Prime Healthcare, CEO to pay $65M Medicare fraud settlement

Ontario, Calif.-based Prime Healthcare Services, as well as its nonprofit arm, consulting subsidiary and CEO, agreed to pay $65 million to the federal government to resolve allegations hospitals submitted false Medicare claims and admitted patients who only needed cheaper, outpatient care, according to the Justice Department.

As part of the settlement, Prime Healthcare founder and CEO Prem Reddy, MD, will pay $3.25 million, while Prime Healthcare, Prime Healthcare Foundation and Prime Healthcare Management will pay $61.75 million.

The settlement involves 10 Prime Healthcare Services-owned hospitals and four Prime Healthcare Foundation-owned hospitals in California, according to the Justice Department. They are:

  • Alvarado Hospital Medical Center (San Diego) 
  • Garden Grove (Calif.) Medical Center 
  • La Palma (Calif.) Intercommunity Hospital
  • Desert Valley Hospital (Victorville)
  • Chino (Calif.) Valley Medical Center
  • Paradise Valley Hospital (National City)
  • San Dimas (Calif.) Community Hospital 
  • Shasta Regional Medical Center (Redding)
  • West Anaheim (Calif.) Medical Center
  • Centinela Hospital Medical Center (Inglewood)
  • Sherman Oaks (Calif.) Hospital 
  • Montclair (Calif.) Hospital Medical Center
  • Huntington Beach (Calif.) Hospital
  • Encino (Calif.)Hospital Medical Center

The federal government alleged the 14 hospitals submitted false Medicare claims from 2006 through 2013 by unnecessarily admitting beneficiaries who initially went to emergency departments at the hospitals and required cheaper, outpatient care. The federal government also alleged the hospitals from 2006 through 2014 billed for higher-cost patient diagnoses to gain more Medicare reimbursement. The settlement resolves these allegations without liability determined, The Wall Street Journal reports.

The allegations resolved by the settlement were originally brought by a whistle-blower lawsuit filed under the False Claims Act by Karin Berntsen, former director of performance improvement at Alvarado Hospital Medical Center.

In addition to the financial settlement, Prime Healthcare Services entered into an agreement with HHS' Office of Inspector General "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 check the accuracy of the company's claims for services furnished to Medicare beneficiaries," according to the Justice Department.

Prime Healthcare Services overall was pleased with the resolution of the allegations, noting "there was no finding of improper conduct or wrongdoing of any kind by Prime" and that Prime's "record of clinical quality care was never in question."

"Prime Healthcare will always support independent physicians who provide quality, compassionate care while fulfilling our mission to save hospitals, save jobs and save lives," Joel Richlin, Prime Healthcare deputy general counsel, said in a prepared statement. "We look forward to a strong period of growth while preserving vital community services and jobs throughout the nation."


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