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Thursday, Mar 28, 2024

Saving the Medical Center is Goal of Legislative Action

Encino-Tarzana Regional Medical Center has now been on the market for four years. With its ground lease set to expire in February 2009, selling the hospital has taken on an urgency that has led Assemblyman Lloyd Levine and State Sen. Sheila Kuehl to introduce bills they hope will impel Tenet, the hospital’s parent company, and HCP Inc., the real estate investment trust that owns the land under the hospital, to reach an agreement that would allow for a purchase. “Hopefully we can put pressure on both Tenet and the REIT to come to a resolution,” Levine said. “We’ve had three hospitals close in the Valley in the last five years, not counting Children’s Community Mental Health Center. I don’t want to see this hospital close.” Amid rumors that HCP Inc. plans to turn the medical center into condominiums, Kuehl’s SB 1734 seeks to prevent REITs that own land occupied by a hospital from changing or terminating a lease or selling any interest in the real property if it were to result in a hospital closure or reduction of care. “I think it’s a critical situation when there’s a possibility that the real estate investment trust could turn the facility over to a non-hospital operator, and so that’s what got me to do the legislation,” Kuehl explained. “If there’s going to be a sell or lease it has to be approved by the Department of Public Health. And that approval would be impossible, if they were turning it to anything other than a health facility.” Kuehl’s bill also requires mediation between the REIT and the hospital operator in the event that they are unable to come to a resolution. Meanwhile, Levine’s AB 2715 would require the owner or operator of a for-profit general acute care hospital to provide patients with a level of care that equals or exceeds the care provided the previous year. In addition, Levine’s bill would prohibit hospital operators from decreasing the amount of expenditures by more than 10 percent from the previous year if it would adversely affect the level of care provided. The combined goal of the bills is to ensure that Encino-Tarzana Regional Medical Center continues to function as is and that Tenet and HCP reach an agreement. Since early 2004, the hospital has been on the market. It was one of 19 hospitals Tenet put up for sale because it couldn’t afford to make state-mandated seismic upgrades, a requirement that arose after Valley hospitals were damaged in the 1994 Northridge Earthquake. Because neither the Encino campus, built in 1954, nor the Tarzana campus, built in 1973, was harmed during the quake, Tenet wasn’t eligible to receive Federal Emergency Management Agency assistance. It is likely that a new buyer would have to totally reconstruct the hospital because of the staggering cost of seismic upgrades. Kuehl said that the ongoing uncertainty about the hospital’s future has been difficult for the community. Levine is hopeful that the legislation he and Kuehl have proposed will ensure that the terms under which the hospital can be sold will make its future auspicious. “I’ve been working over the past several years with the hospital staff, doctors and nurses,” he said. “Our goal has been to keep the hospital open. We don’t want to see any beds close. We can’t afford to lose any more beds.” Tenet spokesman Steven Campanini called the legislators’ efforts noble, but he also stressed that he wished they would have waited to introduce the bills. “While we understand the desired effect and we appreciate their level of concern, we share their level of concern, and we need to work with the system to let the transition move forward without interference,” Campanini said. “We are very concerned about the potential interference of third parties that could destabilize the delicate balance that both Tenet and HCP have worked hard to achieve so far.” Campanini said that Tenet and HCP have recently reached a proposed settlement agreement, which he called the first step of the final phase to transition the hospital to a new operator. Campanini said that the proposed bills could jeopardize any pending transactions. “New operators come into a hospital to overcome the challenges that led to the divesture,” he said. “Dealing with proposed legislation could further destabilize a transition process.” Campanini added, however, that the bills might be irrelevant, as it is possible that the hospital could be sold before they are passed. Kuehl disagreed with him that the bills amounted to interference. “I guess if it hadn’t been going on for four years they could call it interference,” she said. “Unless we take an interest, it could roll on even longer.” Encino-Tarzana Regional Center Medical Center Chief of Staff Dr. Wayne Kleinman felt likewise, as did the hospital’a board of governors head Lee Alpert. Kleinman, for one, believes that negotiations over the sale price have been more of an issue than finding a qualified buyer. “We’ve been told there is a very interested, well-qualified, experienced and well-funded nonprofit hospital group in Los Angeles that wants to buy the hospital and continue it as an acute care hospital,” he said. “We’ve also been told the third party has come to an agreement with the REIT and with Tenet, so the only roadblock that remains is for Tenet and the REIT to come to an agreement. Tenet leases other facilities from this same REIT in other states. Tenet claims that the REIT is trying to use this situation to renegotiate the existing leases at other facilities at more favorable, more profitable rates to the REIT. If it was a single hospital transaction, it would have been a done deal by now.” Alpert said that, from reading the legislation, he doesn’t understand how Campanini considers it to be interference. “They have to understand we’re not trying to cause harm,” he said of Tenet executives. “Tenet says they’re going to sell the hospital, and, if the REIT is willing to sell the hospital, then just sell the darn thing, particularly if you have ready, willing buyers. We know they’re out there, so stop playing the numbers game and get this sale completed. There’s more to it than the bricks and mortar. We’re looking at human lives. “

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