California Watch
A Project of the Center for Investigative Reporting
Health and Welfare

October 15, 2010 | Lance Williams and Christina Jewett

The Southern California hospital chain under investigation for suspected Medicare fraud – and the labor union that blew the whistle – have both made significant political donations to officials with roles, present or prospective, in the probe.

As disclosed Tuesday by California Watch and the Los Angeles Times, Ontario-based Prime Healthcare Services is being investigated by state and federal authorities in connection with high rates of septicemia, or blood poisoning, reported among Medicare patients at the 13-hospital chain.

The probes began in response to a computer analysis by the Service Employees International Union. The union represents thousands of health care workers nationwide and has repeatedly clashed with Prime over workers’ wages and benefits.

The SEIU contends the chain’s high septicemia rates likely reflect “upcoding” – a type of fraud in which a provider falsely claims to have treated a complicated infection to qualify for premium reimbursement rates from Medicare. Prime says it has done nothing wrong and contends the SEIU made the allegations to leverage a labor contract at a Prime hospital in Inglewood.

In all, there are three investigations under way: by the Inspector General of the U.S. Department of Health and Human Services; by the state Attorney General’s Bureau of Medi-Cal Fraud and Elder Abuse; and by the state Department of Public Health.

Both the hospital and the union are major political donors in California. Some donations have gone to officials who played roles in initiating the probes – or who might play a role depending on how events unfold.

Jerry Brown, Attorney General and Democratic candidate for governor. As A.G., Brown is in charge of what an aide has called the “criminal investigation” of Prime being conducted by the Bureau of Medi-Cal Fraud. If Brown is elected governor, he would supervise the state Health Department.

This year SEIU affiliates have spent more than $4.6 million to elect Brown governor, most of it on an independent expenditure campaign.

Meanwhile, Prem Reddy, Prime’s CEO, has donated $51,800 to Brown’s campaign for governor, the maximum allowed for an individual donor in the primary and general elections.

Last month Prime Healthcare donated $32,900 to the state Democratic Central Committee, which also is electioneering on behalf of Brown.

In 2006, through a foundation, Reddy donated $100,000 to an Oakland charter school founded by Brown.

The donations “didn’t in any way influence” the probe by the attorney general’s office, said Sterling Clifford, Brown’s campaign spokesman.

Kamala Harris and William Cooley, candidates for Attorney General. The winner of the election will inherit the AG’s probe of Prime.

Records show Reddy has donated $6,500 to Democrat Harris, a Democrat and present District Attorney of San Francisco, while an SEIU PAC gave her $25,800, records show.

Reddy also donated $5,000 to Republican Cooley, the Republican D.A. of Los Angeles.

Rep. Henry Waxman, D-Los Angeles. The lawmaker, chairman of the Committee on Energy and Commerce, co-authored a letter that led to the federal probe of Prime.

To read entire story, click here.