Hospitals Level Antitrust Claims at Kaiser

     SAN DIEGO (CN) – An independent hospital chain that faces fraud claims from Kaiser Permanente fired back this week with claims that Kaiser conspired with the SEIU union to try to put it out of business.



     A Kaiser spokeswoman called the antitrust complaint a “baseless” attempt to deflect a Kaiser lawsuit against Prime Healthcare Services, but Prime called Kaiser’s lawsuit part of the hospital giant’s “coordinated attack.”
     Prime Healthcare Services sued Kaiser and its affiliates and the Service Employees International Union in Federal Court.
     Prime claims that Kaiser “joined forces” with the SEIU to use a variety of underhand tricks – including wage-fixing to increase health-care costs – to “eliminate Prime as a competitor” in the Southern California market.
     Prime operates 12 hospitals in five California counties: San Bernardino, San Diego, Los Angeles, Orange, and Shasta. “Prime hospitals are primarily operated without affiliation or reciprocal care agreements with Kaiser or any other managed care networks,” according to the complaint.
     “Prime is the only independent hospital system in the market … in that Prime hospitals are not owned by or otherwise affiliated with health care service plans or health maintenance organizations (collectively ‘HMOs’) and Prime’s business model is based on being largely non-contracted with such pay or controlled plans, including Kaiser. To that extent, Prime offers a unique alternative to, and therefore threatens the dominance of, the payor-controlled, closed-staff model on which defendant Kaiser … has based its multibillion-dollar business, particularly with regard to emergency care services. Ultimately, this is an action to protect some of the most vulnerable of consumers – consumers making life and death choices regarding where and when they will receive hospital treatment,” the complaint states.
     Prime, which specializes in emergency and critical care, says that Kaiser patients sometimes end up in its emergency rooms due to the “location, accessibility, and services available at Prime facilities” and says Kaiser is required to “compensate Prime for care provided to those Kaiser members.”
     However, “Kaiser, among other acts as described below, often refuses to pay Prime for services rendered to Kaiser members and requires Prime to pursue administrative appeals and litigation to recover payment for Prime’s treatment of Kaiser members. The sheer amount of the receivable at any point in time (currently believed to exceed $100 million) and the time and expense incurred in litigating a majority of claims for reimbursement for services rendered to Kaiser members has a significant adverse impact on Prime’s operations.” (Parentheses in complaint.)
     The defendants are Service Employees International Union, SEIU-United Healthcare Workers West, Kaiser Foundation Health Plan, Kaiser Foundation Hospitals, and Southern California Permanente Medical Group.
     In an emailed statement, Kaiser Permanente told Courthouse News that the claims are “baseless.”
     “Prime’s allegations appear to be that Kaiser Permanente’s 66-year-old model of integrating the delivery and financing of care, coupled with our nationally well-regarded Labor Management Partnership, are somehow conspiracies designed to illegally compete with Prime Healthcare,” Kaiser spokeswoman Sandra Hernandez-Millett wrote.
     “The additional allegation by Prime – that Kaiser Permanente is driving up health care costs – clearly flies in the face of the facts. Kaiser Permanente is a well-recognized leader in quality and affordability in California.
     “Prime is the subject of multiple allegations of wrongfully driving up costs in the hospitals it takes over, and providing inappropriate care. Kaiser Permanente’s case against Prime’s wrongful and fraudulent practices is already pending in Los Angeles Superior Court. It may be that Prime’s baseless lawsuit is an attempt to deflect some of those legal allegations.”
     But Prime says in its complaint that the lawsuit in L.A. Superior Court was “part of a coordinated attack” related to “Kaiser’s failure to reimburse Kaiser members based on false claims that Prime ‘upcodes.'”
     Prime also claims that Kaiser and SEIU entered into an “anticompetitive, unfair and exclusionary” agreement, which “was not part of the collective bargaining process.”
     The complaint states: “Defendants have acted in concert to fix wage rates for healthcare workers’ services in the market and force Prime to adopt the high-cost labor practices of the conspirators with the ultimate goal of eliminating Prime as the sole remaining independent hospital provider in the market. Defendants seek to accomplish these objectives by engaging in a pattern and practice of overt acts designed to damage the business of Prime by producing the inaccurate reports and studies described herein below, working with complicit media outlets to publicize the sham and baseless allegations described herein below, initiating certain sham and baseless complaints causing regulatory and administrative investigations and sham and baseless litigation, wrongfully withholding reimbursement for care provided to Kaiser members, coercing and threatening Kaiser members and others who may direct Kaiser members to Prime hospitals to keep Kaiser members from exercising their right to seek and, where their condition requires, continuing to receive treatment at Prime hospitals, and undertaking various other activities for the purpose of diminishing Prime’s revenue and raising Prime’s costs, thereby eliminating Prime as a competitor in the market.”
     In early 2010, Prime says, SEIU began circulating “propaganda,” including claims that Prime hospitals were not in compliance with California’s earthquake safety requirements, and that patients at its hospitals were at risk of septicemia and malnutrition.
     “Beginning in late February 2011, defendant SEIU sent flyers to Prime’s current and prospective patients attacking Prime’s hospitals for blood poisoning. Examples of flyers mailed to Prime patients, including one mailed as recently as late October 2011, are attached as Exhibit E. To make matters worse, the SEIU resorted to the use of phone banks to scare elderly patients into believing that those patients had already or would in the future obtain blood infections when they sought care at a Prime hospital and that Prime’s hospitals had improperly disclosed private information about the patients to the caller,” the complaint states.
     Prime says these allegations led to “administrative investigations and sham and baseless litigation.”
     Prime also accuses Kaiser of “wrongfully withholding reimbursement for care provided to Kaiser members, coercing and threatening Kaiser members and others who may direct Kaiser members to Prime hospitals to keep Kaiser members from exercising their right to seek and, where their condition requires, continuing to receive treatment at Prime hospitals.”
     Prime seeks an injunction and damages for violation of the Sherman Act.
     It is represented by Jeffery Shohet with DLA Piper, who did not immediately respond to a request for comment.

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