Announcement of sale stuns staff at Encino-Tarzana.

The announcement by Tenet Healthcare Corp. that it had decided to put its only Valley hospital, Encino-Tarzana Regional Medical Center up for sale alongside 18 of its other California hospitals cut like a knife at the 236-bed facility.

"It was a big shock to all of us, although we did know that there needed to be some changes at Tenant." said local attorney Lee Alpert, who has served as the hospital's chairman of its governing board of directors for nearly two decades. "But being sold was not something that was on our radar screen."

Troubled Santa Barbara-based Tenet has said it made the decision to unload the 19 facilities because it can't afford to pay the roughly $1.6 million it needs to complete state mandated seismic upgrades, a requirement stemming from the damage done to Valley hospitals during the 1994 Northridge Earthquake.

Unlike other hospitals across the Valley, Encino-Tarzana was not damaged during the quake, and, as a result, Tenet is not eligible to receive any assistance from the Federal Emergency Management Agency.

Dale Surowitz, Chief Executive Officer at Encino-Tarzana said he spent much of the last week in meetings with administrators, physicians and other staffers to discuss the changes and assure them that closing the hospital was not an option at this point.

"The issue we are focusing on now is continuing with our core services," said Surowitz. "We've told our employees that we are going to continue to provide the outstanding level of services that we always have."

But the sale announcement has frozen Encino-Tarzana's long-term plans for growth and addressing its retrofit requirements. Although the hospital had been weighing out several options, it was leaning toward a master plan for development that would ultimately combine the two campuses.

"Obviously that was one of the scenarios we were looking at as a way to address the retrofits, but now we will have to wait until we have a buyer," Surowitz said. Encino-Tarzana has a combined total of 236 beds and an 80 percent occupancy rate. The Encino campus was built in 1954 and Tarzana was built in 1973. Combined, the two campuses have 1,650 employees.

Tenet says it intends to hold on to 17 of its other California hospitals, which, according to David Langness, the company's director of communications, will only cost roughly $300 million to upgrade.

"You can see that that is a huge difference," Langness said.

Restructuring plan

Langness said the push to sell the hospitals has been in place for several months as part of an overall restructuring plan for the cash-strapped company that has been plagued by federal investigations into allegedly performing unnecessary procedures and overcharging the state's Medicare program. Those allegations culminated in the 2003 departure of Tenet's Chief Executive Officer, Jeffrey C. Barbakow, who is reported to have left the company with an agreement to receive three years of severance payments equal to his annual salary, plus bonuses and stock options.

Langness said he believed the market for Tenet's facilities was strong and that the company had received several phone calls the day of the announcement from potential buyers for many of its facilities, including some of its own physicians.

"Doctors do this all the time," said Langness, who declined to say if any doctors from Encino-Tarzana had expressed interest in buying that facility.

Langness said the company's goal was to sell all 19 hospitals by the end of the year and that until buyers come forward, the goal was to continue the current level of service and care.

"We are convinced these hospitals will continue to be viable to operate normally," said Langness. "We just sold off 12 hospitals across the country. So we certainly know what we're doing."

Tenet officials have repeatedly said that non-profit hospital groups would be ideal candidate buyers because they qualify for bonds and other tax incentives that for-profit hospital chains do not, and, as such, could withstand the price tag of a facility in need of millions of dollars of mandated renovation.