Prime Healthcare to pay $65M to settle Medicare fraud claims

Per the deal, the hospital chain will pay $61.75 million, while CEO Dr. Prem Reddy will dish out the remaining $3.25 million, Department of Justice officials said.

Prime Healthcare has agreed to pay $65 million to resolve a whistle-blower lawsuit alleging the hospital system routinely extended stays of patients and exaggerated diagnoses to collect on lucrative Medicare billings.

The suit was filed four years ago by Karin Berntsen, a former administrator at Alvarado Hospital in San Diego, but the U.S. government later intervened to assume ownership of the complaint as to some of the whistle-blower’s allegations, finding others without merit.

Berntsen was awarded $17.225 million of the total settlement announced Friday. Despite the agreement, the resolved claims remain merely allegations “and there has been no determination of liability,” the U.S. Department of Justice said in a statement.

In its statement announcing the settlement, Prime sought to emphasize exactly that: “There was no finding of improper conduct or wrongdoing of any kind.”

Yet the hospital chain — which includes Victorville-based flagship Desert Valley Hospital, one of 10 party to the agreement — was castigated by federal law enforcement.

Paul D. Delacourt, the assistant director in charge of the FBI’s Los Angeles Field Office, said those who engage in health care fraud “exploit helpless or unwitting patients” — often at a cost to American taxpayers.

“By reaching this settlement, the FBI and our partners are holding Prime Healthcare accountable for exaggerating patients’ needs and inflating the severity of their symptoms while handsomely lining their pockets,” Delacourt said in a statement. “This case should send a clear message to others who intend to engage in similar schemes that rout the American healthcare system.”

Prime has regularly denied the whistle-blower’s accusations, previously describing the suit as “entirely frivolous” and suggesting it defied logic that Alvarado Hospital or any others had engaged in a false claims scheme when the chain has been under heightened regulatory scrutiny for years that never uncovered “significant issues” regarding admissions.

The alleged wrongdoing centered between the years 2006 and 2013, when it was claimed that Prime systematically drove inpatient admissions, when unnecessary, to secure significantly higher Medicare payments.

Between 2006 and 2014, Prime was accused of falsifying data about patient diagnoses, including complications, in an effort to boost reimbursements from Medicare — a scheme known as “up-coding.”

“Patients and taxpayers who finance health care programs such as Medicare deserve to know that doctors are making decisions solely based on medical need,” First Asst. U.S. Attorney Tracy Wilkison said in a statement, “and not based on a corporate desire to increase billings.”

Prime officials have cast the dispute as a matter of “technical classification of the category under which patients were admitted and billed,” and never intersecting with the chain’s clinical quality care as they also underscored that physicians ultimately direct the level of care patients receive — not hospitals.

“Prime is committed to defending the rights of patients to receive the highest quality care, and it has always supported the clinical decision making of physicians acting in the best interests of their patients,” the company said.

Prime also noted that the American Hospital Association, which represents nearly 5,000 hospital chains and networks nationally, and the California Hospital Association, each filed briefs in 2016 to accuse government regulations of inappropriately challenging the clinical decisions of physicians.

Prime also sought to diminish the severity of being subject to the filing, arguing that such complaints related to inpatient admissions “have become increasingly common among hospitals and health systems nationally.”

Joel Richlin, the deputy general counsel for Prime, said the company was “very pleased” with resolving the litigation, eyeing now a “strong period of growth while preserving vital community services and jobs throughout the nation.”

Per the settlement, Prime will be subject to “significant compliance efforts” over the next half-decade through the U.S. Department of Health and Human Service’s Office of the Inspector General. The additional oversight will include an independent review of the accuracy of Prime’s claims for services furnished to Medicare beneficiaries.

Prime tempered that oversight agreements were “customary” with such settlements.

Per the deal, the hospital chain will pay $61.75 million, while CEO Dr. Prem Reddy will dish out the remaining $3.25 million, Department of Justice officials said.

Shea Johnson can be reached at 760-955-5368 or Follow him on Twitter at @DP_Shea.

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