Preserving the Healthcare Mission
October, 2011
In August, Christ Hospital CEO Peter Kelley announced that the hospital Board of Trustees had signed a letter of intent to sell our 140 year-old, not-for-profit community hospital to Prime Healthcare Services (PHS) Inc, a California-based for profit chain of 14 hospitals. PHS and Christ Hospital are in the process of finalizing their agreement and getting the necessary approvals from the NJ Department of Health and Senior Services (DHSS) and the Office of the Attorney General (AG).
Prime Healthcare portrays itself as a generous and responsible member of the communities it serves. They describe awards they have won, free clinics they fund and operate, and unprofitable but needed services and programs they maintain. But federal and state regulators, patient care advocates, legislators, watchdog groups and insurers question whether PHS’ whopping and enviable profit margin of nearly 18%(1) comes at the cost of communities’ access to safe, quality patient care and reflects a policy of putting profits ahead of patient care needs.(2)
The Truth about Prime Healthcare’s Record on Patient Care
• Prime Healthcare’s business model relies on canceling contracts with insurers, which then allows the hospital to collect steeply higher reimbursements by admitting more “out-of-network" patients through their emergency room, a practice experts say reduces patient access to services and raises healthcare costs.(3)
• PHS has suspended necessary but unprofitable services at some of its hospitals, including chemotherapy, mental health care and birthing centers, creating hardships for patients who depend on the hospital for access to these services.(4) At one facility, PHS closed 7 out of 13 operating rooms after their takeover of the facility.(5)
• The California Attorney General has twice refused to allow PHS to purchase financially failing hospitals. In 2007, the AG denied PHS’ bid to buy Anaheim Memorial Medical Center because “we are unable to conclude that…the sale is fair to Anaheim, reflects fair market value, contains a market value that has not been influenced by the parties, and is consistent with the public interest”.(6) In September 2011, the AG denied PHS’ bid to buy Victor Valley Community Hospital because the sale would “likely create a significant effect on the availability or accessibility of health care services to the affected community,” and would not be in the public interest.(7)
Instead of complying with a full and transparent legal process that allows for community and union input into the sale of Christ Hospital, attorneys have already asked the NJ Attorney General (AG) to ‘fast-track’ the process. Normally, a sale of a non-profit hospital to a for-profit triggers a full and comprehensive review by the NJ Attorney General under a law called the Communnity Healthcare Assets Protection Act (CHAPA). During the CHAPA process, the Attorney General must decide if the hospital’s trustees used “due diligence” in selecting a buyer and must determine whether the ‘deal’ is in the public interest, protects the non-profit assets of the hospital, establishes a ‘fair-market’ price, has proper financing and avoids a ‘conflict of interest by or financial benefit to the hospital’s existing board members or executives.
In addition, NJ law requires full review by the NJ Department of Health and Senior Services (DHSS), which is charged with protecting access to quality care and essential services for the community. Both agencies hold public hearings into the proposed sale. In prior sales, the AG and the NJDHSS have established conditions to the sale, some of which include:
• Maintaining the hospital as an acute-care facility with all existing services for at least 10 years;
• Establishing a community oversight board;
• Requiring transparency of financial operations;
• Preserving care for the uninsured;
• Maintaining existing insurance contracts and coverage;
• Hiring all employees and preserving working conditions, including health coverage.
In the case of the Christ Hospital sale, there is no publicly available evidence that the hospital’s Board of Trustees looked for a non-profit buyer or partner, or put out a ‘public’ request for bids. This process needs to be open to the public, and it needs to end up with a buyer or partner who will preserve the mission of the hospital; provide care to all in need; maintain all health care services; and protect the economic security and rights of all employees.
Citations
1. 2010 Audited Financial Statement of Prime Healthcare Services Inc and Subsidiaries
2. California Watch, “Hospital chain profits by admitting high number of ER patients”, July 23, 2011,
3. Daniel Costello, “Hospital group rejects system and cashes in”, LA Times, July 8, 2007
4. Daniel Costello, “Hospital’s cuts sow anxiety in South L.A.”, LA Times, May 29, 2008
5. Daniel Costello, “Hospital’s cuts sow anxiety in South L.A.”, LA Times, May 29, 2008
6. AAMC letter
7. VVCH decision
