The Ontario-based Prime Healthcare Services hospital system and two of its doctors will pay $37.5 million to resolve violations of the False Claims Act and the California False Claims Act involving alleged kickbacks for patient referrals, the U.S. Attorney’s Office announced Monday.
The settlement resolving two cases is a joint resolution with the U.S. Department of Justice and the California Department of Justice.
The federal government and state of California entered into a settlement agreement with the Prime Healthcare Services; Prime’s founder and chief executive officer, Dr. Prem Reddy; and interventional cardiologist Dr. Siva Arunasalam to resolve the violations based on what federal prosecutors said were kickbacks paid by Prime to Arunasalam for patient referrals, according to prosecutors.
Prime includes Prime Healthcare Services Inc., Prime Healthcare Foundation Inc., Prime Healthcare Management Inc., High Desert Heart Vascular Institute and Desert Valley Hospital Inc.
In a statement sent to City News Service, Prime Healthcare noted that it reached the settlement “with a complete release of any liability and no finding of fault. … The allegations did not involve patient care, but instead related to the valuation of a physician practice and the appropriate documentation for a limited number of implant claims totaling approximately $200,000.”
Under the settlement agreement, Arunasalam will pay $2 million. Reddy has already paid neary $1.8 million, and Prime has paid $33.7 million. The U.S. government will receive nearly $35.5 million of the settlement proceeds, and the state of California will receive $2.03 million.
In 2018, Prime and Reddy paid $65 million to settle unrelated allegations of false claims and overbilling, federal prosecutors said.
“Doctors have a sworn duty to do no harm and to put their patients’ interests first,” said Acting U.S. Attorney Tracy L. Wilkison of the Central District of California. “Kickbacks designed to increase the number of patient referrals corrupt the doctor-patient relationship and needlessly waste this nation’s health care resources.”
The settlement resolves allegations that:
— Prime paid kickbacks when it overpaid to purchase Arunasalam’s physician practice and surgery center because the company wanted the cardiologist to refer patients to its Desert Valley Hospital in Victorville. The purchase price, which was substantially negotiated by Reddy, exceeded fair market value and was not commercially reasonable. Prime also knowingly overcompensated the doctor when HDHVI entered into an employment agreement with him that was based on the volume and value of his patient referrals to Desert Valley Hospital.
— For about two years between 2015 and 2017, HDHVI and Arunasalam used the doctor’s billing number to bill Medicare and Medi-Cal for services that were provided by Dr. George Ponce, even though they knew Ponce’s Medicare and Medi-Cal billing privileges had been revoked, and that billing Ponce’s services under Arunasalam’s billing number was improper.
— Certain Prime hospitals billed Medi-Cal, the Federal Employees Health Benefits Program, and the U.S. Department of Labor’s Office of Workers’ Compensation Programs for false claims based on inflated invoices for implantable medical hardware. Arunasalam was not implicated in for such conduct.
In its statement, Prime Healthcare said the settlement related to “an isolated, single physician practice in Southern California between 2015-2017 and billing of 45 implantable device claims. … As soon as these matters were identified, Prime conducted an exhaustive internal review, fully cooperated with the DOJ (Department of Justice) and negotiated a mutually acceptable resolution. In order to ensure continued transparency, Prime has agreed to amend its current Corporate Integrity Agreement to include testing on physician compensation arrangements as part of the settlement.”
CIAs are standard monitoring agreements in the healthcare industry and Prime has operated successfully under a CIA since 2018 and remains in full compliance. The settlement has already been fully disclosed and reserved in the 2020 year-end financials and audit report, according to the statement.
The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by a federal healthcare program, such as Medicare, Medicaid or TRICARE. Claims submitted in violation of the Anti-Kickback Statute may give rise to liability under the False Claims Act.
“In our cities and neighborhoods, hospitals are where we go for healing and care, which means they must be worthy of the trust placed in them by the people they serve,” said California Attorney General Rob Bonta. “(The) settlement should send a message that schemes like those alleged here, which put profits before people and seek to defraud our Medi-Cal program, will not be taken lightly.”
In connection with the settlement, Prime and Reddy entered into a five-year agreement with the U.S. Department of Health and Human Services Office of Inspector General. The agreement requires, among other things, that Prime maintain a compliance program and hire an independent review organization to review arrangements entered into by or on behalf of its subsidiaries and affiliates.
“Federal healthcare funds are integral to the provision of necessary medical services to beneficiaries across the country,” said Special Agent in Charge Timothy B. DeFrancesca of the Office of Inspector General for HHS. “Therefore, we will address any actions, including those alleged in this case, that could compromise the system on which many patients rely. We will continue working with federal and state prosecutors to guard taxpayer funds that support these vital programs.”
The civil settlement includes the resolution of claims brought under the qui tam, or whistleblower, provisions of the False Claims Act in two lawsuits filed in federal court in Los Angeles. One suit was filed by Martin Mansukhani, a former Prime executive. The second suit was filed by Marsha Arnold and Joseph Hill, who were formerly employed in the billing office at Shasta Regional Medical Center, a Prime hospital in Redding, according to the U.S. Attorney’s Office.