Prime Healthcare

By Stuart Pfeifer
January 1, 2014

Atty. Gen. Kamala D. Harris is jumping into a heated battle over the purchase of six struggling nonprofit Catholic medical centers in California by the fast-growing Ontario hospital chain Prime Healthcare Services Inc.

The sale of the nonprofit Daughters of Charity Health System, which includes St. Vincent and St. Francis medical centers in Los Angeles County, to profit-making Prime requires Harris’ approval.

Supporters and opponents are gearing up to promote their views at a series of public hearings that begin Monday in Lynwood and run through Friday.

Prime’s offer has the support of Daughters of Charity and the California Nurses Assn., a union that represents 1,800 Daughters of Charity nurses.
Prime Healthcare’s deal to buy hospital chain is scrutinized
St. Vincent Medical Center in Los Angeles is one of six hospitals in a planned sale to Prime Healthcare. (Brian van der Brug / Los Angeles Times)

But the sale is hotly opposed by the SEIU-United Healthcare Workers West, the Roman Catholic chain’s largest union and a longtime, outspoken critic of Prime’s business practices.

As part of the deal, Prime agreed to pay off more than $400 million of Daughters of Charity’s tax-exempt bonds and other debt, and the company would assume nearly $300 million of pension liability.

Prime also promised to keep the six hospitals open for at least five years. The Ontario-based chain has said it would retain most of the hospitals’ 7,600 jobs but would make some cutbacks in middle management.

The attorney general’s office is holding hearings in each of the communities served by the Daughters of Charity hospitals: Los Angeles, Lynwood, San Jose, Gilroy, Moss Beach and Daly City. A decision is expected in early February.

Prime’s biggest obstacle is well-organized opposition from SEIU-United Healthcare Workers West, which argues that Prime puts profit first at the expense of patient care.

The union has spent years battling Prime, conducting public protests and issuing news releases that attack the hospital chain for its billing practices, litigious history and what the union calls a high rate of admitting patients who visit its emergency rooms.

“They have a long track record of providing care in a way that drives up costs and reduces quality,” said Dave Regan, president of the SEIU-United Healthcare Workers West. “They’re not a good citizen in the healthcare community.”
They have a long track record of providing care in a way that drives up costs and reduces quality. They’re not a good citizen in the healthcare community. – Dave Regan, president of the SEIU-United Healthcare Workers West

The union, which represents about 2,600 of the chain’s 7,600 employees, has urged Harris to reject the sale. It supports a competing offer, previously rejected by Daughters of Charity, from private equity firm Blue Wolf Capital.

Prime, which operates 29 hospitals in California and eight other states, is owned by Dr. Prem Reddy, a cardiologist who shaped the company’s growth through a series of acquisitions of troubled hospitals during the last decade.

Reddy said his company has never closed a hospital and has managed to turn money-losing hospitals into profitable ones by cutting middle management and negotiating favorable reimbursement contracts with insurers.

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