Prime, 2 physicians reach $38M settlement over patient referrals, billing

Ontario, Calif.-based Prime Healthcare Services and two physicians agreed to pay $37.5 million to resolve allegations that they violated the False Claims Act, the Department of Justice said July 19.

The settlement with Prime, its founder and CEO Prem Reddy, MD, and interventional cardiologist Siva Arunasalam, MD, resolves allegations of kickbacks paid by Prime to Dr. Arunasalam for patient referrals, according to the Justice Department. 

According to the allegations, Prime intentionally overpaid for its purchase of Dr. Arunasalam's physician practice and surgery center, as the company wanted the physician to refer patients to its Desert Valley Hospital in Victorville, Calif. Additionally, Dr. Arunasalam erroneously billed Medicare and Medicaid, according to allegations.

Prime hospitals also allegedly overbilled state and federal insurers for implantable medical hardware, an accusation that didn't involve Dr. Arunasalam. 

In a written statement shared with Becker's, Prime said: "The settled matters related to an isolated, single physician practice in Southern California between 2015-2017 and billing of forty-five implantable device claims. The allegations did not involve patient care, but instead related to the valuation of a physician practice and the appropriate documentation for a limited number of implant claims totaling approximately $200,000. As soon as these matters were identified, Prime conducted an exhaustive internal review, fully cooperated with the DOJ and negotiated a mutually acceptable resolution."

Under the settlement, Dr. Arunasalam will pay $2 million, Dr. Reddy will pay $1.8 million and Prime will pay $33.7 million.

In 2018, Prime and Dr. Reddy also paid $65 million to settle other unrelated allegations of false claims and wrongful billing.

The settlement is a joint resolution with the Justice Department and the California Department of Justice. 

Editor's note: This article was updated July 19 to include a statement from Prime.

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