A Victorville-based chain plans to spend at least $30 million upgrading
three Southern California hospitals it purchased recently, according to
the company’s founder and chairman.
Prime Healthcare Services acquired hospitals in Garden Grove, Encino and
San Dimas from Tenet Healthcare Corp. in Dallas, said Prem Reddy, a cardiologist
and chairman of Prime Healthcare’s board of directors.
The transactions, announced June 2, are subject to regulatory approval
and are expected to be approved formally in late June or early July, Reddy said.
He declined to disclose the price Prime Healthcare paid for the 151-bed
Encino campus of Encino-Tarzana Regional Medical Center, the 167-bed Garden
Grove Hospital Medical Center and the 93-bed San Dimas Community Hospital.
The facilities are “underperforming,” he said.
Since its founding in 2001, Prime Healthcare has specialized in buying
hospitals that were losing money and restoring them to profitability.
Prime Healthcare will own 12 Southern California hospitals, the same number
owned by Kaiser Permanente, after the San Dimas, Garden Grove and Encino-Tarzana
purchases are approved.
Separate negotiations for the Tarzana campus are in their final stages,
according to a Prime Healthcare release.When all three sales are approved,
Prime Healthcare will have purchased 11 hospitals during the past 12 years.
All three hospitals will continue to operate as acute care facilities.
The Encino-Tarzana hospital lost $10 million during fiscal year 2007,
while the Garden Grove and San Dimas facilities’ financial performance
were “marginal” during that time. Neither produced a positive
cash flow, said Stephen L. Newman, Tenet Healthcare chief operating officer.
Prime Healthcare – whose holdings include Centinela Hospital Medical
Center in Inglewood and Huntington Beach Hospital – plans to spend
at least $10 million improving each of its three new facilities, Reddy said.
Those upgrades will include infrastructure improvements, upgraded and expanded
emergency care and better computer information systems in each hospital
that will communicate among various Prime Healthcare facilities.
“The idea is to improve all of the hospitals and allow them to run
successfully,” said Reddy, a cardiologist who has been a medical
doctor for 30 years.
Money for upgrading all three hospitals will come from various sources,
including Prime Healthcare’s own funds and loans from lending institutions,
particularly real estate investment trusts.
“We’ll have a good overall presence, about 8,000 employees
and 2,000 beds,” Reddy said. “We’ll be a player, but
we won’t have anything close to market dominance. Our plan is to
keep buying more underperforming hospitals that we think we can improve
and see where that approach takes us.”
Prime Healthcare has been criticized by some officials in the medical community
for its practice of canceling contracts with insurance providers so it
can charge those insurers higher rates.
That approach has forced some people to seek medical attention at other
facilities at a time when hospitals are cutting back on services, according
to Prime Healthcare’s critics.
His company has kept hospitals from closing, often in low-income areas
that otherwise wouldn’t have any medical care, Reddy said.
“If the insurance providers would pay us a reasonable rate we would
sign contracts with them, but they don’t,” he said.
Prime Healthcare provides health care, especially emergency services, in
some places that otherwise wouldn’t have any, said Jim Lott, executive
vice president of the Los Angeles-based Hospital Association of Southern
California. “They have accepted the challenge of keeping a lot of
hospitals open that probably would have closed and they deserve a lot
of c redit for that,” Lott said.