Possible buyer for struggling Monroe Hospital a controversial firm

Aug. 28--The California hospital chain that hopes to buy struggling Monroe Hospital has been investigated for its billing practices and unusually high numbers of rare ailment diagnoses, and has been fined for violating patient confidentiality.

Prime Healthcare Services Inc., based in Ontario, California, has been managing the 32-bed private hospital's daily operations since July and hopes to buy the Bloomington facility once Monroe Hospital's reorganization through Chapter 11 bankruptcy is completed.

Last week, hospital workers, union representatives and elected officials protested against Prime Healthcare Services outside the St. Vincent Medical Center near downtown Los Angeles, one of the six hospitals Prime may buy from the Daughters of Charity Health System, according to an Aug. 15 story in the Los Angeles Times.

Protesters are saying the for-profit company, which owns or operates 28 hospitals in eight states, including 14 in California, typically buys distressed facilities and then cuts patient services, boosts prices and lays off workers. The protest efforts are being spearheaded by the Service Employees International Union, which says Prime will reduce workers' pensions and other benefits at the hospitals.

A May 29, 2008, article in the Los Angeles Times says Centinela Hospital Medical Center in Inglewood, California, after being taken over by Prime Healthcare in 2007, "has shuttered departments, laid off 13 percent of its 1,700 staffers and canceled most private insurance contracts." In January of 2011, the San Diego Union-Tribune reported that Prime had announced "significant staff reductions" at the Alvarado Hospital in San Diego it had acquired two months earlier, but would not say how many jobs had been cut.

"Prime Healthcare has a history of layoffs and huge wage and benefit cuts for its employees," Ra Criscitiello, research analyst with the Service Employees International Union, told The Herald-Times. "If there's going to be a Prime takeover in Bloomington, I would urge people to ask the Indiana attorney general or State Department of Health to impose conditions on Prime Healthcare like they've done in other states."

She cited the Rhode Island Department of Health, which demanded earlier this year that Prime invest $30 million over five years in capital improvements, service expansions and technology, at least $15 million in routine facility maintenance and at least $4.5 million in physician recruitment -- and meet 11 other quality benchmarks -- before Prime could buy the Landmark Medical Center and Rehabilitation Hospital of Rhode Island.

In September 2011, the California attorney general denied approval for the sale of Victor Valley Community Hospital to Prime, stating the sale would not be in the public interest. A July 12, 2007, story in the Los Angeles Times says Prime's bid to buy the Anaheim Memorial Medical Center in Orange County, California, was rejected by state officials who said it would not be in the best interest of the community.

But a block of the sale by Indiana's attorney general's office probably will not happen, according to spokeswoman Molly Johnson.

"The legal jurisdiction of state AG offices varies a great deal from state to state," she said. "Under California statute, the California AG can block the sale of a hospital, an authority that does not exist under Indiana law for the Indiana AG. Similarly, Rhode Island has a state law that allows that state's health department to review and approve hospital sales. Again, there is not a similar statute in Indiana for the Indiana AG. We will continue to monitor this situation in case some aspect of the proposed acquisition falls under the Indiana AG's Office's jurisdiction."

A 2007 LA Times story asserted that the policies of Prime Healthcare Services resulted in higher-than-average profits, saying that when Prime takes over a hospital, it typically cancels insurance contracts, allowing the hospital to collect much higher reimbursements; and has suspended services -- such as chemotherapy treatments, mental health care and birthing centers -- that aren't lucrative. Prime had profits of $283 million on revenue of $1.6 billion in 2010, according to a financial statement filed with the Securities and Exchange Commission.

"Prime Healthcare cancels insurance contracts so they can bill patients out-of-network rates," Criscitiello said. "That's damaging to hospitals, and to patients as well."

Prime Healthcare officials have said the Service Employees International Union is engaged in a smear campaign against the hospital chain.

"The union's leadership has demanded that Prime Healthcare agree to a neutrality agreement at all of its California hospitals," said Edward Barrera, spokesman for Prime Healthcare, in an email response to questions from The Herald-Times. Barrera explained that a neutrality agreement is a contract between a union and an employer that prevents management from giving any information that would be unfavorable to the union, and does not allow employees to have secret-ballot elections.

"Prime Healthcare values our employees and believes they should have the right to decide if they want to unionize. Prime follows all state and federal laws allowing workers to do that, if they wish," he said in the email. "But Prime Healthcare opposes broadly recognizing the SEIU to the exclusion of other unions without allowing its employees to exercise their right to vote for or against unionizing in a supervised secret ballot election. Agreeing to this, we believe, would rob our employees of their right to vote."

Prime sued the Kaiser Foundation Health Plan and the SEIU for conspiring to keep it out of the market, but a District Court judge in San Diego dismissed the suit for failing to provide sufficient facts demonstrating a conspiracy.

Barrera said that rather than decreasing or eliminating services, Prime often expands service lines and improves services through more efficient staffing models and the purchase of cutting-edge equipment. He said three Prime hospitals have acquired Da Vinci robotic systems that allow for the delivery of minimally invasive surgical procedures, and that Prime is also investing in linear accelerator beam devices for cancer radiation treatments.

Barrera said Prime Healthcare will be offering new mental health services at seven hospitals and opening new spine services and wound care programs at several others.

Joe Roche, Monroe Hospital's CEO, said critical articles are frequently written about large, for-profit healthcare companies, such as Prime Healthcare.

"The key thing to look for is whether there have been any fines from the federal government," he said. "While there have been a lot of accusations about Prime Healthcare, accusations are not facts. If you look for facts, you'll fine very few that pan out to be true problems identified by governmental agencies. Prime has a great reputation for quality in the work they do with patients."

Turning hospitals around

Prime Healthcare focuses on overhauling distressed hospitals, many of which are on the verge of closing their doors.

"A majority of the hospitals Prime Healthcare has acquired were in financial distress and all have been able to continue to serve their communities and provide quality health care," Barrera said. "Since 2005, Prime has invested approximately $788 million in facility renovation, equipment purchase and general capital improvements in its facilities."

According to numerous media reports, when Prime acquires a hospital, it typically installs medical directors to focus on quality of care, implements staff-training programs and tries to raise the hospital's standards to a level that's on par with its other hospitals. As a result, Prime has earned a number of quality awards from various organizations.

"Prime has developed an effective business model that emphasizes a physician-led flat management structure, significant capital investments to acquire cutting-edge medical technology and the use of evidence-based clinical protocols to improve patient care and clinical outcomes," Barrera said in his email. "Through these strategies, Prime has become an award-winning healthcare system."

In the past six years, including 2013, Prime Healthcare has been recognized three times as one of the "Top 15 Health Systems" in the nation, based on quality of healthcare and patient satisfaction. In 2014, eight Prime Healthcare hospitals were ranked among the "100 Top Hospitals" in the nation by Truven Health Analytics, formerly Thomson Reuters. Prime Healthcare hospitals have earned the award 27 times since 2003.

But in February, Truven rescinded the 2012 and 2013 Top 100 designation from Prime's Desert Valley Hospital after it received a sanction last year from the California Department of Health, according to a June 6, 2014, article in "Modern Healthcare." Two California state legislators are calling on Truven to rescind the Top 100 honor from two more Prime Healthcare hospitals, one for a 2012 health department sanction because a fatal overdose of a sedative was administered to a patient, and the other over billing practices.

Billing issues

For several years, Prime Healthcare has been under fire for its billing practices. The Los Angeles Times and other media outlets cite a 2010 investigation of Prime by the California attorney general into accusations that Prime was "upcoding" medical bills. Upcoding refers to a practice of billing Medicare for higher paying services than were actually performed.

More recently, a March 19, 2013, Times story says Prime Healthcare received a federal subpoena related to allegations that it has inflated its billings to Medicare.

"We've seen what happens when Prime Healthcare buys a failing hospital and miraculously turns it around," Criscitiello said. "There's a reason there are federal and criminal investigations of their billing and coding practices. If people working in one of their hospitals complain that the billing is unethical, they are let go."

A January 2014 article in the San Diego Union-Tribune reported that an executive from San Diego'sAlvarado Hospital had filed a $50 million whistle-blower lawsuit against Prime Healthcare, alleging Medicare billing fraud. It said the former executive who filed the suit was claiming some of the hospital chain's facilities ran up Medicare charges by avoiding admitting patients for observation, a classification that brings in smaller reimbursements from Medicare than listing them as inpatients.

The Union-Tribune article says Prime Healthcare has been under federal scrutiny since 2011, when the Center for Investigative Reporting published a year-long federal investigation questioning Medicare billing rates that were 70 times higher than the state average for kwashiorkor, a severe form of malnutrition that occurs when there is not enough protein in the diet. It's common in very poor countries, often during a drought or other natural disaster. In February 2012, a hearing was held before California lawmakers in concerning whether Prime was overbilling for medical care and refusing to transfer stabilized patients to hospitals in the patients' insurance network to drive up revenue.

Criscitiello said California state officials found that Prime Healthcare-owned Shasta Regional Medical Center in 2010 claimed that 20 percent of the Medicare patients they saw that year -- 727 of them -- were suffering from kwashiorkor.

"It wasn't just kwashiorkor," she said. "If you add up all the disorders Shasta was being investigated for regarding billing fraud, it totaled $6.9 million in 2010."

In 2011, California Watch said at least nine former Prime employees said the company's owner, Dr. Prem Reddy, encouraged staff to record common medical conditions as more serious ailments in order to receive larger reimbursements from Medicare. It said Prime hospitals reported caring for malignant hypertension (bleeding eyes) at seven times the state average and encephalopathy (brain swelling) at five times the state average; and reported treating autonomic nerve disorder at a rate of one out of 75 Medicare patients -- compared to the state average of one out of 6,667.

Barrera said there are many patients in Prime Healthcare hospitals who are elderly, poor, uninsured or reside in residential care facilities.

"Many of our patients may have serious conditions or multiple conditions because our hospitals are all acute-care facilities, and many are in locations where primary doctors are in short supply and/or are in rural areas," Barrera said. "Given the characteristics of our patient population, our medical staffs have tried to stay in the forefront of effective and efficient treatment. We have adopted clinical protocols for the early detection and treatment of diseases that are more often found in our patient population -- such as septicemia and malnutrition rates. And there has been increasing focus on the need to increase the diagnoses of these conditions to ensure prompt and effective treatment, and therefore improve outcomes and care."

Barrera said Prime Healthcare hospitals, like other hospitals, are often surveyed, with thousands of medical records reviewed by state and national accreditation agencies.

"All have concluded that we routinely follow state and federal guidelines, and found no substantive evidence supporting the allegations," he said. "We are confident any review will arrive at the same result and that we will continue to follow our mission -- 'Saving Hospitals, Saving Jobs, Saving Lives.'"

Patient confidentiality

A Nov. 29, 2012, LA Times story says state health officials fined Prime Healthcare Services$95,000 for violating patient confidentiality by sharing a woman's medical files with journalists and sending an email about her treatment to 785 hospital employees. The California Department of Public Health levied the fine in November 2012 after determining that Shasta Regional Medical Center in Redding had five deficiencies related to the unauthorized disclosure of medical information on a diabetes patient treated there in 2010. The state agency said it issued an additional $3,100 in fines in the case because the hospital failed to report the breach to the state and the patient in a timely manner.

The LA Times also reported that the Department of Public Health fined Prime $25,000 because a Shasta Regional employee inappropriately accessed a co-worker's medical files while the person was being treated there. In 2013, Prime Healthcare agreed to pay $275,000 to settle a federal investigation into the alleged violations of patient privacy at Shasta.

"In reaching the agreement, Shasta Regional Medical Center admitted to no wrongdoing pertaining to the alleged violation of patient privacy of a single patient," Barrera said. "Prime Healthcare and (Shasta) firmly believe they would have prevailed in this matter based upon the merits. However, in view of the unnecessary expense to both (Shasta) and to the taxpayers of the United States, they reached an agreement to settle the matter and pay $275,000 as a resolution amount."

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