LOS ANGELES (CN) — The Justice Department has intervened in a civil lawsuit accusing Prime Healthcare Services of submitting false claims to the federal government as part of a $50 million Medicare fraud scheme.
Whistleblower Karin Berntsen sued on behalf of the federal government in 2011, alleging that the Ontario, California-based company's founder and CEO Dr. Premy Reddy "explicitly encouraged" physicians and staff to admit patients for more costly short hospital stays instead of offering outpatient services.
Berntsen estimates that 14 Prime Healthcare hospitals in the state had submitted false claims to Medicare in excess of $50 million and says that Reddy's directives were corporate-wide.
According to an amended federal lawsuit filed in 2014, Reddy "startled" a large group of physicians and administrators at a 2011 meeting when he encouraged them to admit patients, even if there was no medical need for a hospital stay.
"We don't do observation. All patients should be in-patient. You can always find a reason to make the patient an in-patient," Reddy said, according to the 31-page lawsuit.
Reddy encouraged staff to misdiagnose patients for in-patient stays, the lawsuit claims, stating at a meeting that he would get "$3,000 more per case," and that if a patient "leaves against medical advice you are free to document whatever conditions you want."
"If the patient is elderly, you should add encephalopathy for a higher payment. You are missing some of these elderly patients. But, be careful ... I don't want to go to jail, ha, ha, ha," the lawsuit quotes Reddy as saying at a May 3, 2011 meeting.
Berntsen, a former nurse and administrator, was employed at Prime's Alvarado Hospital in San Diego.
She says the hospital made at least $8 million in false claims and says that Reddy's instructions led to fake diagnoses for malnutrition, acute heart attacks, sepsis, and other conditions.
"Reddy instructed Prime physicians and administrators to diagnose heart failure as 'acute' rather than 'chronic' so that hospitals could receive higher reimbursement amounts," the 31-page complaint states.
In a prepared statement, U.S. Attorney Eileen Decker for the Central District of California said the Justice Department sometimes collaborates with citizens like Berntsen to "ensure the integrity of a system that provides health care to millions of Americans."
"Fraudulent billing practices, such as those alleged in this civil lawsuit, harm taxpayers who fund health care programs, such as Medicare," Decker said.
In the past seven years, the Justice Department has wielded the False Claims Act to collect $29 billion, Thom Mrozek, an official with the U.S. Attorney's Office in LA, said in a statement.
Mrozek said that that over $17.5 billion of that sum is related to fraud in federal health care programs like Medicare.
Berntsen's lawsuit, filed by attorney George Newhouse of Brown White & Newhouse, seeks civil penalties of between $5,500 and $11,000 for each violation of the False Claims Act.
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