Hospital buyer offers bitter pill: is Prem Reddy a savior or a profiteer?

This much is certain about Dr. Prem Reddy, an Indian native of modest origins who immigrated to the U.S. 32 years ago.

He's a respected cardiologist, dedicated philanthropist and successful entrepreneur, who in a few short years has shaken up the L.A. hospital industry.

But whether

"Prem Reddy causes a lot of people heartburn." said Jim Lott, vice president and spokesman for the Hospital Association of Southern California, a local trade group. "But the fact is that he's taking over and turning around hospitals with emergency rooms that were on the road to being closed. And we can't afford to lose another ER in Los Angeles."

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Reddy is the controversial founder and chairman of Victorville-based Prime Healthcare Services LLC, which is fast becoming the region's largest single hospital owner. Prime announced this month that it was acquiring its 10th, 11th and 12th facilities, including the Encino campus of Encino-Tarzana Medical Center and San Dimas Community Hospital, both from Dallas-based Tenet Healthcare Corp.

But it's not the size of his company that has ruffled feathers, but his business model.

Prime aims to turn around a hospital's finances by making it more efficient. That can include reducing administrators and other staff and eliminating low-profit outpatient medical procedures that Reddy maintains patients can get elsewhere. He also cancels managed care contracts he contends do not cover the cost of services.

The cancellations, plus an emphasis on admitting most patients through the emergency room where insurers pay higher rates, enables Prime to receive higher reimbursements.

Reddy's critics--including doctors, labor leaders and health care activists--claim the 58-year old millionaire is enriching himself through patients with limited access to health care.

He's even been sued by former employees over business practices and patient care policies that employees alleged were putting patients in jeopardy. In most instances, the cases were settled out of court. Sometimes, Reddy has countersued.

"His model of business is of grave concern to us," said Barbara Lewis, the Los Angeles-based vice president of SEIU United Healthcare Workers--West, which is in the midst of contentious contract negotiations at Inglewood's Centinela Hospital Medical Center, which Prime acquired in 2007. "He's growing so last he wants to be the McDonald's of health care."