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Prime-managed hospital draws potential buyer

Monica Lam/California Watch

A San Bernardino County hospital managed by Prime Healthcare Services is considering a purchase offer from a nonprofit Catholic health system, possibly signaling an end to a long and rocky bankruptcy.

Orange County-based St. Joseph Health System has offered $35 million to buy Victor Valley Community Hospital, with the promise of $25 million in upgrades over five years.

Last year, state Attorney General Kamala Harris denied a sale of the hospital to Ontario-based Prime, concluding that it was not in the public interest. Since then, Prime and the hospital board reached a loan and management consulting agreement that went forward over Harris’ legal objections.

The chain has been the subject of a yearlong California Watch investigation. The FBI has begun interviewing former workers and at least one patient over the chain's billing matters.

While the Victor Valley Community Hospital board reviews the offer, St. Joseph and its local facility, St. Mary Medical Center in Apple Valley, are examining the books of the financially troubled hospital.

St. Joseph owns 14 general hospitals in California and Texas, as well as home health agencies and nursing homes. Randy Bevilacqua, St. Mary Medical Center's vice president of strategic services, said the purchase might relieve crowding at its busy facility and ensure that community residents have access to the care they need.

“We know that medical center takes care of a significant population of poor and vulnerable, that’s part of our mission,” he said.

An attorney for the Victor Valley Community Hospital board said the top priority is to get the hospital in the hands of an operator with the financial resources to make improvements.

“Time is not on our side at Victor Valley,” said attorney Charles Slyngstad. “We have to do something as soon as we can do it – whether it's a resolution with Prime or St. Mary, whatever is needed to get the hospital in financially stronger hands.”

A spokesman for Prime declined to comment on the possible sale, deferring to Victor Valley hospital leaders.

Initially, the hospital was approved for sale to a group including Hemet physician Kali Chaudhuri, but the deal did not close within an agreed-upon timeline. Prime brought a second offer of $35 million, and chain chief executive Lex Reddy called for approval of the deal during a divisive August hearing before deputy attorneys general.

Harris did not approve the sale, citing the potential impact [PDF] on patients' access to care. It was the second time the attorney general’s office denied a nonprofit hospital sale to Prime. In the first case, Prime tried to buy Anaheim Memorial Medical Center.

During hearings convened by the attorney general’s office in mid-2007 in Orange County and in August in Victorville, speakers aired concerns about the chain’s tendency to eschew contracts with insurers, thus limiting in-network choices for covered patients.

Most hospitals agree to bargain over prices with insurers, knowing they will see a steady flow of patients. Prime, in many cases, has avoided such contracts and charged higher prices to insurers that cover the patients who end up in its emergency rooms.

The practice has been particularly controversial with insurers such as Kaiser Permanente, which has accused the chain in court of “capturing” its patients in the interest of profit. Prime has denied the allegations, which are being deliberated in ongoing litigation.

If Victor Valley and St. Joseph leaders arrive at a deal, it would require the approval of the bankruptcy court and attorney general.

Bevilacqua said the attorney general has not, to his knowledge, denied a sale to the health system. And he said staff, patients and the community have reacted favorably to news of the possible sale.

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