Prime Healthcare Services and CEO, Dr. Prem Reddy, to Pay $1.25 Million to Settle False Claims Act Allegations

PHILADELPHIA – U.S. Attorney William M. McSwain announced today that Prime Healthcare Services, Inc. (“Prime”) and Prime’s Founder and Chief Executive Officer, Dr. Prem Reddy, have agreed to pay the United States $1.25 million to settle allegations that two Prime hospitals in Pennsylvania – Roxborough Memorial Hospital in Philadelphia and Lower Bucks Hospital in Bristol – knowingly submitted false claims to Medicare by engaging in the following conduct: (1) admitting patients to the hospital for overnight stays who required only less costly, outpatient care and (2) billing for more expensive patient diagnoses than the patients had (the latter practice known as “up-coding”).  

“We are committed to ensuring that hospitals, companies that own and operate them, and their executives appropriately bill Medicare,” said U.S. Attorney McSwain.  “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.  Those who engage in these practices will be held accountable.”

Headquartered in Ontario, California, Prime is one of the largest hospital systems in the nation, with 45 acute-care hospitals located in 14 states.  Prime acquired Roxborough Memorial Hospital on February 22, 2012, and Lower Bucks Hospital on October 3, 2012.

The Settlement resolves allegations that Prime submitted or caused the submission of fraudulent claims to Medicare.  Specifically, from the date that Prime acquired Roxborough and Lower Bucks through September 30, 2013, under Prime management, Roxborough and Lower Bucks 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 the dates of acquisition through December 31, 2014, the hospitals upcoded inpatient diagnoses (i.e., billed Medicare for more serious medical conditions than the patients actually had) to increase Medicare payments.   

As part of a separate lawsuit in the Central District of California, Prime and Dr. Reddy paid the United States $65 million dollars in August 2018 to settle similar Medicare fraud allegations arising out of 14 Prime hospitals in California.  

Also in August 2018, Prime, Roxborough Memorial Hospital, Lower Bucks Hospital, and Dr. Reddy entered into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) requiring the company to engage in significant compliance efforts over the next five years.  Under the agreement, Prime is required to retain an independent review organization to review the accuracy of the company’s claims for services furnished to Medicare beneficiaries.

“We expect health care companies to accurately bill federal health care 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, Philadelphia Regional Office. “Our investigators will ensure those who launch such deceptive schemes are held accountable.”

This settlement resolves a lawsuit filed under the False Claims Act (FCA) in the U.S. District Court for the Eastern District of Pennsylvania by an employee and former employee of Roxborough Memorial Hospital.  Under the qui tam or whistleblower provisions of the FCA, private citizens are permitted to bring lawsuits on behalf of the United States and obtain a portion of the government’s recovery.  The FCA also permits the government to intervene and take over the lawsuit.

“We thank the relators for their invaluable contribution in this case. Together with their lawyers, they provided vital assistance to the government throughout this case. Without information from citizens like the relators, detecting fraud and conserving government program funds would be far more difficult,” said U.S Attorney McSwain.

The government’s resolution of this matter illustrates the government’s emphasis on combating health care fraud.  One of the most powerful tools in this effort is the False Claims Act.  Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement can be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477).

The case was investigated by the Office of the Inspector General of the U.S. Department of Health and Human Services, the U.S. Attorney’s Office for the Eastern District of Pennsylvania, Assistant U.S. Attorneys Jacqueline Romero and Judith Amorosa, and Health Care Fraud auditor Dawn Wiggins, in coordination with Senior Trial Counsel Marie Bonkowski of the Department of Justice’s Civil Division’s Commercial Litigation Branch

The case is captioned United States ex rel. Jane Doe v. Prime Healthcare Services, Inc., et al.,  No. 14-cv-1695 (E.D.Pa.).  The claims resolved by this settlement are allegations only and there has been no determination of liability.