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Whistle-blower says hospital company milked Medicare of $50 million; Prime Healthcare denies ‘frivolous’ allegations

January 15, 2014 6:21 PM
Shea Johnson, Staff Writer

LOS ANGELES • 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.

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.

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