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Analysis

Prime Healthcare, CEO Pay $1.25M to Settle More Upcoding Allegations

By John Commins  
   February 15, 2019

Prosecutors say two Pennsylvania hospitals owned by the California-based, for-profit health system billed Medicare for unneeded overnight hospital stays.

For the second time in less than one year, Prime Healthcare Services Inc. and founder and CEO Prem Reddy, MD, have reached an upcoding settlement with the U.S. Department of Justice.

Reddy and the for-profit health system, based in Ontario, California, this week agreed to pay $1.25 million to settle additional whistleblower allegations that two Prime hospitals in Pennsylvania—Roxborough Memorial Hospital in Philadelphia and Lower Bucks Hospital in Bristol—knowingly submitted false claims to Medicare, a violation of the False Claims Act.

Prosecutors said the hospitals allegedly admitted patients for overnight stays who needed only less costly, outpatient care. The hospitals also allegedly up-coded for more expensive patient diagnoses than needed.  

"Charging the government for more-costly services than what the patient actually needs and billing the government for more serious diagnoses than what the patient actually has is a waste of taxpayer dollars," William M. McSwain, U.S. Attorney for the Eastern District of Pennsylvania said in a media release.  

Prosecutors allege that from the time Prime acquired the two hospitals in 2012 through September 30, 2013, the hospitals admitted emergency room Medicare patients for costly and medically unnecessary one- and two-day overnight hospital stays, instead of treating the patients in less costly outpatient service or keeping them under observation.

In addition, from 2012 through Dec. 31, 2014, the hospitals up-coded inpatient diagnoses to increase Medicare payments.   

In August 2018, Prime and Reddy paid $65 million to resolve whistleblower allegations that 14 Prime hospitals in California systematically overcharged Medicare. Prime admitted no wrongdoing in that settlement.

The Pennsylvania settlement resolves a whistleblower suit filed by an employee and a former employee at Roxborough Memorial.

"We expect health care companies to accurately bill federal healthcare programs for services they provide, not pad profits by charging for more expensive services than were actually provided," said Maureen Dixon, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services.

Prime Healthcare Responds

Prime Healthcare on Friday afternoon acknowledged the settlement, and said it "dealt primarilty with the technical classification of the category under which patients were admitted and billed."

"Prime Healthcare agreed to resolve this matter as part of the larger resolution of the California qui tam lawsuit that Prime settled on August 3, 2018," the statement read. "This settlement contains no finding of improper conduct or wrongdoing, and Prime Healthcare's record of clinical quality care was never in question. The settlement also provides a full release to Prime Healthcare and does not affect its existing corporate integrity agreement."

Joel Richlin, Prime Healthcare's deputy general counsel, said "this settlement allows Prime Healthcare to continue to focus on its mission of providing quality, compassionate healthcare while saving hospitals, savings jobs, and saving lives."

“Charging the government for more-costly services than what the patient actually needs and billing the government for more serious diagnoses than what the patient actually has is a waste of taxpayer dollars.”

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

For the second time in seven months, Prime Healthcare and CEO Prem Reddy settle upcoding-related False Claims Act allegations.

This time, two Pennsylvania hospitals allegedly overbilled Medicare for unnecessary overnight hospital stays.

The settlement resolves a whistleblower suit filed by an employee and a former employee at one of the Pennsylvania hospitals.


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