Prime Healthcare pitches singular corporate voice

Prime Healthcare Services should be a feel-good story: Upstart hospital chain buys financially ailing facilities and turns them around, planting feather after feather in the cap of its chairman, himself an immigrant enjoying the upscale version of the American dream.

Except Prime's tale feels more like a bear breaking into a camper just as its owner has returned from a hike.

In the space of a few days last month Prime issued press releases boasting that it regularly prevails over Kaiser Permanente in administrative law hearings, claimed Kaiser and another organization were being regularly fined by the Centers for Medicare & Medicaid Services (CMS), and promised it would sue a non-profit investigative reporting group. These are fairly typical missives from the company, which possesses, what I can say after nearly 19 years covering the healthcare industry, a singularly unique corporate voice.

These statements, at turns testy, defensive, and even ungrammatical, are likely penned by Prime founder Prem Reddy, a physician who immigrated to the United States from India in the 1970s and has made tens of millions of dollars first forming a medical group in Southern California, and later Prime. I make that guess because having crossed the aisle a few times in my career to do public relations consulting, no communications executive at a major corporation could release such statements of their own volition and keep their job. Nor would they likely counsel doing so. These are strictly top-down announcements.

Prime has grown by leaps and bounds with a formula that is about as controversial as its voice: Eliminate contracts with insurers, admit their patients through the emergency room, and bill full charges. In an era where healthcare cost containment is the operative mode, this is a default mode few hospital operators embrace. Moreover, news outlets such as the Los Angeles Times and California Watch--a non-profit group whose work is regularly printed in major newspapers--say that Prime is under investigation or has been investigated by both federal and state agencies for the way it bills to treat patients for septicemia and malnutrition.

Prime is used to close scrutiny: It was sued by the Department of Managed Health Care for engaging in balanced billing--charging insured patients for portions of their care their insurer would not pay for--a violation of state law. Prime eventually agreed to stop the practice. It also was sued by the California Attorney General after closing down a psychiatric unit at a Los Angeles area hospital after agreeing to keep it open for a minimum of six months in order to get state approval to buy the facility. Later on, Prime reopened the unit, but claimed in another of its press releases it had been shut down by the previous owner.

Despite being called out repeatedly for conduct that would chagrin more than a few hospital operators, Prime pugnaciously guards its turf. I know this from personal experience, when I wrote about the malnutrition allegations earlier this year and found myself and a five-member editorial board on the business end of bulky Fed Ex packages that included demands for a retraction (a matter settled with a published letter to the editor from Prime).

Such strategies would make a healthcare finance executive simultaneously sing and fret, because although Prime makes money, it is keeping itself perpetually on the radar of CMS, the Internal Revenue Services, and a variety of state agencies.

Of course, there is a possibility these allegations and investigations will lead to nothing, and perhaps Prime will walk away unscathed. But given CMS demands back overpayments versus refunding underpayments at a more than five-to-one clip, and firms like Tenet Healthcare have been the subject of multiple billing probes (and never really recovered from the last one), the odds don't look terrific.

Either way, Prime's corporate voice runs counter to the notion that a hospital is not only a community asset but a public trust. If the tone of its ownership is simultaneously belligerent, boastful, and defensive, it becomes perfectly reasonable that members of that community would not want to entrust their lives to it.

This brings me back to the scenario of the hiker and the bear. You can invent your own ending, but outside of a fairy tale, it's awfully difficult to find one that feels good in any way. - Ron