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Desert Regional Hospital Board votes to move forward with Tenet Healthcare deal for Palm Springs hospital ⋆ The Palm Springs Post


The future of Desert Regional Medical Center was up for discussion Tuesday evening

The future of Desert Regional Medical Center in Palm Springs is coming into sharper focus after a major decision Tuesday evening.

Members of the Board of Directors for the Desert Healthcare District voted to move forward with negotiations with Tenet Healthcare after hammering out the broad strokes of a term sheet with the corporation. 

The nonprofit Desert Healthcare District, run by elected officials, and for-profit Tenet Healthcare have been at odds over the renewal of a lease dating back to 1997 when Tenet first agreed to lease the hospital from the district. That lease expires in 2027. 

In September, Tenet came to the district with its first proposal for a new lease, which would expire in 2057, and would allow Tenet to buy the hospital at the end of the lease agreement.

Members of the board of directors at the time were against the proposal, especially because of the provision that would have Tenet purchasing the hospital.

With Tenet buying the hospital, the district would no longer have public oversight over the hospital. But if the district took over operations of the hospital, it would have to foot the bill for costly state-mandated seismic updates to the hospital, estimated to cost about $222 million. 

New proposal

After months of negotiations between the two entities, Tenet offered its updated proposal which addressed some of the directors’ concerns.

The new proposal will eventually total $650 million in cash payments to the district over 30 years and includes more money upfront, $100 million instead of $75 million. The new proposal also outlines specific commitments from Tenet to renovate the emergency department and admitting areas of JFK Hospital in Indio. 

Still remaining in the proposal, however, is the provision that would allow Tenet to purchase the hospital.

Board members said they did not come to their decision lightly, and they examined all possible avenues.

Carole Rogers, a member of the board, said they reached out to other possible buyers, including the University of California system and Loma Linda, but they were met with negative responses.

She said the healthcare entities declined their offer for multiple reasons, including the fact that the lease would begin in 2027 and the lack of financial operating data that Tenet has refused to release, claiming that it has a legal reason to retain the information until it is mandated to release it.

‘The best we can get’

Director Leticia De Lara said, “I believe that we are not going to get a better position. We can try in three months, six months, 12 months, but we’re going to be in the same position.”

“We just know this is the best we can get.”

Arthur Shorr, another board member, agreed. He pointed out that 50% of the hospitals in California are on the verge of bankruptcy, “And we’re talking about a $600 million asset infusion,” he said. “It’s an extremely good deal.”

Earlier in the meeting, board members heard just how difficult it would be for the district to take over operations of the hospital during a presentation of a feasibility study.

If the district were to take over operations of the hospital the feasibility study found significant financial, operational, and clinical risks that representatives said could cause serious disruption to the hospital.

The consultants at Gibbins Advisors, which conducted the feasibility study, found that at least $219 million would be required for the district to take over operations come 2027. 

“If you think about it,” Clare Moylan, with Gibbins, said, “The district would be starting a business from scratch. When you start day one of running a business you don’t have any accounts receivable and it could be six weeks or longer before you actually start getting cash coming in the door.”

Members of the public packed a room at California State University San Bernardino’s Palm Desert campus Tuesday evening as the Board of Directors for the Desert Healthcare District discussed the future of Desert Regional Medical Center in Palm Springs.

She explained that there’s not even a guarantee that the district would have access to that money upfront.

The cards would be stacked against the district when it comes to borrowing money, too. Lenders would be wary about loaning money to a district that has no proven track record of operating a hospital and not enough cash reserves.

The district could consider their property as assets, “But it can be questionable whether lenders will provide a loan against a building, when, in order to be repaid, they would have to foreclose,” said Moylan.

Compounding the concerns, the district would have to extricate itself from nearly 30 years of administrative integration with Tenet’s corporate system. All of that work would take up a significant amount of the board’s time, dividing their attention away from other matters. 

In all, Moylan estimated it could take more than seven years before the hospital is stabilized if the district took over operations.

What’s next

Before the meeting began, about a dozen nurses rallied outside the California State University San Bernardino Palm Desert campus, saying that if Tenet owned the hospital, their ongoing complaints of poor maintenance and staffing issues would only get worse.

During the hour-long public comment, more nurses spoke up, some in favor of the Tenet deal, others not. Several nurses were from out of town and worked in Tenet-owned hospitals, saying the corporation would not put the priorities of the community first.

Stephanie Salter worked at Desert Regional and said, “Everybody supporting Tenet is a stockholder, and if you think that the stockholders are not interested in making money, think again.”

With a broad term sheet agreed to by both parties, they can begin drafting a thorough legal document. At the board’s July meeting, board members will vote to create a ballot measure for the November General Election which will ask voters whether they agree with the terms of the deal.

“We do not have the last word,” said Director Carole Rogers. “There are people in this community who do not wish the hospital to be sold to Tenet at the end of the 30 year lease. Let’s allow the voters to make their decision on this matter.”



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