July 9, 2002
Attorney
General Bill Lockyer
Office
of the Attorney General
1300
I Street
Sacramento, CA 95814
Via Facsimile
(916) 445-6749
Dear Attorney
General Lockyer,
Consumers Union is concerned that Tenet’s closure of the
Marina Hospital is in violation of the conditions
imposed on the sale of the Daniel Freeman Hospitals.
Pursuant to your authority under 11 CCR 999.5(g)(1), we urge your office
to investigate this matter. During the
investigation, we also urge you to take steps to prevent any further closure
activities at the Marina facility.
We are concerned
specifically about:
1)
Tenet’s
failure to solicit public input from community based healthcare organizations
and the Los Angeles County EMS Agency in conducting a comprehensive assessment
and planning process as required under Consent Condition IX.
2)
Tenet’s discussions with the governing board
of Marina regarding the decision to close the
hospital under Consent Condition XVIII.
We do not
believe that Tenet should be permitted to reap windfall profits from buying and
then immediately closing and selling for its real estate value a vital
nonprofit community hospital.
We raised issues
related to the appropriate valuation of the Marina property early and often. On July
19, 2001, Consumers Union and other consumer groups stated that it
was “necessary for the Attorney General to act now to gather information and
documents that will be necessary for the review process.” We recommended at that time that you “[o]btain any other bid offers and conduct an independent
valuation of the hospitals’ property and assets to determine its fair market
value” and “[e]valuate whether $55 million is a reasonable price, based upon
the Attorney General’s appraisal of the fair market value.”
On August 21, 2001, we received a letter from you that
stated “We are retaining the services of a financial consultant to determine
whether Tenet is paying fair market value for the hospitals and whether this
transaction is the best alternative available to Carondelet. Our consultant's evaluation of the
transaction will address many of the concerns raised in your letter. Other concerns will be discussed in the
context of public hearings.” Unfortunately
the issue of fair market value was not resolved during the time of this
transaction and still remains unanswered.
At the October 18, 2001 public hearing, Consumers Union
testified “It is our understanding that the Attorney General is conducting an
independent valuation of DFH. What if
any analysis has been completed? Given
that the valuations vary, and that the valuation firms were working for DFH at
the time, we think it is imperative that the Attorney General's independent
valuation of the land and other assets be made available as soon as possible.” The information relating to the independent
valuation of the land and other assets proved to be inadequate.
At the public
hearing on November
15, 2001,
Consumers Union testified that “In order to protect the charitable assets, you
need to know what [the] Daniel Freeman assets are worth. Yet at this point in time we still do not
have this critical piece of information, and there are three problems with the
information we do have . . . . no one has done an independent appraisal of the real
estate. At the last hearing we raised
questions about the real estate, questions that we trusted would be [answered]
by the independent valuation [you] commissioned, but Houlihan,
Lokey did not do an independent appraisal; instead
they appeared to have taken the information provided by the parties,
information we all had access to, and concluded that selling to Tenet is a
better option than liquidating the assets . . . . Without an independent
valuation of the real estate, no one knows if Tenet is paying fair market value
for the hospital. Given that Marina Hospital is on a choice piece of real estate, we
do not know if the estimates submitted are even in the ballpark.”
In a November 19, 2001 letter, Consumers Union once again
articulated the deficiencies with the valuation conducted by your
consultant. “An independent appraisal of
the real estate to ensure the assets are being sold at fair market value has
not been conducted, as required by CA Corp. Code § 5917(c) . . . . the firm you
retained to conduct an independent valuation of the assets [and] did not do an
independent appraisal of the real estate.
Instead, they appear to have taken the information provided by the parties,
information that we all had access to, and concluded that selling to Tenet was
a much better option that liquidating.”
The only basis
for valuation applied during the transaction was to treat the hospitals solely
as going concerns. Therefore, we do not
believe it is appropriate for Tenet to close the Marina hospital, sell the land for its real
estate value, and take the profits out of the community’s healthcare.
We call on you
as the legal representative of the public to conduct an investigation as to
whether Tenet has complied with all of the conditions in DFH transaction and if
necessary, utilize independent consultants to obtain that information under 11
CCR § 999.5(g)(2). Further, we ask that
you “make available to the public all documents relating to compliance with any
terms or conditions” as provided by 11 CCR § 999.5(g)(5). In order to protect the public interest, it
is critical that Tenet be prevented from closing the hospital during your
review.
Sincerely,
Staff Attorney Staff Attorney Staff Attorney
Mark Urban