Recently a “chain” of eight hospitals in California has been described as operating under a similar approach, involving the cancellation of insurance contracts and avoidance of serving Medicare or Medicaid patients, wherever possible. The owner and operator is Prime Healthcare Services, owned by the family of Dr. Prem Reddy, described as one of the wealthiest physicians around, with two multi-million-dollar mansions and his own helicopter.
Rather than accept as little as 30% of charges from insurance payers, the hospitals do not contract with such payers, and collect about $10,000 per patient day at one of their facilities, desert Valley Hospital in Victorville. The company’s total revenue, according to newspaper reports, is over $500 million a year, with profit at around 15% at several of its facilities, quoting Dr. Reddy. The company has acquired seven hospitals since 2004, including four last year, with a total of 1256 beds overall, and has announced another “major acquisition” coming this year.
While specialty hospitals have avoided ERs in order to avoid having to accept all patients regardless of insurance, the Prime Health Services hospitals take advantage of their ERs as a major source of patients. When patients are emergencies, they cannot be denied coverage by insurance, and since Prime does not contract with insurers, it can charge them their normal charges and expect to get paid. I recall in my last job as Chief Marketing/Strategy Officer for a multi-hospital system in Denver, one insurer with whom we did not contract approached us with a request for discount prices when patients were admitted through our ERs, but offered nothing in return, so we kept charging and getting full-charge payment.
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