Prime Healthcare Loses Motion to Dismiss: Whistleblower Case Moves Forward

A blow was dealt to Prime Healthcare as a California federal court issued three rulings denying motions filed on behalf of the hospital corporation. As a result, an important whistleblower case, alleging Prime inappropriately admitted patients to increase profits, will move forward.

“This is a very important ruling,” said James Hoyer Law Firm Partner Elaine Stromgren, who represents whistleblower Karin Berntsen, a Prime employee. “The evidence, supporting Ms. Berntsen’s and the government’s allegations, is very strong,” added Stromgren.  Ms. Berntsen is Director of Performance Improvement at Alvarado Hospital Medical Center in San Diego.

Prime Healthcare is one of the fastest growing hospital corporations in the country, which operates more than 40 hospitals in 14 states. The company is known for using aggressive tactics to buy underperforming, financially distressed hospitals and then implementing cost-cutting measures to make money.

According to the government, “Defendants implemented a scheme to maximize revenues by improperly admitting Medicare patients into the hospital who should not have been admitted so that they could charge Medicare three to four times what they would have been able to charge had the patients merely been observed in the hospital and allowed to go home,” U.S. Magistrate Judge Patrick Walsh of the Central District of California explained in his order.

The Court noted that the government alleges Prime’s founder and Chief Executive Dr. Prem Reddy used several tactics to improperly influence the medical decisions of the doctors. The complaint alleges those efforts included removing the choice of “observation” from hospital forms; telling doctors what to write in patient medical charts to justify unnecessary admissions; establishing quotas on the number of patients admitted; and retaliating against doctors if those quotas were not met.

Becker’s Hospital Review and Modern Healtcare reported on the decision.

Motion to Pre-empt Statistical Sampling Denied

In addition to denying the Motion to Dismiss, the Court also denied a motion filed by Prime to pre-empt the government from using expert, statistical analysis to prove its case.

The government estimates more than 35,000 patients were improperly admitted at 14 Prime hospitals in California, resulting in false billings to Medicare. With such large numbers, statistical sampling is often used to extrapolate results.

Amicus Briefs “unhelpful”

Lastly, the Court denied requests by the American Hospital Association and the California Hospital Association to submit Amici Curiae briefs in the case. The Court indicated the briefs merely complained about the complexity of regulations governing outpatient observation versus inpatient hospitalization, without presenting any new or helpful information.

The Court agreed with the government’s contention that the briefs were “unhelpful” and, therefore, denied the motion.

“We are pleased that this important case will be allowed to proceed,” Attorney Stromgren said. “We have strong evidence to show Prime manipulated the system to get millions of dollars in improper payments from Medicare.”

Upcoding Allegations Proceed

In addition to the medically unnecessary inpatient admission portion of the case, Whistleblower Karin Berntsen will continue to pursue allegations of “upcoding” by Prime. Berntsen alleged in her complaint that Prime hospitals improperly upcoded and falsified patient diagnoses, which resulted in unlawful billings to the federal government. Defendants’ challenge to that portion of the case in an earlier motion also failed.