Prime Healthcare and CEO to pay $65M in false claims case

Prime Healthcare Services, a national hospital system with 45 locations in 14 states, and its CEO have agreed to pay $65 million to settle a whistleblower case alleging false claims. 

The case stems from allegations that 14 Prime hospitals in California knowingly submitted false claims to Medicare by admitting patients who required less costly, outpatient care and up-coding to bill for more expensive diagnoses than patients had, according to the U.S. Department of Justice (DOJ).

Prime will pay more than $61 million in the settlement, and CEO, president and chairman, Prem Reddy, MD, will pay more than $3 million.

“This settlement reflects our ongoing commitment to ensure that health care providers appropriately bill Medicare,” Acting Assistant Attorney General Chad A. Readler of DOJ's Civil Division said in a statement. “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.”

The settlement resolves billing practices from 2006 to 2013, where the government alleged Prime engaged in a “deliberate corporate-driven scheme” to boost inpatients admissions when it was not medically necessary. Hospitals receive higher payments from Medicare for inpatient treatment compared to outpatient treatment. From 2006 to 2014, the company allegedly also up-coded to increase Medicare reimbursement.

Prime, which is based in Ontario, Canada, maintained that it did no wrongdoing, noting that the case dealt with a “technical classification” of billing patients in the correct categories, the company said in a statement on Aug. 3. Prime also noted that inpatient admissions versus outpatient observation are “complex” without clear criteria from Medicare, leaving it to the discretion of physicians.

“Medicare second-guesses the treating physician’s decision regarding the level of care a patient needs, arguing that patients should be placed under a lower level of care as observation rather than inpatient care,” the company said.

Under terms of the settlement, Prime is required to engage in significant compliance efforts with HHS over the next five years, including a review from an independent review organization for services provided to Medicare beneficiaries.

“Those who engage in health care fraud, including corrupt doctors and medical professionals 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,” Paul D. Delacourt, assistant director in charge of the FBI’s Los Angeles Field Office, said in a statement. “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."