California for-profit hospital operator Prime Healthcare Services has launched a not-for-profit division where it intends to move one facility per year, according to Payers & Providers.
Prime, which owns 14 hospitals throughout California, moved Montclair Hospital Medical Center east of Los Angeles into its not-for-profit foundation on Dec. 31. It joins Encino Hospital Medical Center in Los Angeles, which was moved into the foundation in 2009.
"We thought creating two divisions would be helpful, because there are different community perceptions of for-profit and not-for-profit hospitals," said Prime Healthcare CEO Lex Reddy. "It also may impact how we acquire hospitals. A not-profit seller, for instance, might insist that we put in an offer as a not-for-profit operator." Reddy disclosed that Prime recently bid on Victor Valley Medical Center in Southern California's high desert as a not-for-profit operator.
Industry observers say Prime's strategy goes against the current trend among hospital mergers and acquisitions. However, it does provide some advantages, such as improving Prime's public image, which has been battered by numerous clashes with state regulators over the balance-billing of patients and eliminating services.
"The aura of being a not-for-profit plays well in the local community," said Ed Kazemek, chairman of Accord Limited, a Chicago hospital consulting firm. He added that such facilities may draw more patients, even when competing against a for-profit hospital that provides superior care.