Nonprofit hospital affiliations and network creation in the wake of federal healthcare reform have dominated Orange County’s hospital headlines in recent months.
Meanwhile, a group of for-profit hospitals have quietly hummed along behind the scenes in their daily work of treating patients in cities such as Fountain Valley, Santa Ana, Anaheim and Orange.
The only technical difference between the for-profits and their nonprofit counterparts is tax status.
A number of the nonprofits have higher profiles because of their long histories in the community. Irvine-based St. Joseph Health dates to the 1920s, and Hoag Memorial Hospital Presbyterian has been around since the 1950s.
Most of the for-profits have shorter histories here. They also tend to be on the smaller side when it comes to finances in OC’s hospital landscape, although they account for 16 of the 28 largest hospitals and 3,549 of the 6,279 available beds.
Industry observers nevertheless anticipate a continued role for the for-profits in the larger hospital community following reform, with no wave of consolidation seen on the horizon.
“I don’t see for-profit hospitals going away anytime soon,” said Jennifer Bayer, vice president of external affairs for Los Angeles-based industry advocate Hospital Association of Southern California, which has an office in Garden Grove and represents nonprofit and for-profit hospitals.
“With the Affordable Care Act, there is a lot of room for for-profits” in the OC marketplace, Bayer said.
She noted that Tenet Healthcare Corp., Prime Healthcare Services and Integrated Healthcare Holdings Inc. have benefited from the Medi-Cal expansion portion of healthcare reform that covers more people than before reform.
The following is an overview of several of the county’s for-profit hospitals, including ones owned by Tenet, Prime and Integrated.
Tenet
Dallas-based Tenet owns the 400-bed Fountain Valley Regional Hospital and Medical Center, 167-bed Los Alamitos Medical Center, and 114-bed Placentia-Linda Hospital.
The company once had nine hospitals in OC but divested several in the mid-2000s as part of a Medicare billing settlement with the federal government over alleged fraud.
Fountain Valley ranks No. 9 on the Business Journal’s annual list of hospitals, with net patient revenue of $309.5 million. The hospital has been in Fountain Valley for more than 40 years and features programs such as laborists, or doctors who treat women who are about to give birth, as well as a pediatric intensive care unit.
“We do all sorts of acute care. … The only thing we don’t do is transplants,” said Joseph Badalian, Fountain Valley’s chief executive.
Fountain Valley is “affiliated well with our sister [hospitals],” he said, mentioning Los Alamitos Medical and Placentia-Linda, as well as Lakewood Regional Medical Center in south Los Angeles County—his last outpost before arriving at Fountain Valley last year.
One collaboration involves Fountain Valley’s staff physicians’ availability to be shuttled to Los Alamitos or Placentia-Linda when a service isn’t available at the two smaller facilities.
Fountain Valley would be open to an affiliation arrangement similar to the county’s nonprofits “if it works for everybody involved,” Badalian said. He referred to integrated health networks in which patient care is coordinated to cut waste.
One of Badalian’s colleagues said differences between Tenet and nonprofit systems are few.
“At the end of the day, we are all doing what we should be doing. [The only difference] between the two is paying taxes,” said Kent Clayton, chief executive at Los Alamitos.
He spent 10 years at Placentia-Linda before moving to Los Alamitos in July and was replaced at Placentia-Linda by Audrey Gregory.
Clayton said Los Alamitos “hasn’t seen a dramatic difference” in how it’s paid for services because of healthcare reform.
“We have a huge senior population,” he said, explaining that Los Alamitos’ service area includes the Seal Beach Leisure World retirement community, whose residents use Medicare as their payer. Medicare rates generally are more stable than those in the commercial marketplace.
Prime
Prime Healthcare’s for-profit entries are the 219-bed West Anaheim Medical Center and the 167-bed Garden Grove Hospital and Medical Center.
Michael Sarian, president of operations for Ontario-based Prime, echoed Clayton in terms of how the for-profit company operates.
Sarian also noted that not every hospital is a good fit for a for-profit portfolio.
Prime Healthcare recently converted two of its properties—La Palma Intercommunity Hospital and Huntington Beach Hospital—to nonprofit status. La Palma Intercommunity, which has 141 beds, was donated to the Prime Healthcare Foundation last month, and the 131-bed facility in Huntington Beach went nonprofit in 2013.
Sarian said demand for services has risen as healthcare reform has taken hold.
“From initial signals, we’re seeing extra business in our emergency room,” he said, mentioning that things such as Medi-Cal expansion and health insurance exchanges are bringing more insured patients into the system for care.
Integrated
Santa Ana-based Integrated Healthcare Holdings owns and operates Western Medical Center-Santa Ana; Western Medical Center-
Anaheim; Coastal Communities Hospital in Santa Ana; and Chapman Medical Center in Orange.
The company was created in 2004 when the four hospitals were bought from Tenet.
The hospitals offer a variety of services, including at the Cardiac Institute of Anaheim at Western Medical-Anaheim. The institute has a cardiac lab and provides several types of cardiac surgery, including heart valve repair and coronary artery bypass grafts.
Integrated, whose recent market value was $24 million, is one of OC’s lower-profile public companies. Its shares trade on the Pink Sheets exchange, and the company last filed financial statements with the Securities and Exchange Commission in 2013.
Other for-profit operators include Alhambra-based AHMC Healthcare, which owns AHMC Anaheim Regional Medical Center, a 223-bed hospital. AHMC Healthcare acquired the then-Anaheim Memorial Medical Center in 2009 from Fountain Valley-based MemorialCare Health System.
