California Announces $37.5 Million Settlement With Prime Healthcare Services

Monday marked the announcement by California Attorney General Rob Banta of a $37.5 million settlement which will be paid by a large hospital and two of its doctors . The settlement follows allegations that the hospital and its doctors violated both the False Claims Act and the California False Claims Act.

The settlement is a joint resolution with both the U.S. Department of Justice and the California Department of Justice. The other parties are Prime Healthcare Services, its founder and Chief Executive Officer Dr. Prem Reddy, and California interventional cardiologist Dr. Siva Arunasalam. According to the announcement, Dr. Arunasalam is responsible for $2 million of the settlement and Dr. Reddy is responsible for $1.775 million. The remainder of the settlement,$33.725 million, will be paid by Prime.

In 2018, Prime and Dr. Reddy paid $65 million to the DOJ in an effort to settle previous allegations of false claims and overbilling, the press release said.

The claims being resolved in this settlement are accusations that Prime intentionally overpaid when purchasing Dr. Arunasalam’s practice so that Dr. Arunasalam would refer patients to one of its hospitals and that Prime filed false claims with Medi-Cal, the Federal Employees Health Benefits Program, and the U.S. Department of Labor’s Office of Workers’ Compensation Programs based on inflated invoices.

A key portion of the settlement is that Prime and Dr. Reddy will enter into a five-year Corporate Integrity Agreement, that will require them to have a compliance program and an Independent Review Organization so that their activities can be more closely monitored, the release said.

California Attorney General Rob Bonta explained that “today’s 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.”

Other officials described the situation as undermining the doctor-patient relationship and “needlessly” wasting health care resources. Acting Assistant Attorney General Brian M. Boynton asserted that “offering illegal financial incentives to physicians in return for patient referrals undermines the integrity of our health care system by denying patients the independent and objective judgement of their health care professionals.” He explained that the settlement spoke to the DOJ’s commitment to protect health care programs.