Forerunner To St. Rose’s Questionable New Operator Hit With $95,000 Fine

Prime’s Dr. Prem Reddy

HAYWARD | While the health care system in Alameda County undergoes significant growing pains in the run-up to Obamacare coming in 2014, the questionable acquisition of St. Rose Hospital by a group with close ties to a notorious Southern California hospital chain has flown under the radar.

Last September, the governing board at St. Rose approved an acquisition by Alecto Healthcare Services to help stanch its growing and potential debilitating losses. However, the group, only formed last February and headed by the former CEO of Prime Healthcare Lex Reddy, failed to raise many eyebrows in the East Bay.

In fact, Reddy resigned his post a day before he was scheduled to testify before a joint legislative health committee hearing over Prime’s controversial billing practices. In March, rumors of Prime helping St. Rose avoid potential bankruptcy were met with significant derision from the county officials, including Supervisor Wilma Chan. But, a nascent group headed not by Prime’s charismatic founder, Dr. Prem Reddy, but his right-hand man and brother-in-law, was apparently good enough for St. Rose and county officials.

Over the years, Prime’s zeal for acquiring bankrupt hospitals and quickly, sometimes magically, turning them into multimillion dollars profit centers, in some cases, within a year, has raised questions at the state and local level. Prime’s tactic of funneling uninsured patients through the more costly emergency room is cited as its golden goose, but, ultimately poses a direct threat to the entire health care delivery system. Prime’s reputation in health care circles is as bad as it gets. Numerous investigations over its business model, including allegations its bilked Medicare have hovered over Prime over the past few years. This week, according to a report, the state Department of Health fined Prime $95,000 for publicizing a patient’s private medical records in a bid to discredit a new report alleging it overcharged for unneeded procedures

The CEO of the newly-formed Alecto, curiously named after one of the ferociously vengeful mythological Greek Furies, is Lex Reddy, the former head of Prime for the last 11 years and brother-in-law of its founder, Dr. Prem Reddy. Is this just a different logo and color scheme pasted upon the same group of allegedly unscrupulous hospital providers or St. Rose’s savior? According to St. Rose’s Web site, the hospital’s operations will go forth without any changes to its customer base, staff or accepted insurance providers. Yet, the potential $75 million debt will be reversed without changes to the status quo?

In the meantime, the transfer of the hospital to Alecto must be approved by Attorney General Kamala Harris, who in the past has been cool to Prime’s rapid expansion in the state. The application was sent Nov. 1, according to St. Rose. Harris’s office will likely render a decision in the 60-90 days.

Categories: Alameda County Board, Alecto Healthcare, bankruptcy, Hayward, health care, Lex Reddy, obamacare, Prem Reddy, Prime, St. Rose, Wilma Chan

16 replies

  1. Sounds like St. Rose is being set up to fail.


  2. Where have you been? St Rose (like the other loser San Leandro Hospital) has been failing for years.


  3. Agree. And why does the author of this blog cut St Rose slack (“Yet, the potential $75 million debt will be reversed without changes to the status quo?”) while continuing to beat the drum against any change at San Leandro Hospital, which is an equal money pit in any measure?


  4. If I'm your doctor and you're overweight and you're plan is to continue eating cheeseburgers, how are you going to lose weight?

    Until someone makes a presentation on how the hospital will be turned around, don't you think it's safe to assume the tactics used by Prime will be also used here?


  5. Lex Reddy have been getting rid of toxic management team that brought St Rose to this point. The top post CNO's last day is today.
    It takes a person like him to clean up the huge mess. There are more incompetent cronies and clowns in medical staff to get rid off.
    Then hopefully we are on track to stay in business.


  6. The transfer approval by AG Harris is a done deal. Lex Reddy used Willie Brown to negotiate the takeover and secure the teamsters labor contract. Anyone think Kamala Harris will rule against her old boyfriend and mentor?

    Just wait – another scandal of bilking consumers on the horizon!


  7. Lex Reddy is the only game in town. He promised staff that he will run St. Rose Hospital as it is with its current mission. It is Lex Reddy or shut the hospital down. Let the jury decide.


  8. I know where the hospital can get some money to help with the debt. Sue Micheal Mahoney, Mary-Ellen Faire, and Ken Hinkleman for stealing money from the hospital and knowingly fugding accounting numbers to hide losses while giving themselves hundreds of thousands of dollars.


  9. st. rose employee, but not the same as above:
    The management at St. Rose is horrible. Big paychecks to the undeserved. Clean that mess up, and you might see a turn-around. Let the actual health care providers, for example Nurses keep doing their good work without the threat of being let go.


  10. St Rose is screwed. Lex is the only game in town, true. But he's a liar and shady as hell. He will bleed the county dry, stacking up coffins while he makes millions. The community is too stupid and fractured to oppose him. Sure, the old management was inept and small-scale greedy, but they have nothing on this guy. Time to get out of Dodge, and hope your loved ones don't have to get care there.


  11. It does appear Lex Reddy is trying to compromise pt care


  12. Everyone keeps saying that Alecto and Lex Reddy is “the only game in town”. Well that is not exactly the trueth.

    There where other bids that the board at St. Rose was supposed to be considering. And here is where the story gets good…

    Alameda County Medical Center put in a bid to guaranty the current loans and dept ($75 Million) that St. Rose had piled up. Then to assume day to day operations and expenses. Some said this would make sense and would consolidate the uninsured and under-insured under one umbrella.

    The board and Mahoney had been in contact with Prime (Lex Reddy) more than a year before the bid that was pitched by Lex and Alecto. That's right more than a year !! So the question if this is a hospital purchase by Alecto is suspect. It's more like Prime Healthcare Services of Northern California.

    Alecto's bid to the board was to completely pay off the dept ($75 Mil) and to assume day to day operations and expenses. And the board fell in love with this, so much so that they addressed the Prime issue right away with the employee's assuring them that this was NOT Prime.

    Really ?? When St. Rose had contacted Prime more than a year before ?? Something smells funny.

    The other issue is what did the board of directors have to gain by this acquisition, was there something in it for them ?? Well for one thing they completely sold out the employee retirement program. Alecto will not have a retirement program. So the employees at St. Rose will not have a monetary retirement program to go along with not having a retiree health program. Mohoney and the board scored big time. They got paid !!!

    Lastly why Prime ?…I mean Alecto. Well I've said this a thousand times. St. Rose was PRIME PICKENS for a huckster like Reddy. Check the numbers and the past accusations. St. Rose patients are mostly Medi-Cal and Medi-Care. Prime …I mean Alecto is used to billing them for services rendered and according to some for services NOT rendered. St. Rose was a sitting duck, so it could be that Lex is a smooth talker, or it could be that Mahoney, the Board and Alecto saw this as a way for everyone to make a little cash and the employees and the community will be the ones holding the bag.


  13. You really are and idiot that is completely uninformed. Before you spout off complete fabrications you should do some homework. Prime did bid on this against Alecto. Mr. Reddy (Lex) will NEVER be involved with anything his brother in law is doing and the same goes the other way. The only way this disaster of a hospital has any chance to survive is by having someone of Lex's abilities come in to rescue it through thoughtful medical management combined with good basic business practices. I know him and he is a good man and does not deserve to have the crap slung on him by the likes of you.


  14. I have know Lex Reddy for years and he is a man of great character. Lex is highly regarded in the healthcare community. Alecto is Lex Prime is Prim, don't confuse the two.

    It is in everyone's best interest for Lex and his management team to succeed in getting St. Rose turned around.

    He will need the support from everyone who really cares about the future St. Rose.

    Lastly, enough of the negativity, you are only part of the problem if you are not supporting this very complex endeavor.


  15. I hope things are moving in the right direction for this hospital that is still filled with highly skilled and hugely dedicated employees. A hospital that sits square in the socio-economic geography such as it is, is destined for struggle until the reimbursement model for safely nets changes. My hat goes off to you, St. Rose.


  16. Now St Rose is 2 million in debt. Who is siphoning off funds? Its happening again but this time under the new management. Staff is being cut making it harder for patients to receive good and prompt care. I have a distrust of this hospital based on experience with the previous administration and now with the current administration. I hope the county of Alameda can intervene to discover the source of the financial mismanagement. Some of us have no choice but to use this hospital because of our insurance and proximity. We deserve better in Hayward.


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