DOJ Claims Systematic Scheme to Defraud for Prime Healthcare Services's Patient Admissions

Tuesday, July 12, 2016
By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

On June 24, 2016, Prime Healthcare Services, Inc. (Prime), a California-based company whose mission was stated to be turning around struggling hospitals, is alleged to have run a systematic scheme to defraud the federal government.  Prime was allegedly able to defraud the federal government by forcing doctors to provide medically unnecessary services in order to maximize Medicare reimbursements, the U.S. Department of Justice (DOJ) told a California federal court.

Strategies That Violated Medicare’s Trust.

In late May 2016, the government, joined a whistleblower’s False Claims Act (FCA) suit, accusing Prime and its management team of developing and implementing practices that violated Medicare's trust in hospitals and doctors.

These alleged practices included removing "observation" as an option from admission forms used by emergency room doctors. This is turn, caused high-ranking executives to question individual doctors about their patient-admission decisions, altering existing admission’s criteria and passing it off as the original and  imposing quotas for patient admissions—specifically Medicare beneficiaries—from the emergency department, the DOJ said.
To read more on the original FCA suit against Prime, click here.

Questionable Practices.

Not all staff members felt comfortable with the questionable practices that were implemented. Some doctors and staff members protested these practices and either quit or were fired as a result. Others gave in to protect their livelihoods, the government said.

"As a result of these practices and procedures, defendants have claimed and received millions of dollars in inflated reimbursements for medically unnecessary inpatient admissions," the DOJ said. "In so doing, defendants have burdened the finite resources of the Medicare program and put their own pecuniary interests ahead of the interests of Medicare."

To read more on the original FCA suit against Prime, click here.

The Alleged Fraud Scheme.

The company in this case, Prime, buys distressed hospitals and makes them profitable, purporting to do so by investing tens of millions on capital improvements, maintaining open and accessible emergency departments and implementing procedures aimed at improving the quality of patient care, the DOJ said.

However, from 2006 through September 2013, Prime instead ran the alleged scheme by inducing doctors at its hospitals to increase the number of Medicare beneficiaries admitted as inpatients without considering whether this care was medically necessary, the government said. A service must be reasonably priced and necessary for the government to pay for under its Medicare Part A program. Examples of unnecessary services in this case include, treating patients on an inpatient basis when they could be treated as outpatients.

By scaling up the level of care to beneficiaries, Prime banked three to four times the reimbursement it would have received if it had billed for the appropriate level of care, according to the DOJ.    
Prime has denied the allegations and said in a statement that Centers for Medicare and Medicaid Services contractors reviewed more than 6,800 of its short-stay admissions and nearly all of them were deemed appropriate. Prime also stressed that individual doctors made their own decisions about admissions despite the allegations — though the government has said that these decisions were made under pressure from Prime's executives.        

To read the complaint against Prime in full, click here.

Click here to read one of my prior blogs on the repercussions of unnecessary medical procedures.

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Kennedy, John. “DOJ Claims 'Systematic' Fraud In Prime's Patient Admissions.” Law360. (June 24, 2016). Web.

About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida area. www.TheHealth The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone; (407) 331-6620.

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"The Health Law Firm" is a registered fictitious business name of George F. Indest III, P.A. - The Health Law Firm, a Florida professional service corporation, since 1999. Copyright © 2016 The Health Law Firm. All rights reserved.

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