California-based Healthcare Provider and its CEO Agrees to Pay $65 Million to Settle False Claims Act Allegations
Healthcare providers who exaggerate patients’ need through “up-coding” harm to not only those patients but they also harm taxpayers. Thus, earlier this month the Justice Department announced that Prime Healthcare Services, Inc., Prime Healthcare Foundation, Inc., and Prime Healthcare Management, Inc. (collectively Prime), and Prime’s Founder and Chief Executive Officer, Dr. Prem Reddy, have agreed to collectively pay the US $65 million to settle allegations that 14 of their hospitals submitted false claims to Medicare. Specifically, they are alleged to have charged patients for much costlier procedures than what was required for their conditions. This practice is known as “up-coding”. According to the terms of the 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.”
The hospitals that are parties to the agreement include: Alvarado Hospital Medical Center, Garden Grove Medical Center, La Palma Intercommunity Hospital, Desert Valley Hospital, Chino Valley Medical Center, Paradise Valley Hospital, San Dimas Community Hospital, Shasta Regional Medical Center, West Anaheim Medical Center and Centinela Hospital Medical Center, Sherman Oaks Hospital, Montclair Hospital Medical Center, Huntington Beach Hospital and Encino Hospital Medical Center.
The government alleges that from 2006 through 2013, Prime increased the admissions of Medicare beneficiaries to 14 of its California hospitals via their Emergency Departments. The government maintains that the inpatient admission of these beneficiaries was medically unnecessary because their symptoms and treatments could have been managed with less costly treatments. It is significant to note here that hospitals generally receive higher payments from Medicare for inpatient treatments than for outpatient treatments. Thus, by admitting beneficiaries who did not need inpatient care, the government claims that Prime caused financial harm to the Medicare program. This month’s agreement also resolves allegation that from 2006 through 214, Prime engaged in up-coding and falsified documents concerning patient diagnoses with the purpose of increasing its reimbursement from Medicare.
“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.”
Under the terms of the settlement, Prime is required to enter into a Corporate Integrity Agreement (CIA) with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). The CIA requires Prime to engage in compliance efforts over the next five years by retaining an independent review organization. This organization will be tasked with reviewing the accuracy of the company’s claims to be sure that they comply with Medicare’s regulations.
The settlement resolves a lawsuit that was filed under the False Claims Act. Under the qui tam or whistleblower provisions of this act, private citizens are allowed to bring lawsuits on behalf of the US and to share in any recovery. Plaintiffs usually do so by retaining a qui tam lawyer from a qui tam law firm. The whistleblower in this case is slated to receive $17,225,000 as her portion of the settlement amount. Tips and complaints from all sources about potential fraud, waste, abuse and mismanagement can be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477).