Tenet Healthcare proposes another 30-year lease of Desert Regional Medical Center

Tenet Healthcare, the private company that runs Desert Regional Medical Center, proposed another 30-year lease with the hospital during a special meeting with the Desert Healthcare District on Monday.

The Desert Healthcare District is a public agency that owns Desert Regional. Dallas-based Tenet's current 30-year lease expires in 2027, and under the proposal, the company would have the opportunity to purchase the hospital from Desert Healthcare District at the end of the new lease.

Monday night's meeting was the first of several to consider the potential lease extension with Tenet. Desert Healthcare District directors were able to hear comments from the health care company's CEO Dr. Saum Sutaria, as well as input from the public.

No decisions or votes took place on the matter.

How it works

According to its website, in 1997, the Desert Healthcare District Board voted to lease the hospital to Tenet Systems for 30 years.

This pre-paid lease "positioned the District to meet outstanding debt obligations" and gave the hospital the chance to be part of a national health care company. Currently, Tenet runs the hospital while the District retains ownership of the lease as well other assets including Las Palmas Medical Plaza.

Key points in the proposed lease extension

Tenet Healthcare is proposing another 30-year lease, which would begin in 2027.

The initial proposal includes:

• At the commencement of a new lease, Tenet will make an initial payment of $75 million to help support district community priorities in the near-term, followed by annual lease payments beginning in 2027

• Lease payments to the district total $602 million, based on the district’s recent third-party assessment of fair market value for Desert Regional. If Tenet decides to purchase Desert Regional at the end of the lease, it can make a final payment of $75 million, which would increase the total to $677 million.

• Tenet would be responsible for maintaining state-mandated seismic retrofit upgrades at Desert Regional, which cost an estimated $222 million

• Tenet will continue to make strategic investments across the Desert Care Network, which includes Desert Regional, JFK Memorial in Indio and Hi-Desert Medical Center in Joshua Tree

Sutaria said Tenet has been "blessed and really lucky to have been part of this community." The company purchased JFK Memorial Hospital in 1979, and later entered into a 30-year lease with Desert Regional in 1997. Tenet paid the district more than $100 million for the lease, which included pre-payment of the lease, cash, inventory and a pay-off of the district’s outstanding debt, according to meeting documents.

Under its current lease, Tenet has had an economic impact of approximately $1.4 billion annually, contributed over $43 million in state and local taxes annually and supported around 7,000 jobs, according to the company. It has also invested $339 million in capital improvements at Desert Regional and $117 million at JFK Memorial.

If another 30-year lease is approved, Sutaria said the company plans to make further investments. Those include expanding service capabilities and increasing capacity for patient care areas at Desert Regional, increasing capacity for emergency and trauma care at JFK Memorial and investing in outreach in the eastern Coachella Valley, which could include additional physician offices, mobile clinics, graduate residents, transportation, street and backpack medicine teams, health screenings and physician recruitment.

"Our commitment to the community here is unquestionable. We are the leading institution with respect to providing access to care for those who are not just underserved, but in many cases not served," Sutaria said. "We're also the leader in providing services to those folks who often don't have anywhere else to go from an emergency standpoint, regardless of the ability to pay. That is absolutely critical when you're trying to develop and maintain the health of the community."

He added that the proposed lease is not much different than the current one.

"We don't see the need to have a big, lengthy, drawn-out negotiation over this term or that term or this issue or that issue," Sutaria said. "It's our general belief that the organizations have worked together effectively, through multiple leaders on both sides, and issues get worked out that don't need to be put into the finest of language."

What directors, public had to say

Directors did not make their position known on the issue during Monday night's meeting. The questions they raised focused on under what circumstances Tenet would not want to buy Desert Regional at the end of the lease, plans for future investments, if the district would maintain the same level of oversight and additional details on lease transactions.

Sutaria did not share specific details. Regarding purchasing the hospital, he said it's "hard to predict" what the circumstances might be in 30 years, and did not dive into investment opportunities. Director Leticia De Lara said she and her fellow board members are "going to need to know more" to fully consider a new lease.

Members of the community also got to express support and concerns during public comments. Kim Jakab, a California Nurses Association labor representative, said Tenet has "benefited the most out of this agreement with the profit made off of our community and patients." She believes the company will continue to benefit from profits and not reinvest more back into the hospital.

She noted that Desert Regional was one of 80 California hospitals in 2022 to be penalized by the Centers for Medicare & Medicaid Services due to high rates of readmissions, infections and patient injuries. The hospital's overall rating on Medicare's hospital compare website is two stars out of five.

"As patient advocates, nurses demand that Tenet invest back into the community and stop putting profits over patients," Jakab said. "We know that the board wants Palm Springs to be a place where residents receive quality medical care, and the RNs know exactly how to provide that quality care, but only if Tenet gives the nurses the resources they require to make that happen."

A Desert Regional intensive care nurse said the hospital "needs attention" to its infrastructure, and that nurses need more supplies to take care of patients. She also noted unsafe staffing levels at the hospital, which Desert Regional nurses have been bringing attention to over the last few years through pickets.

An Indio resident hopes that additional investments will be made in the eastern Coachella Valley so that residents have better access to medical care. She was disappointed to see Tenet making annual charitable contributions of $117 million, while it has only made $117 million in investments at JFK Memorial over a nearly 30-year period.

A number of leaders from local organizations, such as DAP Health and OneFuture Coachella Valley, praised the work that has been done at Desert Regional over the years and the partnerships that have been forged between them.

What comes next

Desert Healthcare District and Foundation CEO Dr. Conrado Bárzaga said Monday night's meeting was the first step in the process of considering Tenet Healthcare's lease proposal.

"Much will need to be negotiated and discussed, and full public input will be sought after any such decisions are made by this board. Any transaction proposed by Tenet would be subject to a vote by residents of the district," Bárzaga said. "So we have a long journey ahead."

Directors will continue proposal discussions at future meetings.

Ema Sasic covers entertainment and health in the Coachella Valley. Reach her at ema.sasic@desertsun.com or on Twitter @ema_sasic.

This article originally appeared on Palm Springs Desert Sun: Tenet Healthcare proposes new 30-year lease of Desert Regional