- Tenet Healthcare Corporation will no longer own hospitals in Philadelphia after the Dallas-based company recently sold Hahnemann University Hospital and St. Christopher’s Hospital for Children for $170 million.
The national healthcare organization sold the hospitals to Paladin Healthcare, a private equity-based firm from California that already owns four hospitals in low-income regions in the Los Angeles County and a facility in Washington DC, The Inquirer reported.
Tenet came to Philadelphia in 1998 after purchasing eight hospitals in the region. The organization bought the hospitals from Allegheny Health System for $345 million after the system announced bankruptcy.
Another hospital, Roxborough Memorial, joined Tenet’s offerings in the city later.
However, all hospitals were either sold or closed by 2007, except for Hahnemann University Hospital and St. Christopher’s Hospital for Children.
As of the end of June, the remaining hospitals and related operations reported $790 million of operating revenue and an adjusted operating loss of $15 million, the local news source stated.
Tenet plans to report a $230 million pre-tax impairment charge for their quarter ending in September as part of the hospital sales. The organization also intends to record a taxable loss of $200 million stemming from the sales.
The organizations anticipate finalizing the sales by early next year depending on regulatory approvals.
The most recent purchase not only marks the end of Tenet’s time in Philadelphia, but a new age of divestitures. In a presentation at the Baird 2017 Global Healthcare Conference, CEO Trevor Fetter announced that Tenet plans to divest eight hospitals in domestic markets (including Philadelphia) and nine facilities in the United Kingdom.
Tenet expects to see between $900 million and $1 billion in proceeds from the divestitures, including cash and the elimination of capital lease debt.
The announcement of definitive agreements should appear by the end of the year.
In addition to putting hospitals on the market, Tenet also recently announced that Fetter will step down as CEO by Mar. 15, 2017 or when a successor is appointed, whichever occurs first. Fetter was the head of the organization for 14 years.
His resignation is part of the organization’s attempt to “refresh the composition of its Board,” which is “intended to ensure that the Board has the best mix of skills and experience to maximize the future value of the Company.”
Lead Director Ronald A. Rittenmeyer will serve as the Executive Chairman during the CEO selection process. He stated:
“The changes announced today will ensure Tenet remains focused on providing high-quality care to patients, innovating in ways that meet the demands of today’s healthcare market, and driving operational and financial performance in a manner that maximizes shareholder value. The Board of Directors thanks Trevor for his significant contributions to Tenet and appreciates his commitment to remain with the Company during the transition period. During Trevor’s tenure, Tenet has built a strong enterprise that is aligned with the trends driving healthcare, and which provides multiple channels for growth across the company’s Hospital, Ambulatory and Conifer segments.”
Tenet is also looking to replace two board directors after Randy Simpson and Matt Ripperger resigned in August. The Tenet Directors were also employees of Glenn View Management, a hedge fund with a stake in the healthcare organization.
The former board members left the company “due to irreconcilable differences regarding significant matters impacting Tenet and its stakeholders,” they wrote in a letter to the healthcare organization.
“Both we as individuals, and Glenview as an owner, have determined that the most effective way forward to promote strong patient satisfaction and long-term value creation for Tenet is to step off this Board, which also triggers the expiration of Glenview's restrictive ‘standstill’ agreement in 15 days, after which Glenview may evaluate other avenues to be a constructive owner of Tenet. Glenview remains fully committed to its ownership stake in Tenet and its desire to drive improved performance, culture and value,” they stated.