Next week, the attorney general's office will hold a hearing over the proposed sale of Victor Valley Community Hospital to Prime Healthcare Services, the controversial and growing chain of 14 hospitals.
The hospital, which the chain pledges to operate as a nonprofit, would be Prime's 15th facility. Prime also may buy a 16th hospital, which would be the chain’s first outside of California, according to published reports in New Jersey.
The state’s approval of the Victor Valley sale appears to have been described as a foregone conclusion by the chief executive of a publicly traded firm that works closely with Prime by buying and leasing back some of its real estate.
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During an earnings call with investors Thursday, an executive from Medical Properties Trust said Prime’s nonprofit arm just acquired another hospital. “It was approved by the Justice Department and approved by the state of California,” said Edward K. Aldag, chief executive of the firm.
The attorney general's office and Department of Public Health, which issues hospital operating licenses, said no decisions had been reached regarding the sale or hospital license.
California Watch has written about Prime hospitals’ outsized rates of sepsis and major malnutrition, both conditions that entitle hospitals to enhanced Medicare payments. Additionally, when the chain takes over new hospitals, emergency room-to-hospital bed admissions of those patients tend to spike, state data show.
Lawmakers, concerned about clusters of sepsis and serious malnutrition, have called on the state's Department of Public Health to stop granting new operating licenses to Prime until thorough investigations are complete. Despite that dictate, Prime acquired an additional San Diego hospital, spurring another lawmaker to write a law to close the "loophole" used by the chain to make the deal.
Authorities completed an investigation of about 120 sepsis cases, finding questionable diagnoses in 22 cases. Prime responded to the report, saying it uses broader criteria than the state used to identify sepsis. The malnutrition reports have not yet been publicly released.
As for Prime’s purchase of Victor Valley hospital, which is within miles of the chain’s Desert Valley Hospital, opposition already has cropped up among others who say they’d like to buy the facility.
Deanco Healthcare, a small Southern California hospital operator, predicted that “in light of Prime’s suspect reputation and checkered history with the Attorney General, there will no doubt be numerous public objections” to the sale.
Two other entities, Corwin Medical Group and Physicians Hospital Management, are seeking repayments out of the bankruptcy sale and warn that Prime may not be the ideal buyer, considering its tendency to carry few contracts with health insurers.
Corwin and PHM argued in court that if Prime operates two of the three hospitals in the geographically isolated High Desert region, patient access to care may be limited. They contend that if Prime carries few insurance contracts, doctors would have only one hospital to which they could refer patients.
A bankruptcy judge overlooked these arguments, though, and approved the sale to Prime.
The next test is the hearing to be held by the attorney general’s office, which approves or denies sales of nonprofit hospitals. If history is a guide, the hearing in Victorville may be contentious.
The two most recent hearings, both in 2007, each lasted more than five hours and featured fervent comments both in favor of Prime and against it. The attorney general’s office approved the sale of Paradise Valley Hospital in San Diego, but denied the sale of Anaheim Memorial Medical Center in Orange County.
During hearings, Prime employees and executives spoke in favor of the firm, saying it injected millions into new imaging equipment and other hospital improvements. Others lauded the chain for improving efficiency in the emergency room and reducing wait times.
One detractor included a nurses union leader who said Prime has retaliated against nurses who acted as patient advocates and predicted that they would leave Anaheim Memorial if it was sold to the chain. Another union official quoted a Medicare inspection report in which a doctor said the chain's leaders sought to change the way it scheduled surgeries for Medi-Cal patients, based on reimbursement.
Here are some excerpts from those hearings:
Hearing on sale of Anaheim Memorial Medical Center, June 15, 2007; Sam R. Shoukair, chief of staff at La Palma Intercommunity Hospital (owned by Prime):
Shortly after arrival, they came and evaluated the – what the hospital needs. They have budgeted capital improvement of several million dollars, and since then, there have been continuous improvements.
Specifically, the emergency room was evaluated, and there's a plan to expand the emergency room from 10 to 14 beds and to renovate the emergency room itself. This plan has been submitted and is waiting approval and shortly, hopefully in the next one year, it will start.
There have been also improvements on the equipment. All the beds in the hospital have been changed. This may not have been thought by somebody as important, though – except that he is really committed to the community. So all the beds have been changed.
... They have had improvement in the radiology department. The CT scanner – which we have currently, a CT scanner, a one-slide CT scanner – it is currently being installed, and there will be an aid, a slide CT scanner. We also got a new digital echocardiogram and state-of-the-art stress testing equipment. All of this has been in a short period of time, and I just wanted to stress that fact, you know?
AMMC hearing, Jill Furillo, Southern California director, California Nurses Association:
We are adamantly opposed to the sale of Anaheim Memorial to Prime Healthcare. … We have several reasons for that. I want to address a couple of those concerns that we have. First of all, I was on the board of registered nursing for three and a half years here in the state of California. We, as the board of registered nursing, have the responsibility ensuring that registered nurses live up to their statutory duty to advocate for patients at all times. You can't get a license in the state of California without being a strong patient advocate.
Unfortunately, Prime Healthcare has not recognized that patient advocacy, and I'll give you some examples of that. Nurses who have worked for Prime facilities have complained to the Department of Health Services, filed complaints with the Department of Health Services regarding what they consider to be violations of statute in some of those facilities.
… Also we are aware that the director of nursing issued a memorandum saying that they were going to consolidate telemetry, the telemetry unit, with the medical/surgical unit. And we heard from registered nurses at Paradise Valley that they believed that that – the intent of that was to circumvent nurse-to-patient ratio standards here in the state of California. As a result of that, many nurses have left Paradise Valley hospital. We've been contacted by many of those nurses, not only nurses from Paradise Valley but also other nurses working in Prime Healthcare facilities and at Anaheim Memorial Hospital complaining about what they believe are standards that are not the standards that they believe meet the standards that they are currently working under.
... And I will tell this as a person who's had many, many years of experience working with registered nurses as a registered nurse myself representing thousands of registered nurses in Southern California that nurses will leave this facility. They continue to leave these facilities.
AMMC hearing, Richard Thomason, policy director for SEIU – United Healthcare Workers West:
So on March 1st, Prime took control of Paradise Valley. Days later, according to the State investigators, the hospital's management began issuing memos announcing cuts in hospital services and radical changes in the way the hospital provides care to patients. For example, on March 6th, the hospital's CEO issued a memo stating that the hospital would no longer be providing chemotherapy services.
In addition, the hospital's chief of surgery told federal investigators that the chairman of the board of Paradise Valley, Dr. Reddy, quote – and I want to quote here to be factual – "made the suggestion to no longer schedule outpatient Medi-Cal/Medicare procedures, due to poor reimbursement," unquote. A cardiologist who performs the majority of the cardiac catheterizations at the hospital told federal investigators that, quote, "he had been present when the chairman of the board stated his preference that Medi-Cal/Medicare patients not be scheduled for outpatient insertion of pacemakers or implanted defibrillators, due to lack of reimbursement."
AMMC hearing, Luis Leon, chief executive, Paradise Valley Hospital:
One of the union representatives, actually, earlier made a comment or a reference to a CMS (Centers for Medicare & Medicaid Services) survey report, which you have. That report was – actually, the surveyors came to our facility three weeks after we acquired the hospital, approximately March 26th. They were there four days, a long, grueling survey.
By the third day, the physician surveyor showed up – actually, the second day, due to a complaint to one of the physicians, who sent a – about 25 complaints to DHS and (Medicare). He met with the chief of staff at the facility, and soon after that, she called some of the other doctors, which are referenced in that report.
As you may know, we came into a place which was a lot of – it was very volatile. We had a group of four or five physicians who actually wanted to buy the hospital, and they were against the sale of the hospital to Prime, and also, they were against the sale of the hospital with a vengeance. They were very disappointed to the fact that we were selling the hospital.
These same doctors are the ones quoted in this report from CMS. It was a great challenge. It was somewhat of a challenge for us to build a trust with these physicians, and I'm glad to tell you that since then, their medical staff has been – come together.
They are very united, and I would be glad to send to you and your office the letters and the declarations from most of the physicians in that report against the actual gossips and different innuendos in that report that were actually not true. So I have all the declarations, and I'll be glad to send that to you.
The medical staff also united – almost united – had a declaration testifying to the autonomy and the willingness to work with us. And we have made incredible progress since March 1st. So that was one of the greatest challenges at the facility, dealing with those issues.
Paradise Valley Hospital hearing, Jan. 25, 2007; Dr. Prem Reddy, chairman of Prime Healthcare Services:
(Reporter’s note: "Saturation" refers to briefly closing the hospital emergency room because of crowding or limited staff resources.)
Uninsured and indigent patients will have access to the emergency services as required by these regulations. Actually, access to the emergency department of all patient types, including whether they are – they have the ability to pay or have no ability to pay, it will be more accessible. Why? We just talked about it. That's our philosophy. We, as much as possible, never go on saturation on bypass.
For example, somebody will be talking to you. It is a doctor who is a medical director of Chino Valley Medical Center at Chino. He's in the emergency department. In the whole last year, probably went in saturation. How long, doctor? Four hours. Am I saying it correctly? Four hours in the entire year.
What would be the saturation in a hospital that is like San Antonio Community Hospital, approximately? 250 hours a month. So you are giving exact statistics? Because of time constraints, I can't give you more detail, and I have – every hospital doesn't check that. If we go on saturation bypass, that's a very dire circumstance in our books.