DOJ intervenes in Prime Healthcare whistleblower case

May 25--The U.S. Justice Department has joined a four-year-old whistleblower case against Prime Healthcare Services, adding significant weight to allegations of widespread Medicare overbilling at 14 of the company's hospitals in California.

Federal court documents show that a judge granted the agency's request to join the case Tuesday, one day after the government declared in a court filing that its investigation of Prime has "yielded sufficient evidence" that the targeted facilities "submitted or caused the submission of claims to Medicare for unnecessary inpatient stays."

Anti-fraud statutes allow fines of $5,500 to $11,000 -- plus triple damages under certain circumstances -- for each false or inaccurate bill submitted by hospitals and other health care companies.

In 2012, for example, pharmaceutical giant GlaxoSmithKline agreed to pay $2 billion to the federal government to resolve accusations that it overbilled for the prescription drugs Paxil, Wellbutrin and Avandia. In 2006, Tenet Healthcare paid $900 million in a case involving alleged Medicare bill-padding, kickbacks and changing of billing codes to obtain higher reimbursements.

Prime continues to contest the lawsuit against it, saying it has a consistent track record of meeting Medicare's billing requirements.

Regardless of which side is correct, the government's involvement in the case raises the stakes, said Kathleen Clark, a Washington, D.C.-based attorney who has taught courses in ethics and the False Claims Act for Washington University in St. Louis.

Federal regulators participate in about one-quarter of such cases, she said.

"It is actually quite significant when the government decides to intervene in one of these cases. The government brings to bear significant investigatory resources and leverage," Clark said. "Intervention is seen not as a guarantee of a win, but it's a very good sign for the whistleblower and (his or her) lawyers."

Prime finds itself under federal scrutiny because of a whistleblower complaint submitted in 2011 by Karin Berntsen, a registered nurse and director of quality and risk management at Alvarado Hospital in San Diego. Berntsen's suit accuses Prime of routinely making Medicare patients' illnesses seem more severe than they really were in order to justify billing for additional services and increasing hospital admissions.

Berntsen alleged that this practice occurred not only at Alvarado but also at 13 other Prime properties. Most of these hospitals are in Southern California, including Paradise Valley Hospital in National City, Centinela Hospital Medical Center in Inglewood, Encino Hospital Medical Center, Sherman Oaks Hospital and Huntington Beach Hospital.

Berntsen's litigation estimates the total amount of overbilling at $50 million, an amount that now could result in a significant financial payoff for her. Whistleblowers are entitled to 15 percent to 25 percent of the money recovered in cases involving the Justice Department.

The overbilling sum could increase through the legal discovery process, one of Berntsen's attorneys said this week.

Prime has denied Berntsen's allegations; it called them "speculative nonsense" after her complaint was unsealed in 2013.

In a new statement sent to The San Diego Union-Tribune after the federal government's intervention, the company was a bit more subdued. It said Medicare billing is complex and that there is a "lack of clarity between what federal regulators and physicians believe is necessary to adequately document medical necessity for hospital admissions."

Prime also said its hospitals -- the company currently owns 43 across 14 states -- have successfully undergone Medicare billing audits conducted by an array of organizations such as The Joint Commission, the Healthcare Facilities Accreditation Program, the California Department of Public Health and government "recovery audit" contractors who are rewarded for spotting billing irregularities.

"Over 600 medical records that were appealed to the Administrative Law Judges and Medicare Appeals Council, all had rulings in Prime Healthcare's favor, with no exception," Prime's statement said. "Given this precedence of successful appeals on thousands of claims, Prime Healthcare is confident it will prevail and ultimately be exonerated."

But the Justice Department appears equally certain that Prime has violated federal rules.

A wide-ranging investigation referenced in its court filing this week said "multiple witnesses who have worked at different Prime hospitals" told the government that Dr. Prem Reddy, Prime's chairman, president and chief executive, criticized emergency department physicians and demanded "their termination if he decided they were passing up opportunities to cause the admission of Medicare beneficiaries."

The agency said those witnesses also accused Reddy of requesting "increased work schedules for (emergency department) doctors whose patients had a relatively high rate of admission," of decreasing or discontinuing such shifts for physicians with low rates and of telling emergency department doctors "to find a way to admit all patients over 65 because they all have insurance."

In contrast, the government said, Reddy allegedly worked to minimize hospital stays for uninsured patients -- instructing that they should stay in the emergency department for only six to eight hours to get test results and then be discharged.

The Justice Department also cited the results of a Medicare contractor's review of the company's hospital admissions that "put Prime on notice of the same pattern of seemingly unnecessary inpatient admissions."

Marlan Wilbanks, an Atlanta-based attorney who is one of several lawyers representing Berntsen, objected to Prime's assertion that positive results in previous audits prove that the company's billing practices are sound.

"Those entities were not designated to look for fraud. Prime was given the benefit of the doubt; however, those entities did not have the evidence and the documents that the government and (Berntsen's party) now possess," Wilbanks said.

It's unclear how long the legal discovery phase might take, especially because the Justice Department's intervention will likely spur a series of procedural adjustments in the case.

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