Prime Healthcare and its CEO agreed to pay $65 million to settle allegations that 14 of its California hospitals admitted patients for inpatient care who actually required less costly outpatient care.
The Justice Department announced the settlement in the false claims case on Friday, saying the hospital had been billing for more expensive patient diagnoses than the patients actually had in a practice called "upcoding."
Founder and CEO Prem Reddy, M.D., will pay $3.25 million and Prime will pay $61.75 million as part of the settlement.
It's the conclusion to a yearslong whistleblower case against the California-based health system in which Karin Berntsen, a former director of performance improvement at one of its hospitals, alleged Reddy urged physicians to factor in each patient's insurance coverage when deciding to admit. Prime allegedly took steps to elminate observation status for patients with Medicare coverage—even going so far as to remove "observation status" from admission forms.
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The Justice Department said that between 2006 and 2013, the system set inpatient admission quotas and Reddy reprimanded emergency department doctors who fell below the quotas.
Berntsen will receive $17.3 million as her portion of the settlement amount for serving as the whistleblower in the case.
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“This settlement reflects our ongoing commitment to ensure that health care providers appropriately bill Medicare,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division in a statement. “Charging the government for higher cost inpatient services that patients do not need, and for higher-paying diagnoses than the patients have, wastes the country’s valuable healthcare resources.”
Prime Healthcare Services and not-for-profit Prime Healthcare Foundation make up one of the largest hospital systems in the nation, with 45 acute-care hospitals.
As part of the settlement, Prime also entered into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services Office of Inspector General requiring significant compliance efforts over the next five years and independent reviews of the accuracy of its claims for services to Medicare beneficiaries.