USC Seeks Sale of Hospital by Tenet

USC filed suit Tuesday in an effort to force Tenet Healthcare Corp. to sell its ownership and control of USC University Hospital, contending that the troubled hospital operator had not adequately invested to improve the facility.

The 269-bed hospital near downtown Los Angeles is staffed by USC medical personnel and is also used as a teaching facility. The university owns the land and Dallas-based Tenet manages the hospital and owns the buildings and equipment.

Some of the hospital’s programs, including gynecology, neurology and neurosurgery, ophthalmology and orthopedics, rank among the top 50 in the nation, according to U.S. News & World Report magazine’s annual hospital survey. But The Times recently reported that the hospital’s liver transplant program had the nation’s highest death rate.

Marshall B. Grossman, the attorney representing USC, said Tenet’s investment in the hospital since 2003 was about $100 million short of what was agreed upon.

The lawsuit, filed in Los Angeles Superior Court, does not take issue with Tenet’s management of the Boyle Heights hospital but with the company’s ability to continue investing to improve the facility.

“Tenet simply cannot or will not offer the necessary support at a level appropriate and befitting a top-tier, teaching hospital of USC’s quality,” Grossman said.

Tenet spokesman Steven Campanini disputed that, saying the company had made “substantial investments,” including a new $150-million patient building scheduled to open in coming months.

Tenet officials called the lawsuit a negotiation tactic.

“There has been ample opportunity for USC leadership to indicate their concerns to Tenet leadership, and they chose not to do so,” Campanini said. “They chose to do it this way, and it’s unfortunate.”

The lawsuit is the latest in a string of financial and legal troubles for Tenet, the nation’s second-largest hospital operator with 68 facilities, including 19 in California. The company has lost more than $3 billion in the last three years and has been embroiled in disputes over illegal kickbacks and overcharges.

In May, Tenet agreed to pay $21 million to the federal government to settle charges that its administrators at Alvarado Hospital Medical Center in San Diego paid illegal kickbacks to doctors to boost hospital admissions. Tenet admitted no wrongdoing but agreed to sell or close the hospital. It is currently looking for buyers.

A month later, Tenet settled other lingering legal woes, including allegations that it overcharged Medicare, the federally funded healthcare plan for seniors and some disabled people. The company again admitted no wrongdoing but agreed to pay $725 million and forgo an additional $175 million in future healthcare payments from federal programs.

The company also plans to sell or close nearly a dozen hospitals.

Wall Street analysts generally viewed the settlements as a sign that the company was rebounding, but its stock has struggled to gain ground since. On Tuesday, Tenet’s shares rose 6 cents, or 0.8%, to $7.38.

USC attorney Grossman said the university filed the lawsuit to force a sale of USC University Hospital by Tenet, whose lease on the land doesn’t expire until 2063.

The lawsuit, he said, also is necessary to determine whether Tenet breached its contract by not investing enough in the hospital, which opened in 1991.

The dispute does not involve the nearby USC/Norris Cancer Hospital, also owned and operated by Tenet.

Grossman said the dispute with Tenet would not disrupt hospital operations and that USC officials had not yet decided how to replace Tenet’s management if they forced the company to sell.

“The bottom line is, we want Tenet out,” Grossman said.