Prime Healthcare Services

History

Prem Reddy founded Prime Healthcare Services in 2001 with the purchase of Desert Valley Hospital.

In 2014, Garden City Hospital was sold to Prime Healthcare Services in a deal valued at $76 million. As of that point Prime Healthcare operated 27 hospitals. The full listing of hospitals and their acquisition year is listed below.

The company's specialty is overhauling distressed hospitals, and it had an “aggressive” expansion plan for 2013. At a new facility, Prime installs medical directors to focus on quality of care, implements staff training programs and then holds facilities to task to raise standards on par with its other hospitals. As a result, once-struggling facilities have now earned a number of quality awards from organizations including the Joint Commission, the American Heart Association and the Leapfrog Group. In 2016, Becker's Hospital Review listed four Prime Healthcare hospitals in a list of 49 hospitals with the lowest rate of serious complications.

“Prime is one of the companies that's very, very good at turning around distressed hospitals,” said Joshua Nemzoff, president of M&A consulting firm Nemzoff & Co. Nemzoff, who was tasked in January 2011 with helping to find a buyer for Landmark, acknowledged that Prime has been the target of what he described as “a bit of a smear campaign by the SEIU,” but said there's no weight to the allegations. “It's a public relations issue, but when you look behind the accusations that have been made, they're completely baseless.” Two additional stories on hospitals acquired and turned around by Prime Healthcare are featured in this article by Modern Healthcare.

Awards and recognition

Prime Healthcare has achieved national recognition by having more 2016 Healthgrades Patient Safety Excellence Award recipients than any other health system in the country. Twenty Prime Healthcare hospitals achieved this honor, including all 15 California hospitals. The distinction places the Prime Healthcare hospitals among the top 10% of hospitals in the nation for excellent performance as evaluated by Healthgrades, the leading online resource for comprehensive information about physicians and hospitals. Hospitals were evaluated based on the occurrence of observed incidents and expected performance for 14 Patient Safety Indicators as defined by the Agency for Healthcare Research and Quality. This Healthgrades designation recognizes superior performance in hospitals that have prevented the occurrence of serious, potentially avoidable complications for patients during hospital stays.

In 2013, Prime Healthcare Services was named as one of the "Top 15 Health Systems" in the country by Truven Health Analytics, formerly Thomson Reuters. Prime Healthcare Services was also named top 15 in 2012. In total, the system has been named as a top system three times in five years. PHS was also recognized as a Top 10 Health System in 2009 by Thomson Reuters in its first-ever landmark study of health systems, the only West Coast health system to receive this recognition.

A number of its hospitals have been consistently named in Thomson Reuters’ Top 100 Hospital rankings as well as U.S. News & World Report’s Best Regional Hospitals in Los Angeles. Its hospitals were also recognized in the top 18% as Top Performers in the Nation on Key Quality Measures by the Joint Commission.

More recently, eight of Prime Healthcare Services' hospitals were named among the "100 Top Hospitals" in the nation by Thomson Reuters. Five of the nine California community hospitals that earned this distinction were Prime Healthcare hospitals.

Department of Justice Investigation

United States Department of Justice has started a criminal civil investigation for Medicare Fraud by Prime Health Care and its chief executive.Criminal Investigation

Profits and cost-cutting

In 2007, the Los Angeles Times ran a news story that alleged that the policies of Prime HealthCare Services, Inc. resulted in higher than average profits at the possible cost of patient care. According to the Times story, "When Reddy's company, Prime Healthcare Services Inc., takes over a hospital, it typically cancels insurance contracts, allowing the hospital to collect steeply higher reimbursements. It has suspended services — such as chemotherapy treatments, mental health care and birthing centers — that patients need but aren't lucrative.... On four occasions since 2002, inspectors have found that Prime Healthcare facilities failed to meet minimum federal safety standards, placing their Medicare funding at risk.”

Septicemia and malnutrition

Prime Healthcare is under investigation by the United States Department of Health and Human Services and the California Department of Justice about concerns over a reported spike in septicemia. The investigation centers around whether the spike in septicemia represents a large public health issue or multimillion-dollar Medicare fraud. Six Prime hospitals ranked in the 99th percentile of U.S. hospitals for septicemia and five were in the 95th percentile.

There are also claims that Prime Healthcare Service engages in upcoding elderly patients to malnutrition. In Mount Shasta, Victorville and the Mojave Desert, Prime has had high rates of kwashiorkor among its elderly patients. At Shasta Regional Medical Center, Prime reported 16.1% of their Medicare patients suffered from kwashiorkor, while California’s average for Medicare patients is 0.2%.

Medicare allowances

Prime also has come under scrutiny by investigators over expenses on luxury items disallowed by Medicare. Authorities have flagged $491,000 in operating costs in relation to a Eurocopter for the former Chief Executive Officer, Lex Reddy, brother-in-law of Prem Reddy. The Department of Health Care Services also identified and disallowed $820,000 for the lease and taxes on a home in Beverly Hills and $303,000 in depreciation on the helicopter and a Bentley. The funds flagged by auditors do not represent tax dollars that have been sent to Prime. Rather, they signify sums that the state will not recognize when compensating the chain for its corporate office expenses.

Prime is currently being sued by Kaiser Permanente for "trapping patients" and then sending their insurance companies highly inflated bills.

Emergency rooms

In a similar manner, Prime Healthcare has been accused of transferring high numbers of patients from its emergency room to its hospital beds, specifically with patients on Medicare. Some families describe being trapped by doctors at Prime facilities and were unable to see their own doctor at another facility. Former Prime employees have described an orchestrated campaign of admitting Medicare and Kaiser patients – moving them from the emergency room to a hospital bed – in the interest of changing the fortune of a money-losing hospital.

In September 2011, California Attorney General Kamala Harris rejected the approval for the sale of the Victor Valley Global Medical Center in Victorville, California, stating that the sale would not be in the public interest.

Privacy disclosures

In 2012, two executives at Prime Healthcare Services disclosed a patient's chart to multiple media outlets without the patient's express written consent. The release was in response to a California Watch article on Prime Healthcare Services billing practices at Shasta Regional Medical Center, which included claims by a Darlene Courtois about her treatment by Shasta. In this incident, Randall Hempling, the hospital CEO, and Dr. Marcia McCampbell, its chief medical officer, showed up at the offices of the Redding Record Searchlight and successfully convinced the paper's editor not to publish an article echoing the California Watch claims by reference to Courtois' actual medical records.

Response by company

Prime maintains that their billing practices are legal and proper and claim that the high rate of kwashiorkor is a result of proper diagnosis of malnutrition. They also claim that they are the victim of a campaign by Service Employees International Union (SEIU), but the California Medi-Cal fraud director claims that his bureau had initiated an investigation before SEIU released their findings.

Prime Healthcare hospitals assert that they do not use a diagnosis of malnutrition to increase reimbursement. The relevant (i.e., where the diagnosis affected reimbursement) malnutrition rate at all Prime Healthcare hospitals was 3.6%, which is much less than the rates referenced in the article. For example, the relevant malnutrition rate at Huntington Beach Hospital was 5.3% rather than the 39% reported by California Watch.

Prime asserts that the higher-than-average malnutrition rates at Prime Healthcare hospitals are the result of Prime Healthcare's commitment to providing high quality health care for all of its patients, for which Prime Healthcare insists they should be applauded rather than criticized. Published studies estimate that up to 15% of ambulatory elderly patients, up to 44% of homebound elderly patients, up to 65% of hospitalized elderly patients, and up to 85% of nursing home patients are malnourished. Given these statistics and the morbidity and mortality rates associated with undetected and untreated malnutrition, Prime Healthcare hospitals have implemented a nutritional screening program in order to improve patient care outcomes and decrease mortality and morbidity. This program includes policies and procedures designed to ensure that each elderly patient admitted to the hospital receives a nutritional screening.