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In their own words: Making emergency care profitable

Prime Healthcare Services has been able to turn around the finances of failing hospitals and has described its emergency rooms as central to that success.

Still, critics have come forward, raising questions about the chain's practices. In the following court and public hearing testimony, those critics describe their concerns and experiences, and Dr. Prem Reddy, Prime's founder, articulates his plan to improve emergency room operations.

August/September 2005, testimony of Lisa Crouch, former emergency room nurse manager, Desert Valley Hospital, San Bernardino County Superior Court, Victorville:

Q. When you would see (Dr. Reddy) in the emergency room two or three times a week, what was he doing?

A. When he first started coming there, he really just looked at the medical charts. He would look at the face sheet, the goldenrod as been referred to, and see what kind of insurance the patient had. After he saw what kind of insurance the patient had, if the patient was uninsured, say, “You need to get this patient out of here or transfer them to Arrowhead (Regional Medical Center). I’m not paying for them.”

… And if they were fee-for-service, he would actually just look at the chart, look what the nurse triage notes said, what the nursing notes said, what the emergency physician had written and would start writing "admit patient" to whether it was telemetry, ICU or med-surg, and write a battery of tests and orders and would move on to the next chart.

August/September 2005, testimony of Tina Buchanan, former chief nursing officer, Desert Valley Hospital, San Bernardino County Superior Court:

Reporter's note: Buchanan testified about Reddy’s reluctance to go on “saturation,” which means briefly closing the emergency room to new patients when the staff is busy.

The other reason that he didn't want to go on saturation was because there are many fee-for-service patients circulating out there in ambulances. He said he wanted those patients to end up in his emergency room so he could collect the money for the care that he provided.

August/September 2005, testimony of Dr. Panch Jeyakumar, former medical director, Desert Valley Hospital, San Bernardino County Superior Court:

Q. Do you recall Dr. Reddy giving instructions to physicians regarding where certain procedures should be done in early 2003?

A. Yes. In one of the meetings, he announced to the physicians that he wanted certain procedures, like CT scans, for certain insurance patients to be done through the emergency room, to ask the patient to go to the emergency room to get it done because they get actual reimbursement for that because the contract allows that. He also stated, you would send them to the emergency room to get the procedure done, then you need not get my authorization for this.

Q. Were these procedures that Dr. Reddy was discussing at this meeting – were these real emergencies that he wanted done in the emergency room?

A. No. These were routine procedures.

Q. In your estimation, was it appropriate for Dr. Reddy to be directing patients to the emergency room for nonemergency procedures so he can get more money?

A. No. It actually crowds up the emergency room.

Q. Is the emergency room supposed to be for real emergencies?

A. It’s supposed to be.

Reporter's note: Jeyakumar testified that Reddy referred to an emergency room filled with fee-for-service patients as a “gold mine.”

Q. Were you ever told about some of the things Dr. Reddy was saying in the emergency room in late 2002 and early 2003?

A. In fact, I have spoken to him about these and asked him to tone down. One of the embarrassing statements he made is he would stand there and say, “This is a gold mine. This is a gold mine.”

Q. Where was he when he would say that?

A. In the emergency room.

Q. Were you ever present when that statement was made?

A. Yes. There was one evening when I was meeting a patient there that this incident happened.

Q. Tell me about what you were doing with this patient.

A. There was this patient who came in with a drug overdose. He was unconscious. We had to put a tube down the mouth, placed him on life support, stabilized him, and we were moving this patient to the intensive care unit. Our emergency room has two areas, front and back. This happened in the back. We stabilized him, and we were moving him while the respiratory therapist was bagging the patient, ventilating the patient manually. I was accompanying the patient, the nursing staff, the respiratory therapist and somebody pushing the gurney. We were going through the front portion of the emergency room, and Dr. Reddy was working in the front portion on the other side.

Q. What was he doing?

A. He had some charts in his hand, just yelled across the room, “Panch, this is a gold mine,” and he waved the charts.

Q. Did he offer to help you with the patient whose life you were trying to save?

A. No.

August/September 2005, testimony of CEO Dr. Prem Reddy, Prime Healthcare Services, San Bernardino County Superior Court:

Q. Dr. Reddy, I believe I'm correct that you do not recall going to the ER and saying in an audible voice heard throughout the ER, "It's a gold mine in here"? You don't recall saying that, do you?

A. Not in those specifics, sir, but I might have used the words 'emergency room could be made into a gold mine," reflecting the opposite feeling the community has. Communities think emergency rooms are losing, what you call a hole, and to dispel that rumor, I would use some superlative like it could be made into a gold mine if we all work together.

Q. You wanted the people in the ER to understand that Desert Valley Hospital wasn't losing money, so you would walk through and say, "It could be a gold mine in here"? Is that what you're telling us, Dr. Reddy?

A. I could not understand your question, sir.

Q. What I will do, just to clarify this, is read your deposition, page 205, line 20, to page 206, line 8.

Question to Dr. Reddy: All right. Did you ever walk through the emergency room in late 2002 or thereabouts and say out loud, "It's a gold mine in here," or words to that effect?

A. Whether I said it or not, I don't recall, but that was discussed as though I said it in one of these meetings.

Q. You don't recall whether you said it or not?

A. I don't recall actually whether I said it, but I accept the responsibility. If I said it, I said it. I told them in a later meeting "I'm not going to" – it was a fact that emergency room was the main portal of revenue to the inpatients when we started scaling down our HMOs, and even today.


Q. All right. Do you recall the specific problems that you identified in the emergency room?

A. Yes. Emergency room, or emergency department, was going on saturation. We call the word "saturation," meaning, "OK, my beds are full, and I'm shutting down for new patients." The emergency department. That's called in medical lingo "saturation."

And if you call, for example, Arrowhead Regional Medical Center, which is actually San Bernardino County Hospital, you will never find that hospital emergency room open more than an hour a day. So we were going on saturation quite a bit.

And the second problem we had was the waiting time was way over four hours on an average, and many patients were leaving without being seen, left without being seen. So – and sometimes the patients that – you know, called managed care patients, some people call it HMO patients, that means the patients of Desert Valley Medical Group couldn't come to Desert Valley Medical Group because the operat- – I mean the emergency department was shut down. And that was bad medicine. And I took it upon myself to rectify those mistakes, or errors, and correct and put the process back on track.

Q. You took on that project?

A. Yes, ma'am. I rolled up my sleeves and went to work.


Q. All right. Aside from the saturation issue in the emergency room and the bottlenecking, any other immediate problems that were identified?

A. In the emergency department?

Q. Yes.

A. There were several other problems. You know, it would take me a whole day to describe. But to focus on a few things, the patients that after being seen weren't getting from the emergency department to the medical-surgical ICU to the beds, and there was what we call bottlenecking. And the bottlenecking was very common at somewhere in the lunchtime and somewhere around 7 p.m. Why? The shifts change. I mean the nursing shift, the staffing shifts. And so, in other words, the staff would start winding down, winding down, at 5:00, well, let new people come at 7:00. And then at times you'd get so busy, three, four, five ambulances come, and now we had to go on saturation. So I wanted to unclog those bottlenecks.

In their own words

Transcripts from court and public hearing testimony:

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And the other situation we had was the patients were – you know, some of the patients would come that belong to other health plans, and they would – they would not give us permission to do the best we can as examining doctor. They want this report, that report faxed to them. And – and there's one – one doctor that hasn't seen the patient probably never in the past, will never see the patient again in future, would be calling themselves medical director out in Fontana, telling us what to do. And I wanted to put a stop to that.

There are many things, I could go on. I don't know whether that interests anybody here.

Q. How about the policy changes that were being implemented – let's focus on the emergency room. How were they received by the nursing staff or the director of the emergency room?

A. Initially when – you know, you kind of portrayed me in the light of demanding, going there and trying to get job done. And I said, "You know, nobody likes a boss breathing on their, you know, necks."

Emergency room director and her friends and her colleagues thought it was awesome – awful – I'm sorry – awful for me to come down there as the chairman of the board to look into these things, and they hated me. And they would put like tackling people, you know.

"Don't come," you know, like linebackers, trying to obstruct me going to the emergency room.

Q. Did you spend more time in the emergency room once you identified these problems than you had before?

A. Much more time, ma'am. Much more time. I would go there at least twice a day, if not more times. I'd definitely go there at lunchtime, because I have a break. And I would rather use my break doing something. I normally don't enjoy my lunch that much. And the evening at about, you know, 7:00 or 6:00, I go there and make check. By the time you resolve the bottlenecking, it usually takes around 8:30 to 9 p.m.

Q. Did you do that every day?

A. I – almost every day, ma'am. Almost every day, I did. For a while, not – I don't do it now. I haven't done it for two years. But during that period, I almost had to do. Took that long to accomplish the mission I set out to accomplish.

August/September 2005, testimony of Alanna Waitschies, former charge nurse, Desert Valley Hospital, San Bernardino County Superior Court:

Q. You said that you have never heard Dr. Reddy say ... "Get these uninsureds out of my hospital," right?

A. Well, there was one occasion when he was in the nurses station and was very upset about a patient that was in the emergency department and wanted the patient to be transferred to the county medical center, but they had no beds available, and he went so far as to have the tech at the desk call and get the nursing administrator for Arrowhead Regional Medical Center on the phone and proceeded to tell them that it was their responsibility to take care of these patients. He was very loud; the patients and staff all heard the conversation; it's a small area. He told them that he was not a charity hospital, it's (not) his responsibility to take care of the indigent patients, that they needed to accept those patients, and this patient needed to be transferred and they needed to find a bed somehow, some way, to take care of this patient.

Q. Isn’t the time you’re talking about the time that Dr. Reddy actually got on the phone with county and asked them to get this patient with the hepatic encephalopathy?

A. Yes. He was yelling that it was their responsibility to take care of these patients, he was not a charity hospital, he was a for-profit hospital, and it the county responsibility to take care of these patients.

... Q. You said that Dr. Reddy would say in meetings that he wanted the physicians to make an effort to get uninsured patients admitted to county, correct?

A. Yes.

October 2006, Orange County Board of Supervisors meeting, testimony of Dr. Prem Reddy:

Supervisor Lou Correa: OK, thank you. Let me ask another question here: All the three hospitals have stayed consistent in stable providers of emergency medical care for a number of years; is Prime Healthcare committed to continue the same levels of emergency service at all these facilities?

Dr. Reddy: Not only continue the same level of services, we would improve them. Our Prime Healthcare models and roles, treating the emergency department as a gateway to the hospital, we pride ourselves in keeping our emergency departments open. In other words, not go on saturation as much as possible. Our hospitals, giving you an example of Desert Valley Hospital, went on saturation – that means close for new ambulance traffic, that’s the lingo they call saturation – least amount of time compared to any other hospital in the area.

Chino Valley Medical Center, which we acquired, Prime Healthcare acquired about a year and a half ago, almost never went on saturation. When I say almost, except for two, three hours in the whole year, which is unheard of, how do we do that? We put our resources, we staff it with physicians, we staff it with extra help, like lab technicians, radiology technicians. We take that as our project of performance improvement on quality assurance and therefore we monitor how long they go on saturation, our emergency room, how many hours of waiting for each patient, how long they stay in the emergency room. When was the door-to-triage time, door-to-doctor time, door-to-admit time, door-to-discharge time. This is our ongoing project.

June 15, 2007, hearing regarding possible sale of Anaheim Memorial Hospital to Prime Healthcare Services, Prime board Chairman Dr. Prem Reddy, Anaheim:

Charity care – there's this myth that not-for-profit hospitals do more charity care than for-profit hospitals.  Several national studies have proven that isn't true. Both do about the same level of charity care.

And the point I'm trying to make here is our hospitals that have been under management of Prime for more than a year do more charity care than any other hospital in the area. That's publicly available information posted on the website of OSHPOD, Office of the State Hospital – I'm not sure exactly how to spell it, OSHPOD. (Reporter's note: Reddy is referring to the Office of Statewide Health Planning and Development, or OSHPD.) Everybody in the health care industry would know that.

For example, I'm going to show some slides regarding that fact. Why is that? Why is it that Prime Healthcare hospitals provide more charity care?

Not that we really want to do that, but because of our model, our philosophy, we keep our emergency departments open the longest. For example, Chino Valley Medical Center, which we acquired – I think that the medical director Mike alluded to that point from bankruptcy.

We didn't go on saturation – that means closing of the emergency department because the beds are full so that the patients would go to other hospitals. We did not go on saturation for almost a year and a half or two years now, not even a few hours.

Therefore, when you keep the emergency departments open longest, you end up having uninsured, indigent patients coming there more often because they want – the waiting times are very low; so therefore, they would be treated much faster. 

Second is the door-to-disposition time. That means the total time. We strive to accomplish two hours, no more than two hours per visit, and we're almost close in most of the hospitals. Two hours, that's all it takes.

June 2007 hearing over possible sale of Anaheim Memorial Hospital, Paul Benson, fire chief, Chino Valley Independent Fire District:

I'm really not here to talk about any support or opposition of the proposed transaction. I'm here to tell you about my experiences and professional experiences with the Chino Valley Medical Center.

I've been closely affiliated with the medical center professionally, as the fire chief for that area, serving the cities of Chino and Chino Hills since the year 2000.

And as Dr. (James) Lally alluded to, there were a number of very rough years for that hospital in there. And in 2004, Dr. Reddy and Prime Healthcare Services purchased that hospital, and there's been a complete turnaround.

This is important to the first responders and the emergency medical services in the community, because before, we had to bypass that hospital on a regular basis, transporting critical care patients that needed treatment, because that hospital was on diversion and we couldn't go in there. And as was mentioned, 10 hours' total time in diversion in the last 18 months, or something like that – it's incredible.

My paramedics take their patients to Chino Valley Medical Center. They're able to drop those patients off.  They get the treatment that they need there, and my paramedics and the ambulance are back in the street, ready to go to work and help somebody else in the community 30 to 40 minutes after they get there.

And for you in the community, that's terrific. For me and my personnel, that's terrific.

June 2007 hearing over possible sale of Anaheim Memorial Hospital, Michael Sarrao, vice president and general counsel, Prime Healthcare Services:

And again, this issue about access to care, Prime has proven time and time again the access to care in its hospitals are greatest. The care the majority of the people need is emergency services. Our emergency rooms are open longer. You are seen quicker. That's a simple reality. You are seen quicker.  … Our model is to have that access to care. You heard from the paramedics, you heard from the firefighters that they're able to get more patients in there quicker because we provide that access to care.


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