State OKs Tenet’s Offer for USC Cancer Center

California Atty. Gen. Bill Lockyer has approved Tenet Healthcare Corp.’s proposed $35-million purchase of nonprofit USC/Norris Cancer Hospital in Los Angeles -- but he imposed strict conditions to preserve cancer-care and charity programs already in place.

Under the conditions, USC would earmark more than $25 million from the sale to fund cancer care through a new foundation called the USC/Norris Cancer Center Foundation.

In addition, Santa Barbara-based Tenet ultimately would provide about $1.3 million annually for charitable health care and community-based programs, as well as spend at least $10 million on capital improvements to the facility, including expanding the Lee Breast Center and opening a urology institute, Lockyer said.

A Tenet spokesman said Tuesday that the company is “carefully reviewing the conditions” to determine whether to go ahead with the acquisition.

USC/Norris is a small 60-bed hospital with a national reputation for being on the cutting edge of cancer research. The hospital had net income of $4.2 million last year on $82 million in net revenue, according to state filings.

An acquisition of a prestigious hospital such as USC/Norris could be a plus for Tenet, given its recent troubles. Tenet’s reputation has been damaged after revelations that the company, which operates 40 hospitals in California, aggressively raised hospital charges and reaped excessive Medicare payments for treating the sickest patients.

“Questions have been raised about Tenet’s business practices,” Lockyer said. “But my office believes the transaction, as conditioned, will serve the public interest.”

Lockyer issued his decision after public hearings at which health-care activists raised concerns that an acquisition by Tenet could weaken the quality of cancer care and result in less treatment for poorer residents.

“Some of the conditions they put on Tenet were good,” said Lark Galloway-Gilliam, director of Community Health Councils, a nonprofit advocacy group for the uninsured. “But we still have some concerns about whether the foundation work will go back to actual treatment of cancer in the community, especially the low-income community.”

Under the purchase proposal, Tenet would buy only the business operations of USC/Norris. USC would keep the building and lease it to Tenet, a spokesman for Lockyer said. Tenet already owns USC University Hospital on the same campus, and is building an estimated $92 million, 10-story patient tower next to it.