St. Mary’s new owner

California corporation target of investigations

When Dignity Health announced in March that it was selling Reno’s St. Mary’s Regional Medical Center to Prime Healthcare of Ontario, Calif., the news release announcing the sale read in part, “Since 2008, Dignity Health has invested $67 million in Saint Mary’s, which has significantly strengthened the facility’s ability to sustain its mission. However, the hospital continues to experience significant challenges brought on by an ailing local economy and insufficient reimbursements. In 2011, the hospital posted a net loss of $43.5 million.”

It was not surprising that Prime, which has 14 California hospitals, would want to take over a hospital that was faltering. The corporation was founded by cardiologist Prem Reddy, who has been quoted saying, “Every hospital I acquire, I acquire in bankruptcy.” It has regularly picked up financially troubled properties, often assuring that local opposition or regulation will be less rigorous.

But that has not kept the corporation free from bad publicity or strong regulation outside those areas. In September last year, California Attorney General Kamala Harris refused to allow Prime to take over a hospital in Victor Valley: “We have concluded that this proposed sale is not in the public interest and will likely create a significant effect on the availability or accessibility of health care services to the affected community.” Although there were other buyers available, the hospital continued negotiating with Prime and won a court ruling that allowed the sale to go forward.

In recent years at least three different U.S. House members have called for Medicare investigations of Prime billing practices. In February, at a time when former Prime employees were being questioned by the FBI, Prime president and chief executive officer Lex Reddy—brother of the founder—resigned.

What prompted the calls for Medicare probes was principally charges that Prime was using Medicare number codes for maladies to upgrade to more expensive treatments. Specifically, malnutrition was designated as kwashiorkor, a rare form of malnutrition found mainly in Africa. The investigative organization California Watch reported, “Reports of kwashiorkor at Shasta Regional Medical Center exploded after Prime acquired the hospital in November 2008. That year, the hospital reported only eight cases of kwashiorkor. But in the two years that followed, 1,030 cases were billed to Medicare, more than 70 times the statewide rate for general hospitals. In [patient Darlene] Courtois’ case, the hospital’s reimbursement from Medicare increased by more than $6,700—from $4,708 to $11,463 – by noting kwashiorkor on the bill, according to a California Watch analysis of billing information obtained under the federal Freedom of Information Act.”

In a letter, Prime responded, “California Watch is once again trying to misinterpret a patient’s medical records to suit its malnutrition story angle. Prime Healthcare has sent California Watch hundreds of pages of literature documenting the issues, but still it persists in promoting a misleading and unfair narrative. In the latest query, the patient, who has chronic problems, was referred by her primary care physician from his clinic to Shasta Regional Medical Center emergency department. Essentially, the attending physician documented protein malnutrition based on very low blood albumin levels and sub-optimal nutritional status. … The physicians did an excellent and comprehensive job of identifying, addressing and documenting her significant health issues including her malnutrition.” The entire Prime response can be read at .

Prime has also been accused of violating patient confidentiality. Los Angeles Times writer Michael Hiltzik wrote a piece titled “Her case shows why healthcare privacy laws exist” after Prime showed the medical records of Darlene Courtois to her hometown newspaper. Prime argued that it was no longer bound by confidentiality after she showed some of her records to California Watch.

In 2009, Prime was the only for-profit company to be listed on Thomson Reuters list of the 10 best health care systems in the United States. Prime has said that many of its problems are caused by a labor union, the Service Employees International Union/United Healthcare Workers West, and that it would look outside the union’s territory for new hospitals. Besides St. Mary’s, it has also taken over two hospitals in Texas.