Will Palm Springs hospital deal block some health services?
As Tenet Health inches closer to signing a new 30-year lease to operate Desert Regional Medical Center, a non-compete clause in the deal is drawing concern from community leaders who worry it could get in the way of efforts to provide some health services for Coachella Valley residents.
What the clause states
The proposed lease is between Tenet and the hospital’s owner, Desert Healthcare District, which is a public agency run by an elected board.
In the latest draft, the non-compete clause states the district or its foundation will not own any interest in, manage or operate any current or future hospital, health care facility, provider or business within the district’s boundaries, which stretch from Desert Hot Springs to the Salton Sea.
The district could still participate in activities that promote health care services for local residents, as long as it did not provide financial support to another acute care hospital within the boundaries. The district could also collaborate with or provide joint funding with other acute care hospitals for projects for residents, as long as those projects are outside the scope of the hospitals’ licensure and are provided free of charge to the community so they do not generate revenue for the competing hospitals.
Desert Regional’s main hospital competitor is Eisenhower Health in Rancho Mirage.
If the current version of the lease is approved and the district board receives any grant applications that may be in violation of these terms, they will be submitted to Tenet for review. The Dallas-based company will have 30 days to either approve or dismiss the application.
The lease is still not final, and Coachella Valley voters will ultimately decide whether it is approved, likely as soon as the November election. Residents can read the draft agreement at www.dhcd.org.
District leaders support clause; board members raise concerns
During a community meeting on Tuesday night, the district’s legal counsel Jeff Scott said the non-compete clause has been the “most controversial” item in the lease, and that staff are still negotiating with Tenet.
“The parties are working together in order to streamline the language, to provide greater clarity to the agreement as well as afford the district more flexibility in the administration of its grant program,” Scott said.
Several board members present at the meeting, including Directors Kimberly Barraza, Leticia De Lara, Evett PerezGil and Carmina Zavala, said they are concerned with the non-compete clause provision and want to see district staff continue to work on its language.
“I’m not comfortable approving a provision that would not have the public’s support,” Barraza said. “I’m very confident that we’ll get this done, I’m sure of that. We still have some time.”
There is already a non-compete clause in the current lease agreement between the district and Tenet, and Desert Healthcare District CEO Chris Christensen said the language in the new agreement is very similar.
“We can provide all kinds of financial assistance to nonprofits and federally qualified health centers,” Christensen said. “The only thing that it continues to include is we cannot provide direct financial support to competing acute care hospitals. Eisenhower is the main one.”
While the district would like to provide support to Eisenhower, Christensen said “we also have to live by the terms that Desert Regional Medical Center is the district’s asset and we do want to help it perform successfully, and not have competitors that are receiving financial benefit that helps their bottom line and competes against the hospital that we own,” he continued.
Desert Regional CEO Michele Finney, who has worked for Tenet for four decades, said Tuesday that the Desert Healthcare District, which currently owns Desert Regional, does not fund the hospital. As a result, “we’re asking for equal treatment in the lease: If you don’t fund your own hospital operations, you don’t fund other hospital operations.”
There are possible avenues for Eisenhower to receive financial support from the district. If a grant application from Eisenhower aligns with district goals and mission, the district can make a request to Tenet to consider the application, Christensen said. The two entities have worked together in the past, like for a pre-diabetic screening program, but he did not know details regarding how much funding was provided and who received funds.
Finney added there have been many misconceptions regarding the non-compete clause, especially in how free the district will be to distribute grant funds to organizations in the community.
“We do not insert ourselves into the grantmaking authority of the district,” Finney said.
What Eisenhower Health has to say
Eisenhower Health officials have opposed the non-compete clause at numerous Desert Healthcare District board and community meetings. In a statement from Eisenhower Health received Tuesday, the hospital “strongly urges the Desert Healthcare District to reject any agreement that compromises their autonomy and the well-being of our residents.”
“The clear intent and effect of the non-compete language is to prohibit the DHCD and its Foundation from awarding any grant funds to Eisenhower to provide health care services to the community,” Eisenhower stated.
Referring to a portion of the clause that states the district can collaborate with or jointly fund projects with other hospitals, as long as they do not profit another hospital, Eisenhower wrote the language is “so restrictive and narrow” and “eliminates nearly all of the core programs for which Eisenhower might seek grant funding, like behavioral health and primary care expansion, that could greatly benefit the community.”
While there is a possibility for Eisenhower Health to receive financial support, as Christensen pointed out, Eisenhower officials said: “With a direct and clear prohibition against providing financial support to Eisenhower, any grant application that Eisenhower submits to the District, must be reviewed by Tenet, and Tenet has ‘sole and absolute discretion’ to deny Eisenhower’s request.”
“The DHCD owes its residents complete honesty and transparency when educating the public about the lease that Coachella Valley voters must approve or reject in a future ballot initiative. This proposed language undermines the Desert Healthcare District’s mission — and its very purpose — to achieve optimal health at all stages of life for all District residents,” the Eisenhower statement read. “A for-profit corporation headquartered out of state should not have a role in deciding how local taxpayer dollars are spent.”
City councils weigh in on provision
At least three city councils in the valley have discussed the non-compete clause in recent meetings, with two opposing it because they believe it will restrict the elected board’s decisions on how to best use taxpayer money.
The Rancho Mirage City Council was the first to take up the issue in June. Following a presentation by City Manager Isaiah Hagerman, the council unanimously agreed to have the mayor send a letter to board members, and they later adopted a resolution in opposition to the non-compete clause.
“Neither the District’s activities nor the use of taxpayer funds should be subject to the sole and absolute discretion of Tenet Healthcare,” Mayor Steve Downs wrote in the letter dated July 8.
The Palm Desert City Council followed suit during its July 11 meeting, adopting a resolution in opposition to the provision and voting to draft a letter to the board.
The council did so after a study session on the topic that included a presentation from former state assembly member Chad Mayes, who was acting as a consultant for Eisenhower Health.
“Imagine a scenario in which a public entity owned by the public would contract out with a for-profit corporation based out of Texas, and … yet after (they’ve) paid you that amount, (they) have to get your permission to be able to spend those tax dollars,” Mayes said.
The Palm Desert councilmembers largely shared concerns with the broad parameters of the provision.
“This isn’t an Eisenhower issue. This isn’t a Tenet issue,” Mayor Pro Tem Jan Harnik said. “This is the taxpayers and Desert Healthcare (District’s) issue, and … Why would (Desert Healthcare) ever choose to tie their hands for 30 years in conflict with the stated mission of Desert Healthcare? That, I think in my mind, is the question that has to be answered.”
Shortly before the meeting, the council and city manager received a letter from the CEO of the Desert Healthcare District discussing the clause and some recent changes to it, but councilmembers were unpersuaded.
“We cannot allow a private entity, a for-profit entity, who has reduced the quality of working conditions for their nurses, to continue to operate as they have by holding Desert Healthcare District hostage because they can’t afford to pay for their seismic retrofitting,” Mayor Karina Quintanilla said.
A resolution that would ask the Desert Healthcare District board to remove the non-compete clause from the new lease agreement failed with a 2-1 vote during a Desert Hot Springs City Council special meeting on Tuesday. (Two of the three who voted were in favor, but passage would have required a unanimous vote because two of the five councilmembers recused themselves). Several councilmembers attending the district’s community meeting later that evening spoke about the potential issues it would bring to Desert Hot Springs residents.
“One of my challenges is to try and bring health care to our city, and to do that, we’re going to need to attract an urgent care provider, somebody like Eisenhower, maybe somebody like Tenet, maybe Loma Linda,” Councilmember Russell Betts told the district board. “With this non-compete agreement, if we find a great deal and we come to you as a source of funds, and Tenet says, ‘Sorry, it’s not us, you can’t have them,’ our only deal is Tenet or nothing, and if Tenet doesn’t want to come in, we have nothing. This non-compete agreement … is just wholly unacceptable.”
What happens next
The district is eyeing its July 23 board meeting to finalize negotiations with Tenet and vote to put the item on the November 2024 ballot for voters. The deadline to put an item on the ballot is Aug. 9.
If it’s placed on the ballot, Coachella Valley voters will consider the agreement on Nov. 5.
If it’s approved by voters, Tenet and the district would enter into a new lease agreement on Dec. 1. The new lease would commence on May 31, 2027, and end May 21, 2057. The current lease between Tenet and the district expires May 30, 2027.
Ema Sasic covers entertainment and health in the Coachella Valley. Reach her at [email protected] or on Twitter @ema_sasic. Tom Coulter covers the cities of Palm Desert, La Quinta, Rancho Mirage and Indian Wells. Reach him at [email protected].
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