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Tarzana Purchase Shores Up Valley Health Services

Now that Providence Health & Services has purchased Tarzana Hospital for $89 million, a future that once looked bleak for the medical center appears bright. Not only does Providence plan to make upgrades and expand services at the 245-bed hospital, it also intends to keep Dale Surowitz on board as CEO and the hospital’s 1,200 member staff intact. “I know that Providence wants to put a lot of money into the hospital in terms of capital equipment and other kinds of things, like information systems, that will make us even better,” said Lee Alpert, chair of Tarzana’s governing board. “It’s an exciting time for our board and for our staff. I’m very relieved, very happy that this transaction is occurring.” With Tarzana, Providence owns a total of three area hospitals, including Providence St. Joseph in Burbank and Providence Holy Cross in Mission Hills, which is also a partner of Summit Surgery Center in Santa Clarita. Now the owner of three regional medical centers, Providence appears poised to dominate Valley health care. However, Arnold Schaffer, vice president and chief executive of Providence’s California region, said that the company isn’t seeking to establish a monopoly here. “We don’t plan to buy anymore in the San Fernando Valley,” Schaffer said. It took a total of three years just for Providence to enter into an agreement to purchase Tarzana. The process was so lengthy largely due to the hospital’s former owner, Tenet Corp., being unable to reach an agreement with HCP Inc. about selling Tarzana. HCP Inc. is the real estate investment trust that owns the building and the land Tarzana occupies. There were also ongoing disputes about whether HCP or Tenet was responsible for making costly state-mandated seismic repairs to the hospital building. Neither company returned phone calls from the Business Journal about how an agreement was finally reached. However, there was mounting pressure from the public, medical staff and local legislators for the two entities to resolve their differences, as the hospital had been on sale for more than four years and the lease on the property it occupies expires next February. Public outcry intensified when Victorville-based Prime Healthcare bought Tarzana’s former medical partner, Encino Hospital, in early June. “Originally, we were looking at (buying) both of them, but it became rapidly apparent to us that the seismic needs would only allow us to focus our energies on just one (hospital), and that was Tarzana,” said Arnold R. Schaffer, vice president and chief executive of Providence’s California region. Schaffer said that he doesn’t know how much the seismic repairs will cost, but initial reports have suggested that millions of dollars will be needed for retrofitting. Given that, Providence will launch a campaign of sorts to inspire the public to financially contribute to the hospital. Additionally, said Schaffer, “We now have to acquire some equipment (for Tarzana) because it’s been for sale for four-and-a-half years. It could use a fair amount of medical equipment to bring it back to a state-of-the-art position.” Providence also plans to apply for Tarzana to become a Medi-Cal contracting hospital with the State of California. Moreover, a spiritual care department will be incorporated into the hospital for patients of all faiths, and palliative and end-of-life care services will be expanded. Schaffer said that Providence has long thought highly of Tarzana. The company’s favorable impression of the hospital coupled with fear of its closure motivated Providence to purchase it. “It’s always been an exceptional hospital,” Schaffer said. “We were very, very concerned it could possibly have gone down like so many have gone down. Eleven hospitals have closed in the past five years, three in the San Fernando Valley. Here (at Tarzana), we saw a historically exceptional hospital with good nurses and good doctors. Access to care that’s really what made us get involved.” Alpert also points out the fact that Schaffer has intimate knowledge of the hospital. “Arnie Schaffer was CEO of Tarzana for some time years ago,” Alpert said. “He knows our facility. He’s an outstanding individual. It’s just kind of a match made in heaven for our patients.” Schaffer believes that each hospital it owns in the Valley makes a good match for the other. “We think the services provided (at each hospital) are very complementary,” he said. “Tarzana has an absolutely spectacular pediatric program. Holy Cross has one of the finest trauma centers in Los Angeles County. St. Joseph will soon open the largest cancer center in the San Fernando Valley and surrounding areas.” Because Providence plans on maintaining Tarzana’s current staff, the hospital will likely continue to have a niche on the pediatric market. However, one facet of the hospital that will be affected by the sale is Tarzana’s governing board. That’s because, rather than assign each hospital its own governing board, Providence assigns governing boards to a region, which means Tarzana’s board of governors will be dissolved. Schaffer said that Providence’s regional board, which oversees medical centers in the San Fernando and Santa Clarita valleys, will begin working with Tarzana’s board of governors between now and Aug. 31 to explore how best to incorporate the members, according to Schaffer. He, for one, would love to see Alpert remain on the board, but that’s not his decision to make. “I know that Lee has worked very diligently for the hospital for over 20 years,” Schaffer said. “He’s very respected and very regarded. People with Lee’s qualities and commitment to the hospital are hard to find. I hope he plays a vital role in our future.” Alpert said that he will be fine if he’s no longer part of the board that governs the hospital. “If I’m not asked, I’m pleased to have had the honor to serve,” he said. SNAPSHOT: The Tarzana Property January 2004: Tenet Corp. announces that Encino-Tarzana Regional Medical Center is for sale. September 2007: The Business Journal reports that Providence Health & Services is in talks to purchase Encino-Tarzana Regional Medical Center. December 2007: The California Building Standards Commission approves new regulations for determining how at risk the state’s hospital buildings are of collapse in an earthquake, a major development for Encino-Tarzana Regional Medical Center because the hospital did not qualify for federal funds towards retrofitting. March 2008: Local lawmakers introduce legislation aimed to prevent the closure of Encino-Tarzana Regional Medical Center and other hospitals in its predicament. Tenet Corp. announces it has reached a proposed settlement with HCP Inc. June 2008: In the beginning of the month, Prime Healthcare announces its purchase of Encino Hospital. At the end of the month, Providence Health & Services announces its purchase of Tarzana Hospital. August 2008: Providence’s purchase of Tarzana Hospital is expected to close.

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