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East L.A. Hospital Acquired as Catholic Operator Leaves Town3

East L.A. Hospital Acquired as Catholic Operator Leaves Town

Carondelet Health System Inc. has reached a deal to sell Santa Marta Hospital, the last of its Los Angeles County facilities, to a new for-profit company out of Newport Beach.

The St. Louis-based operator of Catholic hospitals, which began exiting the Los Angeles market with the sale of its two Daniel Freeman hospitals last year to Tenet Healthcare Corp., has executed a letter of intent to sell the East L.A. hospital to Star Healthcare Group.

Terms of the deal were not announced, but should be made public as the deal undergoes scrutiny by the state Attorney General, which must approve all sales of non-profit hospitals to for-profit operators. The Archdiocese of Los Angeles also must approve the deal, since it involves the removal of a hospital from the Catholic healthcare system.

Even so, officials with Star said they plan to retain the hospital’s name and continue operating under the ethical directives of the Catholic church, which include a prohibition on abortion.

Star also sais it plans to continue providing the same levels of charity care historically provided by the 78-year-old community hospital, despite the fact that Carondelet was looking to unload it because it has been losing money.

“It’s our belief you can continue the mission and goals of the not-for-profit by running them in a businesslike manner that emulates to a certain degree a profit-making organization,” said Richard Yardley, a Star managing director who will be the hospital’s chief financial officer.

The group believes that can be done by aggressively seeking patients who qualify for government reimbursement programs, increasing the patient load through close ties to area physicians and lowering bad debt.

Under a separate management agreement, the group began managing Santa Marta last week under the oversight of the hospital’s board. Star is a closely held corporation that is owned by Yardley and two other executives with experience in healthcare management in Southern California.

Hospital Riches

Jeffrey C. Barbakow, the man credited with turning around a company on the brink of failure to the second largest hospital operator in the country, has cashed in to the tune of $111 million.

Barbakow, chairman and chief executive of Tenet Healthcare Corp., exercised options he was granted in 1993 when he took over Tenet’s predecessor company, National Medical Enterprises. The 2 million shares, which had a strike price of $9.50, were sold at just over $65 a share in January, Tenet announced.

The size of the options raised eyebrows, especially during a time when oversized executive compensation is a hot topic something even Tenet admitted as it defended the payout.

“Everybody looks at this and says, “Oh my God,” said Harry Anderson, the company’s vice president of communications, who nevertheless called the options a “classic case” of aligning compensation with performance.

When Barbakow took over National Medical it was under federal investigation for alleged fraudulent billing in its psychiatric division. The Santa Barbara company, which later merged and changed its name, saw its market cap rise from $1 billion to $20 billion.

Nurses Reach Out

The California Nurses Association, which made major gains in January when the state issued proposed nurse-to-patient staffing ratios, is also making headway in its efforts to form a new national nursing organization.

Leaders of the CNA met last month in San Diego with counterparts from Massachusetts, Maine and four other states to form the American Association of Registered Nurses.

The new organization, which will assist its members in organizing and seeking generous staffing ratios, as well as pursuing national legislation, sees itself as an alternative to the long-established American Nurses Association.

Staff reporter Laurence Darmiento can be reached at (323) 549-5225 ext. 237 or at


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