The controversial CEO of a major California provider network is facing accusations that he pressured doctors to ensure more lucrative payouts from Medicare, according to The Wall Street Journal.
The scrutiny of Prem Reddy, M.D., CEO of Prime Healthcare Service Inc., a controversial leader known for his aggressive turnaround tactics, may spook investors in the company, which is considering an initial public offering, as investors are typically wary of legal challenges involving leadership due to their effect on public confidence, according to the article. Those image concerns could also stymie the company's growth, according to the article.
In 2011, a former employee filed lawsuit against Reddy, alleging he coerced emergency room doctors at 14 Prime hospitals to admit patients rather than keep them under observation status because the Medicare reimbursements would be higher. The Justice Department joined the suit in May, alleging Reddy maintained admission quotas and pressured doctors to alter medical records to justify the inpatient admissions. Less than a month after joining the suit, the DOJ filed a complaint alleging Reddy worked to ensure admission for Medicare beneficiaries regardless of medical necessity, FierceHealthPayer Anti-Fraud previously reported.
Reddy has been criticized over his hardball tactics to boost revenues, which have included canceling insurance contracts and suing health payers over what he’s called unfair payments to out-of-network providers. To a large extent, this has been part of Reddy’s mystique, along with his track record of acquisitions. Prime operates 32 hospitals in 12 states and owns 11 more hospitals through a nonprofit affiliate, many of which were acquired thanks to Reddy. Prime has acquired 14 hospitals in the last 18 months alone, according to the article.
Reddy’s reputation for turning struggling systems around by way of drastic cost-cutting measures have made him a controversial figure, and a former executive brought a separate lawsuit against Prime in 2014, accusing the company of overbilling Medicare.
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