Prime Healthcare picks up three Tenet facilities

A growing but controversial hospital chain has agreed to acquire three Tenet hospitals, expanding its network of facilities that reject all forms of managed care contracts. Hospitals included in the deal include the 151-bed Encino campus of Encino-Tarzana Regional Medical Center, 167-bed Garden Grove Hospital Medical Center and 64-bed Dimas Community Hospital. Prime has closed on the Encino-Tarzana deal, but the other two deals await regulatory approval.

The deals fit Prime's pattern of acquiring financially troubled and underperforming hospitals. For example, the Encino facility lost more than $10 million in fiscal 2007, and the other two facilities' performances were "marginal," according to a Prime statement. Prime's chairman, cardiologist Dr. Prem Reddy, says that he plans to sink capital into the hospitals to help turn them around. If Prime's other deals are any indication, he'll also end up realigning the hospitals' service mix dramatically, in some cases low-profit service lines (such as psychiatric services) that, critics say, are needed in the communities the hospitals serve. 

Perhaps the most controversial step Prime has taken with its acquired hospitals has been to cancel all managed contracts. However, as of March of this year, Prime signed a contract with Aetna across its network, which now will include 12 hospitals.

To learn more about the acquisition:
- read this Prime press release

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