Victorville-based Prime Healthcare Services Inc.’s $55 million proposed buy of Anaheim Memorial Medical Center recently got a nod from a consulting firm hired by state Attorney General Jerry Brown’s office.
Medical Development Specialists Inc., an El Segundo consulting firm, said it recommended conditional approval of the deal as long as certain requirements are met, according to a report posted on Brown’s Web site.
Those include:
– Continuing to operate Anaheim Memorial as a general care hospital and maintain emergency service with at least its current licenses and types and levels of service.
– Accept and maintain all Anaheim Memorial contracts pertaining to providers and managed care plans with current terms and conditions, with no exclusions, for at least the length of the existing contract. The firm also recommended that Prime not be allowed to cancel, modify or amend any contracts without consent of the other parties.
– Spend at least $2.5 million in annual charity care for at least five years. The amount should be increased annually based on inflation in the county.
Prem Reddy, Prime Healthcare’s chief executive, didn’t respond to a request for an interview.
Prime Healthcare’s already agreed to certain conditions in its paperwork, including investing $25 million in improvements during a five-year period and assuming all of Anaheim Memorial’s current contracts.
It’s also agreed to offer Anaheim Memorial’s 870 full-time workers employment comparable to that at other Prime Healthcare hospitals.
The company also has agreed to continue to operate as a general care hospital with an emergency room and to honor doctors’ practicing privileges.
That hasn’t stopped some resentment of the proposed deal.
“A few people expressed a desire to block or slow the sale to allow the potential for other parties to present equal or better purchase offers that would be more in the community’s interest and preserve access for the significant percentage of managed care patients,” Medical Development said.
The attorney general’s office still has to sign off on the deal. It held a hearing last week to get public comments on Prime Healthcare’s bid for Anaheim Memorial. A decision could come by the end of the month.
“Overall, the purchase by Prime is likely to insure the continued availability of emergency and acute care services for at least five years of operation,” Medical Development said.
The consultant said it expects that access for patients such as seniors who don’t receive traditional Medicare, Medi-Cal users and those who can’t afford healthcare should remain unchanged.
Figures in the report show that 63% of Anaheim Memorial’s patients are covered either by Medicare, Medi-Cal or the county’s program for poor patients, with 33% having private insurance.
Many who have health insurance could be left out.
“As a result of the business practices and medical policies of both Prime and area healthcare maintenance organizations, it is likely that many managed care patients will be unable to utilize the hospital except on an emergency basis,” the report said.
Prime Healthcare “will be trying to retain the contracts at Memorial, and hopefully discuss with the health plans to extend them to other hospitals if they are fair,” Reddy said in an earlier Business Journal interview.
West Anaheim Medical Center, La Palma Intercommunity Hospital and Huntington Beach Hospital are also in Prime Healthcare’s OC stable. Overall, Prime owns eight hospitals in Southern California.
Long Beach-based Memorial Health Services Inc., which has owned Anaheim Memorial since 1995, put the hospital on the block nearly a year ago for various reasons.
One was hefty expenses to bring the facility in compliance with California’s earthquake safety law. The report says Anaheim Memorial’s estimated bill for seismic retrofitting and new construction could cost $80 million to $140 million.
Medical Development also said that if Prime Healthcare’s able to successfully operate Anaheim Memorial, it may be able to financially support the costs for seismic improvements that would be necessary to operate beyond 2013.
Prime Healthcare’s bid for Anaheim Memorial must be cleared by Brown’s office because the buy would convert the hospital from nonprofit to for-profit status.
The for-profit operator’s earlier buy of Paradise Valley Hospital in National City saw plenty of objections from the medical staff and members of that community. That inspired a legislative effort to regulate such sales.
A proposed law would authorize the attorney general’s office to block the sale of a nonprofit hospital to a for-profit company if the seller didn’t aggressively market the property to drum up competing bidders, or if the seller failed to set aside a portion of net proceeds to benefit the local community (see Healthcare column, page 66).
