The chairman of the Senate health committee announced a bill yesterday that would close a "loophole" that allows hospitals and nursing homes to change hands without applying for a new license.
When evaluating whether a health facility owner should be awarded a license, state authorities determine whether the company has adequate financial resources, ability to comply with laws and regulations and is “of reputable and responsible character.”
Three months ago California Watch wrote about Prime Healthcare, a firm under scrutiny for unusual billing practices, acquiring Alvarado Hospital in San Diego even though state authorities declared a moratorium on approving changes of ownership until billing probes were complete.
But the same public health authority that declared the moratorium determined that the change of ownership – which occurred without a change in license-holders – was in line with state law.
Sen. Ed Hernandez, D-West Covina, seeks to prevent such an apparently contradictory scenario from playing out again.
“The hospital transfer of ownership rules we have in place were designed to maintain quality of care for patients,” Hernandez, an optometrist, said in a statement issued yesterday. “A change of ownership at a hospital can have a real effect on compliance with requirements ranging from seismic retrofitting to minimizing the risk of infections – the public deserves to know the operators of their local hospitals are reputable.”
It was not immediately evident yesterday whether Prime Healthcare’s acquisition of Alvarado Hospital was an unusual move.
Department of Public Health director Mark Horton characterized the business deal as routine in a letter to Assemblyman Marty Block, who inquired about the transfer in December. Horton wrote that the change of ownership – without an application for a new license – was a “longstanding procedure” consistent with laws that had been in place since 1976.
Prime Healthcare, however, has been under heightened scrutiny as a result of a billing analysis by the Service International Employees Union. California Watch conducted its own data analysis for its stories on Prime Healthcare.
The first story examined lawmakers placing heightened scrutiny on the chain for billing Medicare for an unusually high number of patients with septicemia, an infection that attacks the bloodstream.
California Watch also performed an analysis of Prime Healthcare’s billing for rare and routine cases of malnutrition, a condition that, like septicemia, qualifies hospitals for additional reimbursement.
Prime officials said they aggressively treat both conditions for the betterment of their patients. They also accused the union of targeting them unfairly to gain leverage in disputes.
Tim Valderrama, a spokesman for Sen. Hernandez, said his boss has a keen interest in learning whether both conditions are symptomatic of questionable billing or emerging health problems.
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