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Firm Under Legal Pressure to Sell or Close Hospital

Tenet Healthcare Corp. must sell Alvarado Hospital Medical Center by February, or the facility faces closure.

Dallas-based Tenet announced May 17 that it has agreed to either sell or close the 30-year-old La Mesa hospital in exchange for dismissed criminal charges that the facility broke federal anti-kickback laws.

Tenet will pay $21 million to avoid a third criminal trial over whether physician relocation packages were misused and to avoid civil liabilities. The hospital serves more than 900,000 San Diegans, and the likely adoptee of those patients would be Sharp’s Grossmont Hospital.

If Tenet refused to sell or close Alvarado, the Office of the Inspector General, under the U.S. Department of Health and Human Services, had threatened to revoke Medi-Cal and Medicare funding, which likely would have caused the hospital to close anyway.

Tenet faces multiple lawsuits nationwide and has sold or closed more than 40 hospitals in the last four years. The chain owns 19 hospitals in California, and three are for sale, including Alvarado.

Tenet spokesman Steve Campanini said he is unaware of any workers quitting because of the news. He also said he is not aware of any potential buyers contacting Tenet yet.

Alvarado has about 1,000 employees in addition to a 500-plus member medical staff. Campanini would not elaborate on how a closure would be carried out or if employees could be laid off slowly or all at once.

He said Tenet has been mostly successful in convincing buyers of its hospitals to keep employees in good standing in their jobs, and that Tenet would rather sell the hospital than close it.

Tenet shares, traded under the symbol THC on the New York Stock Exchange, did not seem fazed by the day’s news, and were trading up 7 percent at $7.93 late afternoon.

Two lawsuits filed by the Office of the U.S. Attorney Southern District of California against Tenet and Barry Weinbaum, former Alvarado chief executive officer, have ended in hung juries in the last two years.

The U.S. attorney’s office said it will not retry the case.

“This resolution should restore the public’s confidence that physicians are selecting hospitals based on the best medical interests of their patients and not on hidden financial benefits,” U.S. Attorney Carol Lam said in a statement.

In the settlement, Tenet included a note that said the company is “distressed” to learn that from 1992-2002, some physicians said they needed money for tenant improvements to accommodate new doctors, but that these improvements were never made. Mina Nazaryan, a former Alvarado employee in charge of physician recruitment, was found by federal investigations to have accepted payments from these doctors.

The company also said it regretted not having enough checks and balances to put the fraudulent practices to a halt.

, Katie Weeks

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