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Controversial Chief Investor in Hospital Sale to Be Replaced

Kali P. Chaudhuri will reduce his role in the Tenet deal, but he could still own up to nearly half of the land the four buildings occupy.

January 21, 2005|Jean O. Pasco | Times Staff Writer

A group of Orange County physicians announced Thursday it would replace a controversial Hemet surgeon as chief investor in buying four local hospitals in order to quell fears about the new owners.

Dr. Anil Shah said his group, Orange County Physicians Network, would at least match the $20-million pledged by Dr. Kali P. Chaudhuri toward buying the hospitals, which are considered critical to the county's emergency healthcare system. The facilities handle a quarter of the county's emergency room visits and house one of its three trauma centers.

"Dr. Chaudhuri was a dominant player [in the deal], and he was unacceptable to most people," Shah said at the end of a public hearing on the sale held by Sen. Joe Dunn (D-Santa Ana) in Anaheim.

Chaudhuri bought and then closed a chain of medical clinics in 2000, shutting 38 clinics that served 300,000 patients across Southern California, including 56,000 in Orange County. He also invested in clinics that failed in 2001 and 2002.

Chaudhuri said at Thursday's hearing that he agreed to back out as the largest investor in the deal between Integrated Healthcare Holdings Inc. of Costa Mesa and Tenet Healthcare Corp., which is selling four of its nine Orange County hospitals. However, he still will own up to 49% of the land upon which the hospitals sit and will have an option to buy up to 25% of the business in two years, contingent on state approval.

"I'm more than willing to reduce my part to accommodate" the new investors, he told Dunn.

Dunn said he wanted to confirm the details of the sale -- and Chaudhuri's reduced role -- before recommending that the state Department of Health Services issue new licenses for the hospitals. The revised financing also must be approved by Tenet.

Dunn said he would reconvene the hearing next week once details are final.

"My interest in this was always focused on Dr. Chaudhuri and his track record," Dunn said.

The original sale deal alarmed some physicians and patient groups still stinging from the collapse of Chaudhuri's medical clinics. Three of the four hospitals for sale -- Western Medical Center-Santa Ana, Western Medical Center-Anaheim and Coastal Communities Hospital in Santa Ana -- provide care to indigent patients. The fourth is Chapman Medical Center in Orange.

The Board of Supervisors scheduled a similar public hearing on the sale for 1 p.m. Tuesday, with testimony to be sent to the Department of Health Services. The department has said it will decide by Jan. 31 whether to approve the new owners.

Dr. Michael Fitzgibbons, who heads the medical executive committee at Western Medical Center-Santa Ana, said doctors had one unresolved demand of the new owners: to ensure that the hospitals can't contract for goods and services with private companies in which Chaudhuri has a controlling financial interest.

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