Healthcare News & Insights

Hospital chain faces two federal investigations

Prime Healthcare Services, a hospital chain based in Ontario, CA, is facing not one but two federal investigations. One for its Medicare billing practices and another for alleged HIPAA violations. But the company doesn’t seem to be worried about the probes.

In fact the company, which owns and operates 21 acute-care hospitals in California, Nevada, Texas and Pennyslvania, is looking to build its 22nd hospital in Rhode Island. And it was in a filing with the state department in Rhode Island, that Prime disclosed the investigations. Up to that point, the hospital management company had vehemently denied it was under any kind of investigation, claiming its Medicare billing practices are perfectly legal.

Medicare probe

California Watch reported that according to federal records, Prime hospitals have billed Medicare for treating extremely high rates of  septicemia and kwashiorkor, a form of malnutrition seen among children in African famines. And these billings have made Prime eligible for millions of dollars in Medicare bonus payments.

That’s why the Justice Department was subpoenaed Prime’s billing records for Septicemia and malnutrition.

In a response to California Watch’s request for a comment from Prime, company lawyer Anthony Glassman said it’s been targeted for federal investigation due to “false allegations” made by the Service Employees International Union, which represents many Prime workers and has had disputes with the company over labor contracts.

However, federal records show Prime received a Medicare bonus of more than $6,000 for treating a patient with kwashiorkor. And over two years, the hospital said it treated more than 1,000 Medicare patients for kwashiorkor, which is 60 times the state average.

And in an interview with California Watch, the patient whom the hospital said had kwashiorkor,  said she spent five days in the hospital because she got hurt from a fall, not because she was malnourished. She even acknowledged the fact that she is overweight, not emaciated.

HIPAA Investigation

To rebut the California Watch story, records show that Prime shared the patient’s medical files with a local newspaper and hundreds of hospital employees.

This caused California regulators to fine Prime $95,000 for violating state confidentiality laws, as well as federal law.

However, Glassman, Prime’s lawyer, wrote that the chain denies any wrongdoing and is confident it’ll win on appeal.

The company also threatened to sue California Watch for defamation because it reported the company was under federal investigation.

That’s not all

It was also reported by California Watch that Prime’s CEO, Dr. Prem Reddy, gave a presentation to doctors at a south Texas hospital Prime’s nonprofit foundation recently acquired. An hour of that presentation was recorded and shared with the news agency.

The recording revealed that Dr. Reddy instructed the doctors how to boost their Medicare payouts, and encouraged the doctors to add to their patients’ charts with multiple secondary diagnoses for what he called “comorbid conditions.” Reason: Medicare pays big bonuses for treating patients who suffer from specified “major complications and comorbidities,” federal records show.

Dr. Reddy also encouraged the doctors to find reasons to admit Medicare patients because it would triple Medicare payouts.

In a letter in response to a request for comment from California Watch about the presentation, Glassman said Dr. Reddy’s presentation “focused on complex clinical information,” including “evolving Medicare reimbursement models for physicians and hospitals.”

He also wrote, “Dr. Reddy was not instructing his doctors on methods for cheating Medicare.”

So it looks like federal investigators will be the judge of that. We’ll keep you posted on the outcomes of this case.


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