Prime Healthcare Services: Lex Reddy, President & CEO

by HCE Exchange on March 10, 2011

There are thirteen California hospitals under Prime Healthcare Services (PHS) umbrella, a group that traces its roots back to 1985 when Prem Reddy, MD, FACC, FCCP, a cardiologist by trade, began his first multi-specialty medical group. He began managing practices in multiple states and built an 83-bed acute care hospital from the ground up and received the highest commendations for operations and quality services in that hospital within the first year.

Dr. Reddy’s first management practice was sold to a publicly traded company. He founded PHS in 2001 and bought back his 83-bed hospital, which was near bankruptcy under new management. From there, PHS has built a tradition of purchasing small, community-based hospitals in financial distress and turning these community-based hospitals into high quality, patient safety focused, profitable institutions. Lex Reddy, MBA, MHA, President and CEO, says, “We turn them around through operational efficiency and by investing critically needed capital in each facility.”

Desert Valley Hospital and West Anaheim Medical Center were named as two of the top four medical facilities from California that made Modern Healthcare’s most recent top 100 list are PHS hospitals.  Three of Prime’s Hospital’s, West Anaheim Medical Center, Centinela Hospital Medical Center and LaPalma Intercommunity Hospital were all named on US News and World Report’s 2009 Best Hospitals’ List.

Charting a New Course in Hospital Management

PHS is spending time, not only increasing the efficiencies of the hospitals they manage, but making sure that they are financially viable, high quality and accessible to the community. They have invested approximately $10 million in capital per 100-bed facility. In terms of clinical operations, the emphasis is on patient focused care. The goal is to move away from a high emergency room waiting time and focus on being able to tend to the patient the minute they need care, rather than sometime later that day or the next.

At the same time, PHS recognizes the emergency room is a critical component for the health of a community. They keep their emergency rooms filled with high quality staff and they are on diversion fewer hours than other area hospitals. This policy results in a higher number than average of uninsured and underinsured seeking care at PHS hospitals, but the organization views this as a life-saving service to the community.

Every PHS hospital has hospitalists on staff, meaning that patients have minute-by-minute access to a physician rather than day-by-day or even every other day that is provided in a traditional setting.  “There is no delay in care [at a PHS hospital]. Hospitalists attend to the medical needs of the patient on an hour-by-hour basis.  Appropriate tests are done timely.  Medications required are adjusted as appropriate during their admit, which tends to keep their length of stay shorter and resolve the medical problems quickly.”

A Community Leader

Prime’s for-profit model of hospital management is also good for the community and good for the patient, according to Reddy. “As for-profit hospital we benefit the community because we pay property taxes and income taxes, when hospitals become profitable” says Reddy. “Nowadays the small community hospital cannot get any endowment on resources from the community because communities can’t afford to sustain them. Look at the data for the state of California—most of the hospitals are technically bankrupt due to lack of appropriate reimbursement, adequate capital infusion.  They cannot sustain if payments are delayed from insurance companies even for a month.”

As far as charitable work, “there is no difference between a for-profit and a not-for-profit hospital,” says Reddy.  PHS hospitals have provided more charitable care in recent years than most other area hospitals. PHS’s not-for-profit foundation provides services in healthcare to the community and provides scholarships for health care related fields. They maintain a public health library where community members and college students have access to books and videos, as well as online resources for the latest in healthcare. The foundation gives away eyeglasses to schoolchildren and supports a variety of community education programs.

The Coming Crisis

Reddy foresees a collapse of the healthcare industry as the next big crisis in the US. “That’s the thing that nobody wants to talk about,” he says. “We are seeing the number of uninsured and underinsured going up. We also have the problem now of patients not only losing health insurance, but also not seeking necessary preventative healthcare because of the economy. They are not coming in for the elective work and they are not coming in to take care of their health because they are trying to conserve their dollar. It’s going to become a bigger problem as they might end up in the emergency room when their health becomes a serious problem.”

Falling reimbursement dollars, one of the quick fixes the government sees for saving money, is also a problem. With continued expectations to increase the level and amount of care with fewer dollars, hospitals are going to suffer, and what they are forgetting, says Reddy, is that healthcare needs to remain invested in people. There is a stimulus package for the technology side, but what about the people who will ultimately run the technology, provide the care for each patient? “As a nation, we are spending more money on paperwork than actual patient care,” says Reddy.

In the end, operational efficiencies can only take you so far. A lot of hospitals may crumble and fall by the wayside due to lack of adequate reimbursement, high cost of paper work, outdated regulatory requirements which has produced no better quality outcomes, Reddy predicts.

“They all have the same problem, but they are afraid of expressing it because the public does not have sympathy for hospitals. The public thinks healthcare providers have all this money because the public sees these big numbers. What the public does not understand is that no matter what the “billings” or charges are, the hospital receives fixed reimbursement from Medicare, Medi-Caid (Medi-Cal) and most other programs we provide the services under where we are reimbursed way below the cost of what it takes to provide the services,” says Reddy. “Until that thought process changes and the executives become unafraid to educate the community of the problems we face in healthcare, we will have a crisis in healthcare in the long-run, which will become untenable and unmanageable.”

-by Tracy Million Simmons

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{ 1 comment… read it below or add one }

william buck May 2, 2011 at 12:28 pm

Mr. Reddy:
Compliments to you on the article. I agree with you on the the key points made in your article. I think we are already in the final phase of the health care controversy and crisis with the escalation of the issue ddirectly related the national debt crisis we are already in. Medicaid and Meidcare dependent facilities will be the first to fail but none of our health care facilities are immune from the operating issues casued by serious reductions in reimbursements, even those who have strong operating results and metrics.
Regards to Dr. Reddy
Yours truely
Bill Buck, CEO
PRMC

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