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Regionals: Acquisition of Prospect Medical Holdings completed and other news


By Modern Healthcare
Posted: January 3, 2011 - 12:01 am ET
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LOS ANGELES—A private-equity firm has completed its acquisition of Prospect Medical Holdings, Los Angeles, after the company's shareholders approved the deal, valued at $363 million in cash and assumed debt. Leonard Green & Partners, also based in Los Angeles, controls the funds that purchased the company. Four Prospect executives contributed shares to the merger that represented a 54.6% stake in the company. They received a stake of 37.9% in the recapitalized company as well as cash. Samuel Lee will remain as CEO of Prospect and also will remain the largest management investor with a 20.2% stake in the recapitalized company. Prospect reported $157.3 million in long-term debt on its balance sheet as of June 30; the quarter ended June 30 is the last for which the company has reported its earnings. Prospect owns three hospitals with five campuses in the Los Angeles area and also manages 10 medical groups with 7,200 physicians who provide service to 177,000 managed-care enrollees. The Federal Trade Commission granted the deal antitrust clearance in September.

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Poizner blocked Pacificare from paying a dividend.
Poizner blocked Pacificare from paying a dividend.
SACRAMENTO, Calif.—PacifiCare Life and Health Insurance Co. withdrew a $120 million dividend to parent UnitedHealth Group after California Insurance Commissioner Steve Poizner issued an order blocking the move. Poizner said the insurer might need the funds to pay state penalties related to alleged claims violations. UnitedHealth Group acquired PacificCare in 2005 for $8 billion. Since then, the state has been investigating provider and consumer complaints regarding claims handling. The state charged PacifiCare with nearly 1 million violations, each subject to penalties of up to $10,000. The issue is pending before an administrative law judge. “Nobody knows what the outcome of the enforcement action will be,” Poizner said in a news release. “But it is entirely possible that allowing United to siphon off $120 million would enable them to turn penalties into profits.” Minnetonka, Minn.-based UnitedHealth Group said in a statement it disagrees with the order and that “it's inappropriate to use this process to try to gain leverage in a separate case about administrative issues that have long since been addressed.”

SCOTTSDALE, Ariz..—Healthcare Trust of America, a Scottsdale, Ariz.-based real estate investment trust, announced it purchased four long-term acute-care hospitals operated by Select Medical Corp. for $102 million, according to a news release from Healthcare Trust. The seller or sellers of the hospital buildings were not identified by Healthcare Trust of America. Select Medical, a specialty hospital operator based in Mechanicsburg, Pa., has leases with an average remaining term of 11.5 years to operate the long-term acute-care hospitals. Two of them are in Florida, and the other two are in Georgia and Texas, according to the release. This year, Healthcare Trust of America has bought about $660 million in medical office and healthcare-related assets, according to the release. The move follows an agreement in which another REIT, HCP, Long Beach, Calif., signed a definitive agreement to purchase substantially all of the real estate assets of HCR ManorCare, a Toledo, Ohio-based skilled-nursing and post-acute-care provider, in a deal valued at $6.1 billion.

Brewer wants Boehner to end a Medicaid spending requirement for states.
Brewer wants Boehner to end a Medicaid spending requirement for states.
PHOENIX—Arizona Gov. Jan Brewer has sent a letter to incoming House Speaker John Boehner asking the new Congress to eliminate a Medicaid state spending requirement in the health reform law. Brewer, a Republican, wants Congress to quash the “maintenance of effort” rule in the Patient Protection and Affordable Care Act that requires states to maintain 2008 funding levels for Medicaid programs to obtain federal funds. Arizona cannot afford to maintain the Medicaid program at current levels, Brewer wrote. The state faces a budget shortfall of $1.2 billion next fiscal year, and about 20% of residents are on Medicaid. A voter-approved initiative in 2000 expanded Medicaid to people at or below 100% of federal poverty level, adding to costs. “The Medicaid program must be re-focused on essential and catastrophic services for it to be manageable in the long run,” Brewer wrote in the letter, which also was sent to Arizona's representatives in Congress. Arizona ran afoul of the maintenance of effort provision this year when lawmakers attempted to shutter KidsCare, a coverage plan for low-income children. The state Legislature restored the program after learning it would lose $7 billion in federal funds as a result.

SACRAMENTO, Calif.—Preventable hospitalizations have dropped significantly for many health conditions in California, but the state still needs improvement, according to newly released data. From 1999 to 2008, hospitalization rates for 10 preventable conditions fell between 10% and 60%, according to the data from the California Office of Statewide Health Planning and Development. Chest pain hospitalizations dropped by 60% while hospitalizations for pediatric gastroenteritis and chronic obstructive pulmonary disease each declined by more than 40% over the same time period. However, hospitalization rates for hypertension jumped 36% over the nine-year period, with the largest increase occurring between 2006 and 2008. Hospitalizations for urinary tract infections rose 9.6% in the nine years, according to the office. The report analyzed data on preventable hospitalizations for 14 conditions, including diabetes, asthma, dehydration and bacterial pneumonia. Overall, the hospitalization rate in California fell by 6.8% over the nine years, to 10,533 hospitalizations per 100,000 in 2008. “Through these prevention quality indicators, communities can better focus on planning and shaping systems that better meet community needs,” David Carlisle, director of the office, said in a statement.


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