Desert Healthcare, Tenet update non-compete language; still has Eisenhower restrictions

After community officials voiced their concerns regarding what they called a "wholly unacceptable" non-compete clause in Tenet Health's proposed 30-year lease to operate Desert Regional Medical Center, the Desert Healthcare District and Tenet have updated the language to clarify the provision.

The district was eyeing its July 23 board meeting to finalize negotiations with Tenet and vote to put the item on the November ballot for voters. However, the item has been removed from this week's agenda to allow for further discussions.

The deadline to put an item on the ballot is Aug. 9.

The proposed lease is between Tenet and the hospital's owner, the Desert Healthcare District, a public agency run by an elected board. The agreement, including the updated non-compete clause language, is available to read at www.dhcd.org .

A draft lease from last week included a non-compete clause stating that the district could not own any interest in, manage, or operate any current or future hospital, healthcare facility, provider, or business within its boundaries.

It also stated that the district could collaborate with or provide joint funding with other acute care hospitals for projects, as long as those projects were outside the scope of the hospitals' licensure and provided free of charge so as not to generate revenue for the competing hospitals.

Critics were concerned that the clause would restrict the district's grant program, and Eisenhower Health, which is Desert Regional's main competitor, said certain language was "restrictive and narrow."

The latest non-compete clause, which The Desert Sun received Friday night, is divided into two sections. The first states that neither the district nor any of its entities, including the Foundation, will directly or indirectly provide financial assistance or grant any funds for any project within the geographical boundaries of the district (stretching from Desert Hot Springs to the Salton Sea) if the revenues associated with the project would be reflected on the financial statements of another acute care hospital.

"Directly or indirectly" is defined as any project or service that financially benefits another acute care hospital or affiliated entities or operations.

This new language would restrict the district from awarding grants to Eisenhower Health if projects would generate revenue for the hospital.

The second part of the clause states that the district will not directly or indirectly own any interest in, manage, or operate any "competing business," meaning any healthcare-related business currently conducted by Tenet within the district's geographical boundaries (those specific competing businesses will be listed in the agreement). This excludes any businesses already owned by the district or the district from owning a medical office building adjacent to the leased premises, which it operates as a landlord for other providers.

The district will be allowed to own "real property" (such as a medical office building, urgent care clinics, and clinics) in medically underserved areas and lease it to tenants who accept government-funded health care reimbursement (e.g., Medi-Cal and Medicare) and "do not provide services under the licensure of another acute care hospital or for which the revenues associated with such services would be directly or indirectly reflected on the consolidated financial statements of another acute care hospital."

This item will hopefully "provide clarity" regarding expanding healthcare services throughout the valley, Desert Healthcare District CEO Chris Christensen said. Local officials who spoke at a recent community meeting were concerned that the non-compete clause would prevent non-Tenet healthcare operators from providing services in the valley.

"It's saying that we can own and operate ... another medical office building, like we have with the Las Palmas Medical Plaza, urgent care clinics, regular clinics, and we could lease them. We can't lease to Eisenhower, but we could do a (federally qualified health center)," Christensen said. "We could also rent to a medical provider like we do here at the Las Palmas Medical Plaza, as long as they serve both Medi-Cal and Medicare patients."

Tenet said in a statement: "The District will continue to be able to grant funds throughout the Coachella Valley and own and lease property in underserved communities like those in Desert Hot Springs and the East Valley, including the City of Coachella, Thermal, and Mecca. Concerns that the District would be prevented from investing in such healthcare facilities are unwarranted. The District has historically supported non-profit, non-hospital operated clinics and federally qualified health centers (FQHCs) within its boundaries. The Board retains that ability, and the revised language clarifies this further."

Eisenhower Health spokesperson Lee Rice said in a statement Saturday: "Eisenhower Health is disappointed that the new lease language appears to more broadly and negatively impact Eisenhower from working with the Desert Healthcare District to increase health care access across the valley. Eisenhower is exploring all options at this time."

Christensen said he's hopeful there will be opportunities to provide funding for Eisenhower Health programs as long as they do not generate revenue for the Rancho Mirage hospital.

The lease is still not final, and Coachella Valley voters will ultimately decide whether it is approved, likely as soon as the November election.

During Tuesday's Desert Healthcare District board meeting, Christensen said secondary legal counsel has been obtained to help analyze and review the non-compete language in the lease purchase agreement. The legal counsel's billing rate is $840 per hour.

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: Desert Healthcare, Tenet update non-compete language; still has Eisenhower restrictions