Ontario, Calif.-based Prime Healthcare is redefining its cross-market merger and acquisition strategy with its largest acquisition to date — eight hospitals in Illinois, a new market for the health system — and a bold plan to stabilize and elevate these facilities.
In a little over two months, the physician-led health system said it has created more than 1,000 jobs through insourcing services in labs and environmental support, launched a nonprofit medical group to house hospitalists and graduate medical education programs and implemented the Epic EHR system at one of Chicagoland’s largest hospitals, with plans to expand it further.
Sunny Bhatia, MD, president and chief medical officer of Prime, joined the “Becker’s Healthcare Podcast” to discuss how the health system assesses acquisition opportunities, harnesses economies of scale and plans to stabilize distressed hospitals while maintaining its physician-led, patient-centered approach.
Editor’s note: Responses are lightly edited for length and clarity. Click here to listen to the full episode of the podcast.
Question: Prime CFO Steve Aleman recently told Becker’s that the Illinois acquisition had “several positive attributes that other opportunities lacked,” including its vertical and horizontal service line integration. It also aligned with Prime’s strategy for entering new regions by providing a “market cluster presence.” What are the key factors Prime considers when evaluating cross-market deals? What types of opportunities are you actively seeking — and what are the red flags you avoid?
Dr. Sunny Bhatia: Cross-market deals add another layer of complexity to acquisitions. We look for hospitals where we believe we can make a meaningful impact, aligning our strengths with those hospitals’ needs — particularly those serving the underserved, facing financial uncertainty, or at risk of closure.
Since our founding in 2001, we have been focused on making a meaningful impact in financially distressed communities. As a physician-founded, physician-led organization, we first ask, ‘Can we really preserve and improve care for this community?’ This mission-driven approach guides every decision we make.
We’re drawn to hospitals that are integral to their communities but need additional support — whether it’s leadership, resources or operational improvements. These are the hospitals we know how to stabilize and strengthen. That said, we have to be very thoughtful about the opportunities we pursue. The acute healthcare space is extremely challenging, so we’re deliberate in our growth strategy. We tend to avoid situations where we don’t see a clear path to sustainability or where collaboration may be difficult. Our model depends on transparency, shared goals, and a commitment to quality care. We don’t want to grow just for the sake of growth.
Looking ahead, future acquisitions will focus on expanding within existing markets or entering new markets through a cluster scale approach. In today’s healthcare environment, having the right scale and support is essential. Our strength lies in our ability to adapt. We’re disciplined in our operations, understand market dynamics, and maintain a conservative yet flexible approach to growth. This flexibility allows us to stay true to our core principles: keeping hospitals open and ensuring access to high-quality, compassionate care for underserved communities now and in the future.
Q: Bringing hospitals from different markets under one system presents real operational and cultural complexities. What has Prime found to be the most effective strategies for driving successful integration — both behind the scenes and on the front lines?
SB: Integrating hospitals from different markets into a single system is complex. It’s never just about operations — it’s about our people, our trust, our purpose. While the integration process is challenging, we’ve identified a few key strategies that have proven especially impactful. It starts with upfront investment and being present, being visible.
Typically, hospitals in distress have been starved for capital and essential upgrades. Coming in, conducting thorough evaluations, and making those early investments in clinical infrastructure and patient-centered initiatives demonstrate that we’re serious about supporting these hospitals long term. We move quickly to implement enterprise-wide IT platforms, validated clinical workflows, and operational systems that promote quality, efficiency, and safety. Establishing this shared clinical and operational foundation early on creates consistency and enhances care delivery.
Expanding into new markets requires promoting our identity, our ability to support local leadership, staff, and communities. It doesn’t just happen through emails or spreadsheets — we have to show up. Staff want to know: “What’s your story? Are you committed? Are you here to stay? What’s your investment strategy?” These are fair and important questions. We can talk about our commitment, but it’s our actions that reinforce our message.
We empower local leaders and honor the individuality of each hospital while aligning everyone around a common mission. It’s not about making every hospital the same but ensuring every facility is equipped to provide the high-quality, compassionate care that defines us.
Q: Could you provide specific examples of how cross-market transactions like this can lead to significant economies of scale?
SB: In terms of economies of scale, some elements could include shared leadership oversights, added purchasing power and more leverage with health plans — but that’s easier said than done, especially in certain markets. However, with a strong market presence, you can potentially realize those benefits and ultimately reduce some of the costs of care through a market approach where there is a cluster of hospitals. As we face rising costs of care and challenges with revenue, improving the top line through a strategic market approach can be beneficial.
Another example is the hub-and-spoke model for certain clinical services, where the goal is to have a state-of-the-art instructional program at a central hub, creating desirable volume. At the same time, there may be opportunities to increase top-line revenue through competitive services and possibly gain negotiating leverage with COVID plans, though that, too, can be challenging in some markets. Additionally, overall costs of care can be managed through purchasing power, and we’ve also observed the benefits of shared leadership within a clustered market approach.
Q: Healthcare appears to be increasingly shifting toward a “multi-region model.” For health system leaders contemplating similar cross-market expansions, what strategic advice would you offer?
SB: Start with purpose and define a strategy that truly aligns with your mission. It’s equally important to understand your operating model — know where it works best, where it may fall short and how it connects with the values you aim to uphold. Sometimes a hospital may look great on paper, but if it doesn’t align with your mission model, it can be much more challenging than helpful in the long run.
You also need to genuinely believe in the importance of community. In our case, community hospitals are institutions we consider to be public assets, and we aim to lead them with a deep commitment to patients, caregivers and the entire community. Any type of expansion — particularly in cross-market expansion — requires a lot of hands-on work. We have to take a very active role, roll up our sleeves, get into the weeds, and really understand the local dynamics to effectively support our healthcare heroes, hospital leadership and community partners.
Additionally, be visible. Spend time in hospitals. Talk with your staff. Learn from your staff. Those frontline heroes hold a wealth of wisdom and experience. The history of each hospital is quite important, and listening to staff concerns with sincerity and purpose — showing up with humility and consistency — is essential. We’re not going to be perfect, and we acknowledge that, but we’re committed to making each day better than the last.
I do believe you can build trust and help transform culture, which is usually needed when acquiring distressed hospitals. Ideally, the goal is to create strong, lasting relationships. Quick wins are great, but we have to think beyond them. Growth for its own sake is not the objective. It’s about finding and addressing those unmet community needs in a way that aligns with a long-term mission and vision.
Q: Do you expect cross-market health system deals to accelerate or slow in the years ahead?
SB: Cross-market deals, in my view, arise from the opportunity to assess risks, potential value, and both short-term and long-term outcomes. The pace of transactions is driven by your ability to forecast those outcomes effectively. Currently, with the evolving and uncertain political and economic environment, financial performance and valuations can shift rapidly. Economic challenges or unfavorable regulatory changes could potentially slow down the number of deals until there is more clarity from Washington, D.C.
That said, I do expect cross-market deals to continue. We’re seeing various hospitals and smaller systems continue to struggle, and as macroeconomic factors stabilize, I believe cross-market deals will eventually accelerate. The future belongs to organizations that can adapt and thrive with exceptional, passionate leadership and operational strength — especially the latter.
I think strong operators will perform well in this challenging environment, ultimately stabilizing and saving struggling hospitals. During this time, our physician-led, clinically focused, patient-centered model and the intellectual investments we’ve made have proven that we can turn things around and continue to serve these underserved communities effectively.
