Prime Healthcare's aggressive M&A approach: 10 things to know

Ontario, Calif.-based for-profit hospital operator Prime Healthcare Services is rapidly expanding its footprint across the nation, including two acquisitions in the last two weeks.

Here are 10 things to know about Prime and its recent transactions.

1.  Prime operates 28 acute-care hospitals across the country and has expanded by entering into a number of transactions this year, including buying some financially troubled facilities.

2. In January, Prime completed a deal to purchase bankrupt Landmark Medical Center in Woonsocket, R.I., which had been in receivership for five years. However, it was not a smooth transaction, as Rhode Island regulators expressed concern over allegations Prime hospitals in California had systematically overbilled Medicare. The deal was approved after Prime's CEO Prem Reddy, MD, explained how the company would improve the hospital by investing $30 million in technology and capital improvements during the first five years.

3. The Rhode Island regulators' concerns in Prime's deal with Landmark Medical Center were based on a lawsuit filed under the qui tam, or whistle-blower, provision of the False Claims Act. The lawsuit alleged Prime had falsified patient admission information to purposefully overcharge Medicare and Medicaid approximately $50 million, according to a Law360 report. 

4. In February, Prime agreed to acquire 323-bed Garden City (Mich.) Hospital, which had been looking for a sale or affiliation for a few years. The transaction marked Prime's expansion into Michigan. Gary Ley, president and CEO of the hospital, said he is confident the transition "will allow GCH to maintain a tradition of great care."

5. In August, Prime completed its acquisition of 269-bed St. Mary's Hospital in Passaic, N.J., which had been struggling financially for a number of years. Due to its financial troubles, St. Mary's had received $34.3 million in stabilization grants from the New Jersey Health Department and $5.6 million from the New Jersey Department of Treasury to cover debt service payments. Prime agreed to invest more than $80 million into the hospital, including $30 million for capital improvements.

6. Beginning in August, there were rumors Prime was a potential buyer for Daughters of Charity Health System, a six hospital network in Los Altos Hills, Calif. The rumors spurred protests from union members with SEIU-United Healthcare Workers West and the California Nurses Association. The protests were based on the groups' concerns that Prime would fail to adequately serve low-income patients and would cut employee pay and benefits if the acquisition occurred.

7. Subsequently, Prime filed a federal lawsuit against several employee unions, including the SEIU-UHW, alleging the unions were using extortionist tactics to block the sale of DCHS to Prime. The lawsuit alleged SEIU-UHW "issued malicious and false statements, funded operations with money unlawfully received in violation of federal law… and threatened to prevent acquisitions of hospitals by Prime unless it concedes to the defendants' demands."

8. In October, much to the dismay of opponents of the deal, the board of directors of DCHS agreed to sell its six hospitals to Prime. Commenting on the selection process, Robert Issai, president and CEO of DCHS, said "In selecting candidates to take over the hospitals, our priority was to seek the best buyer who could guide our hospitals into a successful future while honoring the obligations of our associates, retirees and other constituents." Like many of the other hospitals Prime has acquired, DCHS had been struggling financially. The system posted a $90.7 million operating loss in 2013.

9. After the deal between Prime and DCHS was announced, SEIU-UHW announced thousands of employees of the hospitals involved in the transaction would fight to stop the acquisition from occurring. "It's disappointing and hard to understand how Daughters of Charity's current owners could turn their back on 100 years of serving the poor by selling to a company with Prime's history," said Dave Regan, president of SEIU-UHW.

10. Within one week of the DCHS deal, Prime signed a definitive agreement to acquire hospitals and long-term care facilities from Carondelet Health in Kansas City, Mo., which is part of St. Louis-based Ascension. Under the agreement, Prime will acquire St. Joseph Medical Center in Kansas City and St. Mary's Medical Center in Blue Springs, Mo. Commenting on the agreement, Dr. Prem Reddy, said "Prime understands the value these hospitals bring to their communities, and we intend to help the hospitals provide residents with the high quality healthcare they deserve."

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