Dr. Prem Reddy, Trustee of the Hindu Temple and Jain Center of Las Vegas and founder of the Prime Healthcare Services has reached a settlement with the United States and California Department of Justice.

Prime’s Founder and Chief Executive Officer Dr. Prem Reddy, and California interventional cardiologist Dr. Siva Arunasalam to resolve alleged violations of the False Claims Act and the California False Claims Act based on kickbacks paid by Prime to Dr. Arunasalam for patient referrals. Locally, Dr. Reddy’s Prime Health Care Services owns and operate North Vista Hospital in North Las Vegas. On October 30, 2015, Dr. Arunasalam sold his medical practice and a surgery center to High Desert Heart Vascular Institute, a California professional corporation owned by Venkamma Reddy, M.D., Dr. Prem Reddy’s wife.

Prime includes Prime Healthcare Services Inc., based in Ontario, California; Prime Healthcare Foundation Inc.; Prime Healthcare Management Inc.; High Desert Heart Vascular Institute (HDHVI); and Desert Valley Hospital Inc. Under the settlement agreement, Dr. Arunasalam will pay $2,000,000; Dr. Reddy paid $1,775,000; and Prime paid $33,725,000.  

In 2018, Prime and Dr. Reddy paid $65 million to settle previous unrelated allegations of false claims and overbilling.

The latest settlement resolve one of the allegation that Prime paid kickbacks when it overpaid to purchase Dr. Arunasalam’s physician practice and surgery center because the company wanted Dr. Arunasalam to refer patients to its Desert Valley Hospital in Victorville, California. The purchase price, which was substantially negotiated by Dr. Reddy, exceeded fair market value and was not commercially reasonable. Prime also knowingly overcompensated the doctor when HDHVI entered into an employment agreement with him that was based on the volume and value of his patient referrals to Desert Valley Hospital.

In connection with the settlement, Prime and Dr. Reddy entered into a five-year Corporate Integrity Agreement (CIA) with the U.S. Department of Health and Human Services Office of Inspector General.  The agreement requires, among other things, that Prime maintain a compliance program and hire an Independent Review Organization to review arrangements entered into by or on behalf of its subsidiaries and affiliates.

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act in two lawsuits filed in federal court in Los Angeles. One suit was filed by Martin Mansukhani, a former Prime executive. The second suit was filed by Marsha Arnold and Joseph Hill, who were formerly employed in the billing office at Shasta Regional Medical Center, a Prime hospital in Redding, California. Under the qui tam provisions of the False Claims Act, a private party can file an action on behalf of the United States and receive a portion of any recovery. Although the United States did not intervene in these cases, it continued to investigate the whistleblowers’ allegations and helped to negotiate the settlement announced today. Mr. Mansukhani will receive $9,929,656 as his share of the federal government’s recovery.

“Doctors have a sworn duty to do no harm and to put their patients’ interests first,” said Acting U.S. Attorney Tracy L. Wilkison for the Central District of California. “Kickbacks designed to increase the number of patient referrals corrupt the doctor-patient relationship and needlessly waste this nation’s health care resources.”

In 2015 the then California Attorney General and now Vice President Kamala Harris questioned the Prime’s proposed $885-million acquisition of medical hospital chain Daughters of Charity, a Catholic medical institution. “Now that Prime has exited from the deal with a snarl, we have a definitive answer. Yes, Prime was bluffing”, said Kamala Harris, the then CA Attorney General.

2018 settlement totaling $65 Million…

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