Dr. Prem Reddy, Board Member of the Las Vegas Hindu Temple and Jain Center of Las Vegas and Founder & Chief Executive Officer of Prime Healthcare Services, Inc., Prime Healthcare Foundation, Inc., and Prime Healthcare Management, Inc. (collectively Prime), have collectively agreed to pay the United States $65 million to settle allegations that 14 Prime hospitals in California knowingly submitted false claims to Medicare by admitting patients who required only less costly, outpatient care and by billing for more expensive patient diagnoses than the patients had (a practice known as “up-coding”). Under the settlement agreement, Dr. Reddy will pay $3,250,000 and Prime will pay $61,750,000.
“This settlement reflects our ongoing commitment to ensure that health care providers appropriately bill Medicare,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “Charging the government for higher cost inpatient services that patients do not need, and for higher-paying diagnoses than the patients have, wastes the country’s valuable health care resources.”
Headquartered in Ontario, California, Prime Healthcare Services and not-for-profit Prime Healthcare Foundation constitute one of the largest hospital systems in the nation, with 45 acute-care hospitals located in 14 states. The 10 hospitals owned by Prime Healthcare Services are parties to the settlement agreement.
The settlement resolves allegations that from 2006 through 2013, Prime engaged in a deliberate corporate-driven scheme to increase inpatient admissions of Medicare beneficiaries who originally presented to the Emergency Departments at 14 Prime hospitals in California. The government claimed that the inpatient admission of these beneficiaries was not medically necessary because their symptoms and treatment needs should have been managed in a less costly outpatient or observation setting. Hospitals generally receive significantly higher payments from Medicare for inpatient admissions as opposed to outpatient treatment; therefore, the admission of beneficiaries who do not need inpatient care, as alleged here, can result in substantial financial harm to the Medicare program. The settlement also resolves allegations that, from 2006 through 2014, Prime engaged in up-coding by falsifying information concerning patient diagnoses, including complications and comorbidities, in order to increase Medicare reimbursement.
“Patients and taxpayers who finance health care programs such as Medicare deserve to know that doctors are making decisions solely based on medical need – and not based on a corporate desire to increase billings,” said First Assistant United States Attorney Tracy Wilkison for the Central District of California. “The Justice Department is committed to preserving the integrity of public health programs and preventing improper billing practices.”
Prime also entered into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) requiring the company to engage in significant compliance efforts over the next five years. Under the agreement, Prime is required to retain an independent review organization to review the accuracy of the company’s claims for services furnished to Medicare beneficiaries.
“When health care companies try to boost their profits by billing federal health care programs for more expensive services than they needed to provide, the Office of Inspector General will ensure they are held accountable for their deceptive schemes,” said Christian J. Schrank, Special Agent in Charge for the HHS-OIG’s, Los Angeles Regional Office.
“Those who engage in health care fraud, including corrupt doctors and medical professionals are driven by greed, exploit helpless or unwitting patients in violation of the oath they took to protect us – and often American taxpayers are the victims,” said Paul D. Delacourt, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “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. This case should send a clear message to others who intend to engage in similar schemes that rout the American healthcare system.”
This settlement resolves a lawsuit filed under the False Claims Act (FCA) in the U.S. District Court for the Central District of California by Karin Berntsen, former Director of Performance Improvement at Alvarado Hospital Medical Center in San Diego. Under the qui tam or whistleblower provisions of the FCA, private citizens are permitted to bring lawsuits on behalf of the United States and obtain a portion of the government’s recovery. The FCA also permits the government to intervene and take over the lawsuit, as it did in this case as to some of Ms. Berntsen’s allegations. Ms. Berntsen will receive $17,225,000 as her portion of the settlement amount.
Locally Prime owns and operates North Vista Hospital in North Las Vegas.
Dr. Reddy became the third member, along with Dr. Dipak Desai and Anil Gupta, of the Board of Trustee of the Hindu Temple who is investigated by the federal authorities. Dr. Dipak Desai who died in the prison was sentenced for life while Mr. Gupta was in federal prison for nefarious business activities. Mr. Gupta, who lives in Montreal, Canada was deported after his release from the federal prison.