Another Hospital System Settles Whistleblower Allegations That Outpatients Were “Turned Into” Inpatients

Alchemists struggled without success for centuries attempting to turn lead into gold.

Will hospitals struggle that long in their quest to turn outpatients into inpatients?

Prime Healthcare Services, Inc. (“Prime”), headquartered in Ontario, California, and Prime’s Founder and Chief Executive Officer, Dr. Prem Reddy. On February 14, 2019, the Department of Justice announced that Prime and Dr. Reddy have agreed to pay $1.25 million in settlement (without admitting any wrongdoing) that two Prime hospitals in Pennsylvania, Roxborough Memorial Hospital and Lower Bucks Hospital, knowingly submitted false claims to Medicare by admitting patients to the hospital for overnight stays who required only less costly, outpatient care. Also involved were allegations that the hospitals billed for more expensive patient diagnoses than the patients had.

If you think the $1.25 was getting off cheap, consider that this settlement follows an August 2018 settlement of $65 million by Prime and Dr. Reddy (again without admitting any wrongdoing) of another False Claims Act suit brought by a different whistleblower.

Here are the takeaways for you:

1. Just as lead isn’t gold, outpatients are not inpatients.
2. No matter how large and sophisticated your healthcare organization is, mistakes, whether or not intentional, abound. Some result in improper claims, not just to Medicare, but to other federal health care programs (e.g., TriCare, health services for Peace Corps volunteers, Medicaid, Indian Health Services, and on and on). All are potential reasons for False Claims Act litigation, whether brought directly by the government or by way of whistleblower lawsuits.
3. Most whistleblowers are insiders such as employees of the defendant entity. For example, nurse executives, physicians, facility administrators such as chief financial officers, and so on. In the Banner case, the whistleblower was a registered nurse who had worked for Banner as its corporate director of clinical documentation. In the recent Prime settlement, it was an employee and a former employee of Roxborough Hospital.

Contact me for more information on how your facility or medical group can take action to reduce the risk of whistleblower action or to discuss how your knowledge of improper claims can lead to the filing of a whistleblower action.