‘We’re at a logjam’: Negotiations with Tenet Healthcare over future of Desert Regional Medical Center stall

The Desert Healthcare District Board of Directors expressed frustrations with the pace of negotiations over the future of Desert Regional Medical Center in Palm Springs Wednesday evening, with its members indicating they are seeking other alternatives. 

The district, a public entity whose board of directors is elected by voters, owns the hospital and leases it to Tenet, a for-profit corporation. With state-mandated seismic refurbishments required by 2030, at an estimated cost of $222 million, district officials are trying to find solutions to avoid taxpayers footing the bill.

During a public meeting held Wednesday evening, the board of directors presented the current state of negotiations to the public for the first time, putting on full display what they see as Tenet’s lack of cooperation. Over a dozen people who spoke during the meeting’s public comment period were split over whether Tenet should continue controlling the hospital. 

Tenet publicly presented its new lease offer in September. Under the proposed terms, the company would make an initial payment of $75 million for community health initiatives, followed by annual lease payments starting in 2027 totaling $602 million. It wants the option to purchase the hospital at the end of the lease and make a final payment of $75 million to the district.

Steve Hollis, a consultant working for the district, said Tenet’s terms were a surprise. He said district officials were hoping to get a lease that looked similar to the one they have now, which was paid upfront and expired in 30 years, at the end of which the district maintained ownership. 

The district responded to Tenet’s proposal in early October and has not had a formal response from Tenet since then. There have been a few informal conversations, but Hollis said “disappointingly little progress” has been made. 

Hollis said the offer puts the district in a bind. 

“The district is acutely aware of the fact that there’s a significant health crisis throughout the communities they serve in areas of care that are outside the hospital,” he said, referring to the valley’s lack of primary care physicians, OB/GYN providers, drug rehabilitation, and psychiatry care.

Hollis said these issues exceed the district’s current resources, concluding, “[The district] is conscious that a transaction such as the one Tenet has proposed would give them the resources to step up and make a difference in the community.” 

Also at play is that the district is grappling with its fundamental purpose while considering the lease. 

“The district has to choose whether it is going to be a big grant fund writer for non-acute care needs,” Hollis explained, “or is it going to be a landlord with its assets tied up in the hospital.”

In a letter to Tenet read aloud during the meeting, the board of directors said, “Given the lack of progress in our talks, we believe we have a duty on behalf of the community that we serve to explore alternatives to a lease extension with Tenet.”

“It takes two people to dance, and it takes two people to negotiate. You can’t dance with yourself.”

— Desert Healthcare District Director Arthur Shorr

However, the district can only explore other options with Tenet’s cooperation in releasing data it owns. That data can then be used when the district starts looking for alternatives. Tenet has not handed over the data, citing issues with confidentiality and liability.

“We’re at a logjam,” Hollis said. “We’re not proceeding in the discussion with Tenet. We need to talk with others, but we don’t have the data we need to enable us to talk with others.” 

Directors present at the meeting made remarks before voting to formally submit the letter to Tenet. Director Les Zendle noted that his biggest priority is continuity of care for patients. He said he favored a 30-year lease but without a unilateral buying option.

Director Arthur Shorr was more blunt. 

“We are very frustrated,” he said. “It takes two people to dance, and it takes two people to negotiate. You can’t dance with yourself.” 

With the negotiation moving at a “snail’s pace,” Shorr said he is “questioning the motives of the organization that would attempt to do this.”

Shorr took particular issue with the yearly lease payments. 

“Imagine getting paid over a 30-year lease,” he said before comparing the deal to Eastern Air Lines and Enron. “Investing in a company and getting your payments over a 30-year period is very dangerous and one of our major concerns.”

Director Leticia De Lara echoed what her colleagues said and hoped there would be progress in the coming months. 

“We do not want to leave things hanging and leave our community wondering what is going to happen,” she said. “We want to make this work.” 

Along with voting to formally submit the letter to Tenet, the directors voted to direct staff to present them with a consultant to determine how to take back the hospital. 

Any decision on the hospital’s future will need significant public input and a public vote, adding to the time crunch. The district estimates the earliest possible time for the public to vote on any transaction would be November 2024.  

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