Strategic decision support: Operate or lease?
Desert Healthcare District
Facing the expiration of its long-term facility lease, a hospital district turned to Gibbins Advisors to evaluate its options. Our assessment provided clarity and confidence, leading to a strategic decision by the District and community to extend the lease and preserve stability.
TEAM Ronald Winters, Clare Moylan, James Davis, Tyler Brasher
Situation Overview
With its long-term lease of Desert Regional Medical Center to Tenet Healthcare expiring in 2027, Desert Healthcare District faced a pivotal crossroads: negotiate a 30-year lease extension with Tenet or assume direct operating control and revert the hospital to a standalone nonprofit. To guide this critical decision, the District engaged Gibbins Advisors as an independent advisor to deliver a thorough evaluation and objective recommendations.
Images are for illustrative purposes only.
Summary
Sector:
District-owned, acute care hospital leased to for-profit operator
Approx. Size:
368 bed-facility
Our role:
Financial Advisor
Key Results:
Delivered a comprehensive financial and operational assessment of District options
District chose to extend the lease which was supported by a later community vote, preserving stability.
Role
Gibbins Advisors served as the District’s financial advisor, providing strategic decision support and evaluating the feasibility of assuming hospital operations from its tenant/operator.
Approach
Analysis based on publicly available information and key assumptions developed with the District, including a three-year interim operating period.
Assessed and benchmarked services and operations, revenue and profitability, transition requirements, and balance sheet impact.
Developed a high-level financial model and summary risk assessment to help the Board understand financial, operational, and strategic implications of a potential operational transition.
Key Accomplishments
Produced a comprehensive report analyzing financial, operational, and strategic risks of the District assuming hospital operations after lease expiration. Identified substantial capital requirements, operational risks, and execution challenges associated with a transition to District control.
Presented findings to the District Board and at a public meeting, ensuring transparency and stakeholder understanding of the implications.
District chose to extend the lease which was supported by a later community vote, preserving stability.
