State officials Wednesday rejected a rapidly growing Inland Empire hospital chain's bid to buy one of the largest medical centers in Orange County, saying the sale was not in the best interest of the community.
The sale had been debated in Orange County for months as community activists, doctors, patients and medical experts argued over whether Prime Healthcare Services Inc., a for-profit chain based in Victorville, should be allowed to buy nonprofit Anaheim Memorial Medical Center.
The attorney general's office declared Wednesday that it was unable to conclude that "the sale is fair to Anaheim, reflects fair market value ... and is consistent with the public interest." Regulators also questioned the propriety of the bidding process. Last month, a public hearing on the proposed deal drew a crowd of about 200, where dozens of people spoke out against the pending sale.
The decision was a blow to Prime Healthcare and its chairman, Dr. Prem Reddy, a cardiologist who has built the chain of eight hospitals in Southern California with a controversial business model that has involved canceling most insurance contracts and eliminating unprofitable services.
In a statement, Prime Healthcare signaled that it would continue its quest for approval for the proposed purchase of the 217-bed hospital. In February, Anaheim Memorial's parent company, Huntington Beach-based Memorial Health Services, accepted Prime Healthcare's bid of about $55 million.
The company said it "respects the decision of the attorney general's office in denying the sale of Anaheim Memorial Medical Center to PHS based on their inability to conclude that the bidding process was fair to all bidders.
"We are prepared to participate in any new process that the board of directors of Anaheim Memorial Medical Center establishes for the sale of the hospital."
Gareth Lacy, a spokesman for Atty. Gen. Jerry Brown, said that Wednesday's decision was rare and that officials could not recall a similar rejection. The office must approve all purchases of nonprofit hospitals by for-profit companies.
In November, Reddy said, he donated $100,000 through his foundation to the Oakland Military Institute, a public charter school Brown founded.
In February, Brown approved the sale of another hospital being purchased by Prime Healthcare. He said later that he saw no conflict and that his deputies had made the decision. Wednesday's decision was also made by Brown's deputies, his office said.
