emanuel Medical Center's hospital assets, including a 209-bed acute-care hospital, outpatient, and cancer treatment facilities. An outpatient imaging facility on Geer Road is also included in the sale.

Tenet will not purchase Emanuel-owned Brandel Manor, a 145-bed skilled nursing facility, or Cypress of Emanuel, a 49-bed assisted living facility. Emanuel will transfer those assets to other affiliated organizations within the Emanuel Covenent Church, likely the neighboring Covenant Village retirement community.

“There are some details we're still working out,” Sigsbury said. “We'll know more in the next few weeks how that will happen.”

The fate of Jessica's House, a facility offering grief support for children and families which opened in April 2012, remains less certain. It will not be sold to Tenet, and no definite plans for the site were announced. Sigsbury said he sees “great opportunity for it to continue,” and that planning would be done to ensure it remains.

Though a dollar figure for the sale was not revealed, Sigsbury said the purchase will pay off $89 million in outstanding tax-exempt bonds. Any excess proceeds will go to a non-profit community benefit foundation, which will be organized to return the residual benefit to the community at large.

Changes May Be Hard To See

Other than a potential name change for the hospital – “Emanuel Medical Center” will remain prominent in the new hospital's name, Koury assured – Turlockers will likely see little change in day-to-day operations.

“I don't know that we'll see, immediately, any significant changes in what the community will see,” Sigsbury said. “This is a tremendous opportunity to have the backing of a very sophisticated, very large, high quality, multi-state healthcare provider who will help Emanuel grow and develop in our community.”

The hospital will continue to provide all services that it offers today, Koury said, including cancer care through a partnership with Stanford. The purchase will allow Emanuel to offer additional services as well, he said.

Tenet will have to renegotiate contracts with some healthcare providers, but Sigsbury expects a Tenet-owned Emanuel to serve more insurance plans, not fewer. He noted that Doctors Medical Center has more insurance arrangements than Emanuel, due to the greater reach of Tenet compared to a small, local hospital.

“There are no downsides to any patients in the community,” Sigsbury said.

Kaiser patients may see changes, as the insurer's major contract with Emanuel Medical Center will end in March. That agreement was forged 10 years ago, when Kaiser had no area hospitals. Any new agreement will likely still allow patients to use emergency department and services, Sigsbury said.

No major changes in employment are expected. Tenet has agreed to offer employment to “substantially all of Emanuel Medical Center's employees in good standing,” according to Koury.

Community May Benefits From Sale

Emanuel Medical Center has long been a major sponsor of community events, including the Stanislaus County Fair. Koury expects many of the hospital's current sponsorship agreements to continue under Tenet leadership, but said sponsor agreements would be reviewed.

“Our hospitals typically provide many of the same community benefits Emanuel does,” Koury said.

Koury also disclosed that the purchase agreement will see Tenet make a $600,000 annual donation to the Evangelical Covenant Church as an “additional thing,” which may be used to fund programs and services in the community.

The sale could be good fiscal news for the City of Turlock, as well. The conversion from a non-profit to for-profit hospital will change the hospital's tax status, leading to $1.7 million in new, annual city, state, and federal property taxes.

The change in tax status will put an end to Legacy Circle, Emanuel Medical Center's longstanding fundraising program. The hospital will, however, continue its annual Festival of Trees Gala, raising money for other hospital services – like, potentially, Jessica's House.

Sale Pending State Approval

The sale is still pending State Attorney General approval.

The Attorney General must approve the conversion of not-for-profit hospitals to for-profit, ensuring access to care is not compromised in the region. State experts will evaluate the sale, with a public hearing to be held where local residents may comment.

The purchase agreement will be submitted to the Attorney General by the end of the month, with the review period taking 60 days. The Attorney General may extend the review for another 45 days, if questions arise.

“We think we have a good understanding of what they're looking for,” Sigsbury said. “Our goal is to produce something complete, that meets the needs of the Attorney General's office.”

Before the ink is dry on its Emanuel Medical Center purchase, Tenet already has plans to further expand its Central Valley healthcare network.

Tenet recently opened imaging centers in Manteca and Modesto to supplement hospital services. And Tenet may further expand its care network through the addition of clinics, surgery centers, or more imaging facilities, Kory said.

“We have plans to continue to invest in the market in the future,” Koury said.

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