SRMC under new Management

Wednesday, October 29, 2008

REDDING - A for-profit Southern California hospital company will take over management of Shasta Regional Medical Center. Prime Healthcare Systems, which owns 12 hospitals in Southern California, has signed a multi-year lease agreement to operate the 246-bed hospital, Prime’s Chief Executive Officer Lex Reddy said today. “We’re leasing the hospital with an option to buy”, Reddy said. “We can buy the hospital any time we want.” The agreement becomes effective Nov. 1. Reddy wouldn’t reveal the the specifics of the deal, citing confidentiality agreements with the hospital’s landlord. “You have to wonder, if they can buy it anytime then why not now, said Business Manager Chris Darker. 
Shasta Regional was listed for sale earlier this year with a $100 million sticker price. “We would like to keep the facility open and continue to provide the care for patients in the community” Reddy said. Reddy assured the hospital’s roughly 800 employees that payroll would be made on time Friday, which is payday. Patients won’t notice the change of ownership, Reddy said.
The announcement of the new leadership comes just days after the hospital’s landlord Birmingham, Ala.-based Medical Properties Trust forced SRMC’s parent company Hospital Partners of America from its leadership role. The North Carolina firm hadn’t paid its lease under its agreement MPT, so the trust had rights to remove them, Reddy said.Deals with various suitors including Catholic Healthcare West, the parent of SRMC’s competitor Mercy Medical Center, fell through, Reddy said. MPT, which also owns the land on which three of Prime’s hospitals sit, brought in representatives from Prime to see if the Southern California firm could keep the hospital open, Reddy said.
Another firm, Transition Healthcare Company, was in negotiations with MPT as late as last night, but the Chicago-firm was unable to broker a deal, Reddy said.
Last month, HPA filed for Chapter 11 bankruptcy after defaulting on the $60 million it owed MPT, which bought SRMC’s buildings and property in 2007. The real estate investment trust also bought HPA’s River Oaks facility in Houston, which closed this summer.
Reddy said the deal doesn’t need the approval of the bankruptcy judge holding control of HPA’s assets because the agreement deals specifically with MPT and the Shasta Regional sub-company. Prime bills itself as a progressive hospital company that buys up distressed hospitals and makes them profitable.The company was founded in 2001, by Indian-born cardiologist, Dr. Prem Reddy. Lex Reddy said he his the founder’s brother-in-law.
Prime has been the focus of some controversy in Southern California in recent years because the company is known for improving hospital’s finances by making them more efficient, according to the Los Angeles Business Journal and other press reports.
Such tactics include laying off administrators and other staff and axing outpatient medical procedures that aren’t making large profits.
The cuts drew cries of protests from local health care advocates and labor unions, according to the news reports. “My concern is that we don’t have much background on these folks”, said Chris Darker, the union representative for nurses and other health care workers at SRMC. “Are they going to come in and further downsize the hospital?’ Prime has $224 million in total assets, according to financial data from 2007 which was filed with MPT’s quarterly report from May.

The Redding Record Searchlight contributed this report.
Reporter Ryan Sabalow can be reached at 225-8344 or .
Reporter David Benda can be reached at 225-8219 or .