Prime finds itself under federal scrutiny because of a whistle-blower 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 lawsuit 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 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 — and potentially large damages against the company.
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 healthcare companies. Whistle-blowers are entitled to 15% to 25% of the money recovered in cases involving the Justice Department. Prime has denied Berntsen’s allegations, calling them “speculative nonsense” after her complaint was unsealed in 2013. In a new statement issued 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 have successfully undergone Medicare billing audits conducted by an array of organizations, including 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. The company currently owns 43 hospitals across 14 states. But the Justice Department in a wide-ranging investigation referenced in its court filing this week cited “multiple witnesses who have worked at different Prime hospitals” who 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.”
It is 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, which is being fast tracked.