July, 1998
This article was written by the Consumers Union Southwest Regional Office.
In October 1995, Tenet Healthcare Corporation, an investor-owned company from Santa Barbara, California purchased Providence Memorial Hospital, a nonprofit acute care hospital serving the greater El Paso region. Providence and Tenet officials did not notify the Texas Attorney General or involve the El Paso community in the sale negotiations, even though citizens and public officials were in the midst of negotiations with the hospital for a new clinic in an under-served area. After the sale, the reorganized Paso del Norte Health Foundation voted to change its mission from direct health services to the indirect promotion of health through education and prevention.
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Some board members negotiated the sale without the knowledge of other board members, including some Providence physicians. The chairman of the former nonprofit Providence Memorial Hospital board, Robert Hoy, acknowledged that physicians on the board "were kept in the dark" because they would have been "vehemently opposed." |
Providence, which first opened its doors as a nonprofit facility in 1952, was guided by a mission to provide "medical care and ministry to the sick, the injured, the helpless, the infirm, the afflicted and the maimed, of all creeds, colors and nationalities, without regard to the patient's ability to pay."1 During its first 40 years Providence increased the quantity of services it provided and eventually expanded into a 436-bed hospital.2 In 1994 it reported a comfortable net income of $12.1 million on revenues of $151.4 million for 1993. 3
However, Providence Memorial Hospital Board members and executives began discussing in early 1995 the possibility of selling the hospital. According to Robert Hoy, former chairman of Providence's nonprofit board, the board believed that the hospital could not survive in the long haul given the changes coming in the health care market and the intense competition from for-profit health care companies like Columbia/HCA.4
Providence was El Paso's last nonprofit hospital. The city's other major private hospitals are owned by Columbia HCA. Consumer advocates and some El Paso employers worried
that the shift in ownership would mean less access to care for the poor, the potential loss of vital but costly services and higher prices for patients and their employers.5 While Pete Duarte, CEO of the county-operated Thomason Hospital, said he couldn't definitely blame the Providence sale for a 10% increase in charity patients seeking services at the public hospital during the year following the sale, he suspected it may have played a part.6
The Providence board approved the sale of the hospital in July 1995 and finalized a deal with Tenet for approximately $130 million in October 1995, assigning the proceeds to the reorganized nonprofit, now called the Paso del Norte Health Foundation.7
These proceeds will no longer be used in pursuit of the hospital's original charitable purpose--direct indigent care. Instead, the foundation has taken a leading role promoting programs designed to change people's health-related behaviors.8 The foundation completed a research study, the El Paso Health Report, to identify the behavioral factors of the populations in the region which impact the health of the community. This report serves as the basis for the foundation's grant allocations.9
During the negotiations for the sale of Providence, and later during its reevaluation of its mission, the Providence board kept the public out of the process.
There is no evidence that Providence Memorial Hospital officials notified the Texas Attorney General or the public about the pending sale to Tenet. Further, there is no evidence to show that Providence officials provided the public access to information or sponsored public hearings or any other forum for the community to voice its concerns about the terms of the sale. In fact, hospital and foundation officials declined to release any transaction documents to us for the purpose of this report.10
The exact financial terms of the sale were never released to the public. The board circulated a financial study showing a gloomy economic future for the hospital, but did not release it to the public. Certain board members negotiated the sale without the knowledge of other board members, including some Providence physicians. The chairman of the former nonprofit Providence Memorial Hospital board, Robert Hoy, acknowledged that physicians on the board "were kept in the dark" because they would have been "vehemently opposed." 11
Although Providence officials tried to negotiate with Tenet in secret, word of the pending sale of Providence Hospital spread throughout El Paso and a group of community activists organized a campaign to fight it. Citizens circulated a petition to protest the conversion of the nonprofit hospital and garnered hundreds of signatures. El Paso city representative Stan Roberts sent a letter to Texas Attorney General Dan Morales arguing that the sale would destroy the original charitable mission of Providence Memorial Hospital. 12 Roberts was particularly troubled because, at the time of the sale, Providence had committed to opening a new clinic in Northeast El Paso and had already purchased the land. Tenet, on the other hand, did not agree to complete this project.13 After purchasing the hospital, Tenet also scaled back plans to expand specialty pediatric services.14 According to news reports, the Attorney General failed to intervene because the board negotiated a fair market value for the assets.15
The former hospital board, now the foundation board, continued to keep the public in the dark after the sale, when it amended the charitable corporation's mission. Although the Paso del Norte Health Foundation board spent much of 1996 determining its new vision and mission for allocating grants, the board did not sponsor any formal meetings to garner public input on the foundation's strategic mission, according to CFO Jim Johnson.16 Armed with $130 million in proceeds from the sale, the board decided to focus on giving health education and prevention grants rather than grants for direct health services.
The board's decision to move away from the hospital's original mission of direct services to all comers, regardless of ability to pay, was controversial. Many community leaders, including officials from the lone public medical facility in El Paso, Thomason Hospital, wanted the foundation to provide grants for direct medical care for the needy.17 El Paso, with its high poverty rate and strained public health care system, has many immediate care needs. John Cook, leader of a group which fought the sale, believed that the board had once committed to using the proceeds for health care, but then limited their focus. "The person in need of medical services is caught between a rock and a hard place," he told the El Paso Herald-Post.
The board concluded that the foundation should not provide money for direct, public medical care because it was too costly.18 It would fund programs "exclusively to address the health needs of the general population residing in the El Paso, Texas geographical area," including surrounding counties in Mexico and New Mexico.19 And these programs would "effect long term improvements in the health status of the population in the greater El Paso region through education and prevention.20
At the end of 1997, the foundation's net assets totaled approximately $183 million, a significant increase from the $123 million it reported at the beginning of 1996. 21 During that same period, it has given out or committed to giving about $12.6 million in grants.22 Its current grants focus exclusively on long range improvements to health infrastructure and health care planning. Many of its programs promote exercise ($2.5 million over five years for a walking campaign, $1.4 million over five years to promote healthy eating and exercise in elementary school children). Although some are only indirectly health-related ($378,000 for bike paths to connect city parks, for example),23 most focus on special issues of critical importance to El Paso, like When Water Works for Health ($1.7 million for a school and community based program to address problems with drinking water and sanitation).24
