Primed for Change

It is hard to believe that it was just about a year ago that I blogged here about Prime Health Care's transition from a bit player to a major player in acute care hospital ownership. A lot can  happen in twelve months, especially when you are on  an acquisition binge. 

Prime, you may recall, specializes in the acquisition and turnaround of financially troubled acute care hospitals. Prime operates 29 hospitals in California and eight other states.

I write today about Prime's proposed acquisition of six  hospitals in the Bay Area, a subject that has produced both considerable heat and light.  If California Attorney General Kamala Harris approves the Daughters of Charity acquisition, Prime will become the fifth-largest hospital company in the United States, based on revenue.

The California Attorney General's review of this transaction, as required by California Corporations Code section 5914 et seq.  continues apace. Consistent with the statute, the public hearings have begun. Consistent with California politics, the letter writing campaigns have begun. You can see the public documents here. 

I don't envy Kamala Harris. It could be that there is just no way to please everyone here. I have written another time about the strong reactions provoked by hospital ownership transfers and  closings.

The Daughters of Charity want out of their debt and do not hesitate to assert that a closed hospital — apparently their view on the likely outcome if the sale to Prime is derailed – costs lives. The interesting thing about this approach is more isn't necessarily better.  The SEIU opposes all Prime acquisitions. The problem with this is that it contemplates absolutely no place for a turnaround artist like Prime Health Care in acute care hospital markets.

It is important to remember that California is not a certificate of need state. No CON is required to enter the acute care hospital market nor to exit it. This can produce some utterly remarkable outcomes — my personal favorite has always been the acute care bed arms race that raged in and  around Redwood City a decade or so ago where the largest acute care bed players raced each other to launch their projects to build hundreds and hundreds of new acute care beds in close proximity to each other. Those familiar with the particular torture of a Redwood City to San Francisco automobile commute will appreciate that I used to observe that whoever lost the acute care bed arms raise could convert their million dollar plus per bed facilities to emergency housing for trapped commuters.

The political theater, of course, is outstanding. But do not be distracted from the exponential growth of Prime Health Care, a business model only destined to grow as health care reform's amplification of the movement of health care outside of not for profit acute care facilities continues.

x-posted at prawfsblawg

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