Fountain Valley-based Memorial Health Services’ fourth attempt in two years to sell Anaheim Memorial Medical Center got a thumbs-up from an adviser to state Attorney General Jerry Brown.
El Segundo-based consulting company Medical Development Specialists Inc. recently recommended approval of the $60 million sale of 223-bed Anaheim Memorial to AHMC Healthcare Inc. of Alhambra, according to a report on Brown’s Web site.
Under state law, the attorney general has to sign off on sales of nonprofit hospitals to for-profit operators, such as AHMC.
Memorial, which has run Anaheim Memor-ial since 1995, put the aging hospital up for sale nearly three years ago. It’s seen three prior deals fall through for various reasons.
The report sets out requirements for a sale.
AHMC should run Anaheim Memorial as a general acute care hospital, including an emergency room, for at least five years after the deal closes, “regardless of market demand or financial viability,” the report said.
All existing contracts should be accepted and maintained, including commercial health insurance, Medicare, Medi-Cal, CalOptima and treatment of patients in the county’s program for the poor, according to the report.
Other suggestions include spending at least $1.6 million on charity care for at least five years after the deal closes and maintaining Anaheim Memorial’s specialized breast healthcare center for at least five years.
AHMC, a privately held company with about $500 million in annual revenue, has said it will spend at least $45 million to improve Anaheim Memorial. It also agreed to keep the hospital’s 905 full-time workers and allow its 211 doctors to keep practicing there, according to the report.
Anaheim Memorial is one of the county’s midsize hospitals. It posted pretax net income of $2.6 million on net patient revenue of $184.5 million for the 12 months through September.
Brown’s office is set to make a decision on the deal by June 12, a spokesman said.
AHMC declined to comment.
The report also addressed what would happen if the sale were denied.
Memorial has said if a sale doesn’t go through, “It would evaluate the closure of some or all services” at the hospital.
Anaheim Memorial’s saga has been long-running. Memorial has tried to sell it three times since early 2007.
The first attempt fell through in 2007, when Brown’s office blocked a proposed $55 million sale of Anaheim Memorial to Prime Healthcare Services Inc., a Victorville-based company that owns four OC hospitals.
Brown’s office cited concerns about the bidding process as a reason for killing the Prime deal.
Memorial then turned to Integrated Healthcare Holdings Inc. of Santa Ana as a possible Anaheim Memorial buyer. Integrated made a $68 million offer for Anaheim Memorial.
In 2005, Integrated paid $70 million to buy four local hospitals from Tenet Healthcare Corp., which was unwinding its California operations.
But Integrated’s bid for Anaheim Memorial fell apart in early 2008 after it was unable to finalize financing.
In August, Brown’s office rejected a proposed $57 million sale of Anaheim Memorial to Tustin-based Pacific Health Corp.
In denying that sale, the office cited a criminal investigation into allegations that Pacific used homeless patients to defraud Medicare and Medi-Cal.
With AHMC, there is less “hostility” toward a proposed sale than prior attempts to sell Anaheim Memorial, according to Medical Development’s report.
Some who were interviewed disagreed with Memorial’s decision to sell the hospital but didn’t have problems with AHMC, the report said.
Like Integrated, AHMC has grown by buying several hospitals from Tenet. Today, AHMC’s hospitals have more than 1,000 beds and are in several Los Angeles County cities, including Alhambra, El Monte, Monterey Park, San Gabriel and Whittier.
When Memorial decided to sell Anaheim Memorial, one major reason was the projected cost to bring the hospital into compliance with California’s hospital earthquake safety law.
That cost once was estimated at $80 million to $140 million for retrofitting and new construction. But Medical Development said it now expects seismic retrofitting costs to come in around $10 million.
