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.