O.C. Asked to Study Sale of 4 Tenet Hospitals

The current and former chiefs of staff for Western Medical Center-Santa Ana implored Orange County supervisors Tuesday to intervene in the sale of four Tenet hospitals to a Costa Mesa company whose chief financier operated a string of medical clinics that went bankrupt four years ago.

It was unclear, however, whether the county could weigh in on the transaction.

The doctors, Michael Fitzgibbons and Robert Steedman, said they weren’t convinced that Integrated Healthcare Holdings Inc. would have the financial resources to keep the Tenet hospitals open. The company has agreed to a price of $70 million.

The largest single investor is Hemet surgeon Dr. Kali P. Chaudhuri, who is putting $20.5 million into the deal. Chaudhuri tried to resuscitate a failing chain of medical clinics in 1999 before seeking bankruptcy protection a year later, closing 38 clinics across Southern California.

Orange County would lose one of its three trauma centers if Western Medical Center-Santa Ana suffered the same fate, the doctors said. The other trauma centers are at Mission Hospital Regional Medical Center in Mission Viejo and UCI Medical Center in Orange.

The other Tenet hospitals being sold are Coastal Communities Hospital in Santa Ana, Western Medical Center-Anaheim and Chapman Medical Center in Orange.

Of those, Western Medical Center-Anaheim and Coastal Communities Hospital are part of the county’s network for providing care to indigent patients.

Supervisor Chuck Smith, whose district includes Santa Ana, asked county attorneys to research whether the board had any authority over the private sale of a hospital. If the hospital or its trauma center closed, it would be disastrous to the community, he said.

“There are questions about the people buying it, but this is a private transaction,” Smith said.

Chaudhuri’s previous clinic business was a calamity, Fitzgibbons said. KPC Medical Management Inc. left $450 million in unpaid bills and only $10 million in assets when it went bankrupt, said Fitzgibbons, part of an investment group whose bid to buy Western Medical Center-Santa Ana this year was rejected by Tenet.

“As one of the 800 physicians of Western Medical Center, I ask you to hold hearings [on the sale] to protect the people of the community,” Fitzgibbons, the hospital’s former chief of staff, said at the conclusion of the board meeting during public comments.

Steedman, named Western Medical Center’s chief of staff this month, said he was surprised that Chaudhuri would “come back into Orange County after such a horrific debacle.”

Chaudhuri, reached later Tuesday, defended his attempt to salvage the failing medical clinics, as well as his current investment.

He said he was interested in helping buy the Tenet hospitals as a way “to redeem myself and get involved again.”

“If I felt that I’d done anything wrong, I wouldn’t go back to the same place again,” said Chaudhuri, who is managing partner in three hospitals in southern Riverside County.

“I tried to do something earlier and I wasn’t able to do it, for many reasons. This is an opportunity to make a difference.”

This time, he will remain an investor only, he said, while the board of Integrated Healthcare runs the hospitals.

He said he was heartened by the company’s announcement Monday that a group of Orange County physicians, including some working at the affected hospitals, had agreed to invest another $20 million in the venture, including an initial $5-million payment.

“As an investor, I feel very good” about the sale, Chaudhuri said. “The hospitals will stay open. We mustn’t scare the patients away.”

An official at Integrated Healthcare Holdings Inc. said he would have defended the transaction at Tuesday’s meeting had he known the doctors would speak.

The sale of the four hospitals, which should close by the end of the month, is a sound transaction involving viable businesses and multiple investors, including Chaudhuri, said company President Larry B. Anderson.

“We’re a well-qualified and well-financed group of hospital managers who have run hospital systems in California and all over,” Anderson said.

Dr. Norman Harris, chief of staff at Chapman Medical Center in Orange, said he had “no feelings” about the company taking over the hospital or Chaudhuri’s involvement.

“These are very complicated issues,” he said when asked about the bankruptcy. “Everyone is cautiously waiting to hear what the future brings.”

Harris, an ear, nose and throat specialist, said he expected to retain his position under the new ownership.

Neither Dr. Jayanti Patel, chief of staff at Western Medical Center-Anaheim, nor Dr. Alan Schwartz, chief of staff at Coast Communities Hospital in Santa Ana, returned calls for comments on their Santa Ana colleagues’ concerns.

Robert Miller, a spokesman for the state Department of Health Services, said no one was available Tuesday to talk about the transaction.

The hospitals must obtain new state licenses to operate as a result of the sale.

But Felix A. Schwarz, executive director of the Health Care Council of Orange County, echoed worries about the future of Western Medical Center when he appeared before supervisors.

He said the board and the community should be concerned about allegations of deteriorating care and unpaid bills at Chaudhuri’s clinics.

Steedman cited as an example Chaudhuri’s alleged failure to pay other doctors for services after bringing patients to Western Medical Center in 2000. That led to a pool of 17 anesthesiologists dwindling to just five.

“This is a crisis that needs to be brought to the attention of the public,” Schwarz said. “Access to healthcare affects everyone.”