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Sunday, July 8th 2007

For Profit To The Extreme

What should we think of Prem Reddy and his company, Prime Healthcare? This cardiologist’s multi hospital group sounds about as for-profit as you can get.

On the one hand I agree with this:

“Why is it in healthcare we expect to have the same?” he asked. “It’s an entitlement mentality. Why aren’t the same people asking why everybody shouldn’t be eating the same foods, or have the same clothes or same homes? Those are as essential services as healthcare.”

What distinguishes a positive right to health care versus other “necessities”?

Where do you draw the line? Patient A, per the algorithm, has a 45% pretest probability of CAD, and gets the stress test or the angio…patient B’s atypical pain only has a 15% chance and he gets pushed out the door. Even with the numbers, those cost control measures, are nothing if not subjective. If that’s the case can you really even define a ‘right to health care’? What is that right even?

That rant aside, Prime Healthcare doesn’t seem like the example of compassion in health care. Dr. Reddy has done away with contracts with private insurers. Instead,

“Somewhere along the line, the insurance industry has gone bad,” he said. “They want to pay $1,100 a day for patients that cost $1,700 to treat. They are bilking the system and getting rich at everyone else’s expense.”

While in his office one night, Reddy had an idea about how to make Desert Valley profitable. If his company canceled the hospital’s private insurance contracts, it might be able to make up for the loss in patients by increasing traffic through the emergency rooms and admitting those who needed more care into his hospitals for longer stays.

To ensure business, Reddy said, he did everything he could to speed up care in his emergency room and treat as many patients as possible.

To save diagnostic time, the hospital had laboratory equipment moved to the ER. Emergency beds and medical staff were increased. Reddy demanded that patients be seen within 20 minutes of arrival. With few options, paramedics eagerly showed up because, unlike many hospitals these days, it was rarely too full to accept patients.

I’d like to know what the California law is like. Are Prime Healthcare’s hospitals billing the remainder to the patients? If so, what is protected? For instance, in Texas they can’t take your primary residence to pay off expenses, healthcare or otherwise. Or, do the insurers have to pay whatever they’re billed?


Reddy says that once his company takes over a facility, savings are sought everywhere. The company often cuts staffs as much as 10% because most are bloated, he said. (State law requires a specific nurse-to-patient ratio, but it doesn’t cover management, who typically comprise as much as one-fifth of the staff.) It discourages doctors from giving patients treatment they can’t afford, including newer heart pacemakers and knee replacements.

“I use the same set of skills when I go into a hospital as I do as a clinician,” Reddy said. “I diagnose the problems and I fix them.”

I will say, some of the outrage at charges of cutting non-emergency care services which are not profitable doesn’t seem so unreasonable. For instance, Dr. Reddy has taken the time to deny this (probably because of Medicaid/Med-Cali and Medicare regulations),

According to the report, one doctor interviewed by regulators said Reddy suggested that the hospital no longer perform some Medicare and Medi-Cal procedures because of poor reimbursement. Reddy denies that.

But is this really so horrific or immoral? Healthcare is a business. Duh. This may fall under the same category, when treating non-emergency situations,

In [a] lawsuit, Lisa Crouch, the former chief emergency room nurse at Desert Valley Hospital, said that during frequent visits to the ER, Reddy pressured staffers to treat insured patients more favorably and turn away uninsured patients.

In a deposition, Dr. Panch Jeyakumar, Desert Valley’s former medical director and chief operating officer, corroborated the nurses’ account about treatment directives.

“The general policy [at the hospital] was that patients with insurance are to be given preference over noninsurance patients,” he said in the deposition. “It was the general concept which pervaded the entire organization during that time.”

Dr. Reddy definitely has a shady record, so I’m not sure I want to agree with him…about anything…ever. He’s faced felony trespassing charges, assault charges, and has had two restraining orders put on him. Having said that, whatever Dr. Reddy’s personal history Prime Healthcare appears to have some novel and ambitious ways of doing things.

“I have gotten calls from hospitals in Hawaii and Nevada asking me if I will come there and consider” buying their hospitals, Reddy said. “This will be a billion-dollar company.”

Even his competitors say Reddy’s ambitions don’t seem farfetched.

Dr. Jack Terner, president of Lancaster-based Prospect Medical Group, which represents 85,000 patients in the Southland, said he would be surprised if others didn’t soon follow Prime Healthcare’s business model.

Said Terner, “In many ways what he’s doing is obvious, but no one ever thought they could pull it off.”

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