Feds Join Prime Healthcare Billing Suit

The federal government late last month joined a civil false claims lawsuit against Prime Healthcare Services, accusing the Ontario-based hospital chain of engaging in questionable business practices intended to maximize its bottom line.

The U.S. Justice Department joined the suit against the for-profit Prime on May 23. The suit against Prime and its 14 California hospitals was originally filed in 2011 by Karin Berntsen, a nurse by training and director of performance improvement at the Prime-owned Alvarado Hospital in San Diego. The suit was unsealed in late 2013.

The suit accuses Prime of violating the federal False Claims Act by submitting inflated Medicare claims for payment. Among the accusations:

• Prime Chief Executive Officer Prem Reddy, M.D., would pressure emergency room physicians to admit any patients over the age of 65 because they have insurance coverage through the Medicare program.
• Any physicians reluctant to do so would be pushed out of Prime-owned hospitals.
• Physicians who admitted Medicare patients on a large scale would be offered more shifts
• Uninsured patients should be kept up to eight hours in the ER, then discharged

“Fraudulent billing practices, such as those alleged in this civil lawsuit, harm taxpayers who fund health care programs, such as Medicare,” said U.S. Attorney Eileen M. Decker for the Central District of California. “The Justice Department works collaboratively with law enforcement agencies, regulators and, in some cases, private citizens to ensure the integrity of a system that provides healthcare to millions of Americans.”

The intervention by the feds greatly ratchets up the pressure on Prime to settle the lawsuit for a significant sum of money.

Usually such settlements are also accompanied by a promise by the defendant to engage in a corporate integrity agreement that would govern their behavior for five years or more.

Prime General Counsel Troy Schell said in a statement that the company would prevail in the lawsuit.  “The allegations under investigation arise from complex regulation and a lack of clarity between what federal regulators and physicians believe necessary to adequately document medical necessity for hospital admission,” he said.

Elizabeth Nikels, a Prime spokesperson, also noted that the company's medical records have been audited thousands of times in recent years by Medicare administrative and recovery audit contractors (MACs and RACs), quality improvement organizations and fiscal intermediaries. The company has said it has prevailed in some 600 instances in which it appealed decisions to claw back payment in federal administrative law court, although it would not elaborate if any of those cases were part of a blanket settlement the Centers for Medicare & Medicaid Services (CMS) recently made to hospitals to clear a backlog of RAC appeals.

Prime's business practices have long drawn scrutiny. When it acquires a hospital, it often cancels contracts with insurers, allowing it to bill at much higher rates for commercially insured patients. In 2010, it settled a lawsuit with California regulators for balance billing HMO patients who received care at its emergency rooms. More recently the investigative journalism group California Watch extensively detailed the hospital chain's practice of systematically filing Medicare claims for rare maladies, such as kwashiorkor, a wasting disease mostly confined to Africa.

The federal government's decision to join the lawsuit was praised by the Service Employees International Union-United Healthcare Workers West, which has long been engaged in battles with Prime over jobs and representation at its hospitals.

“Time after time we’ve seen Prime Healthcare’s shady practices at hospitals a-cross the country, and we’re glad the federal government is getting involved to put a stop to the company’s conduct,” said Dave Regan, president of SEIU-United Healthcare Workers West (SEIU-UHW). “To manipulate doctors so they admit more people into a hospital is immoral and disgraceful.”