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.