Vulture Investor Drops Out of Bidding for Tenet Hospitals
By LAURENCE DARMIENTO
Cerberus Capital Management, a vulture investment firm that was seeking to buy 18 Southern California hospitals from Tenet Healthcare Corp., has dropped out of the bidding, sources said.
Cerberus’ interest in buying the properties had been reported last week by several news outlets. So-called vulture firms specialize in picking up distressed properties on the cheap and either turning them around or selling their underlying assets.
But New York-based Cerberus lost interest in the hospitals, including 14 in Los Angeles County, after Tenet announced July 19 that it had sold four of them to another buyer. The news heartened local health care advocates, who were wary of Cerberus.
“They were too much of an unknown. Their future plans were too uncertain. It’s a good thing,” said Lark Galloway-Gilliam, executive director of the Los Angeles-based Community Health Councils.
AHMC Inc., a privately held corporation that already owns two local hospitals, is buying Garfield Medical Center, Monterey Park Hospital, Greater El Monte Community Hospital and Whittier Hospital Medical Center in a $100 million deal.
Despite Cerberus’ pullout, the sale of other local Tenet properties to another buyer could be announced in coming weeks, according to a source close to the negotiations.
Tenet is negotiating with a group of doctors and hospital officials who have been seeking to buy three West Los Angeles hospitals.
The group is seeking Centinela Hospital Medical Center, Daniel Freeman Memorial Hospital and Daniel Freeman Marina Hospital, said G. Michael Finnigan, chairman of the group, Hospital Acquisition 005 Inc.
“They talk to us about our deal. I hope we are making progress,” said Finnigan, former chief financial officer at Hollywood Park racetrack, adding that the group has financial backing for its bid.
There is also a community group called We CAHRE, or Community Action for Healthcare Reform and Education, that seeks to buy Daniel Freeman Marina.
The group successfully pressured Tenet to keep the hospital open two years ago after the company sought to sell it for development. However, the group’s prospects seem questionable, given they are seeking to have Tenet donate the facility.
“We are the perfect group for Tenet to donate this facility and get a tax break,” said Julie Inouye, We CAHRE’s executive director.
So far, Tenet has sold just five of the 27 hospitals it announced it was divesting in January as part of a restructuring. Tenet has been posting losses since late 2002, after it was discovered that much of its prior financial success had rested on manipulation of the federal Medicare system.
Nancy Weaver, an analyst for Stephens Inc., said she expects Tenet won’t get much from the sale of its California hospitals.
“The reality is, California is an unattractive place to do business in. You have mandatory nurse staffing ratios, onerous seismic retrofit requirements. Nobody want to throw capital into a bad market,” she said.