An employee whistle-blower alleges Prime Healthcare Services, Inc., which boasts its flagship Desert Valley Hospital in Victorville, systematically misdiagnosed and extended stays of patients to collect on lucrative Medicare billings. In an amended False Claims Act lawsuit filed in California federal court June 11 and unsealed last week, the Ontario-based hospital company is accused of overcharging Medicare and Medicaid more than $50 million over three years – a claim which Prime denied this week. While the lawsuit is centered around activities at Alvarado Hospital in San Diego – acquired by Prime in November 2010 – the complaint also names Desert Valley Hospital, several other Prime hospitals and Prime founder and chairman Dr. Prem Reddy.
Prime issued a news release on Tuesday denying that Alvarado Hospital or any of the company’s 24 other hospitals submitted false claims with the Medicare program.
Karin Berntsen – former director of Quality and Risk Management, then Case Management at Alvarado Hospital – contends in the complaint that top Prime executives routinely encouraged hospital staff to admit patients for short stays in favor of outpatient/observation status, regardless of whether the patient’s medical condition warranted it. Berntsen said it was a dubious effort to increase the hospital’s Medicare reimbursement, which is a violation of government rules.Berntsen was employed by PHS in various director roles related to quality and risk management, case management, and performance improvement for Alvarado Hospital, which it acquired in November 2010. She alleges that PHS purchases floundering hospitals and boosts their finances by implementing false claims practices.
Medicare reimbursement is greater for inpatient services than it is for observation services, and roughly 70 percent of patients at Alvarado are covered by Medicare and other federal healthcare programs, according to the complaint.
The complaint alleges that Prime executives also instructed staff to exaggerate patient diagnoses and remove references to observation status on hospital admission forms while eliminating internal oversight into decisions regarding inpatient admissions. Additionally, Reddy is alleged to have altered patient records during a Sept. 6, 2011 instructional exercise and appealed to staff four months earlier to find a reason to make an outpatient an inpatient, according to the complaint. “If the patient is elderly,” he allegedly said during a meeting on May 3, 2011, “you should add encephalopathy for a higher payment. You are missing some of these elderly patients. But, be careful … I don’t want to go to jail, ha, ha, ha.”
Berntsen estimates that more than $4 million in billings to government healthcare programs since 2010 were the result of fraudulent patient stays. She further estimated that the alleged fraud likely extended to the company’s 24 other hospitals nationwide, exceeding an estimated windfall of $50 million.
Troy Schell, Prime Healthcare’s general counsel, called the $50-million estimate “speculative nonsense because Ms. Berntsen’s specific allegations are only about Alvarado Hospital, and she clearly had no knowledge about whether other Prime hospitals supposedly operated in a similar manner.” Schell said in a written statement that Prime hospitals have been under tight scrutiny ever since a workers union accused them in 2010 of submitting claims for unnecessary admissions. “Prime hospitals have been the subject of numerous government agency audits and investigations,” he said, “but none of them have found any significant issues regarding such admissions or the lengths of stay.” He also said oversight and quality control programs and reporting at Alvarado Hospital have always been “robust.” “It defies common sense that Alvarado Hospital has been engaged in a false claims scheme,” he said, “when the entire Prime Healthcare system has been under … heightened and aggressive regulatory scrutiny for years.”
The case is U.S. ex rel. Karin Berntsen v. Prime Healthcare Services Inc. et al., case number 2:11-cv-08214, in the U.S. District Court for the Central Division of California.