Indian-American CEO and company reach settlement in false claims allegations

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United States Attorney for the Eastern District of Pennsylvania, William M. McSwain announced Feb. 14, that Prime Healthcare Services, Inc. (“Prime”) and Prime’s Founder and Chief Executive Officer, Dr. Prem Reddy, have agreed to pay the government $1.25 million to settle allegations that two Prime hospitals in Pennsylvania – Roxborough Memorial Hospital in Philadelphia and Lower Bucks Hospital in Bristol – knowingly submitted false claims to Medicare.

Headquartered in Ontario, California, Reddy’s company is one of the largest hospital systems in the nation, with 45 acute-care hospitals in 14 states.  Prime acquired Roxborough Memorial Hospital on February 22, 2012, and Lower Bucks Hospital on October 3, 2012.

The government said that Reddy and company had allegedly engaged in (1) admitting patients to the hospital for overnight stays who required only less costly, outpatient care and (2) billing for more expensive patient diagnoses than the patients had (the latter practice known as “up-coding”).

It was an employee and former employee of Roxborough Memorial Hospital, who brought the lawsuit against Reddy and his company, the press release said, a step allowed under the provisions of the False Claims Act (FCA), which also allows the government to intervene and take over a lawsuit.

The Settlement resolves allegations that Prime submitted or caused the submission of fraudulent claims to Medicare, the press release said.

Also in August 2018, Prime, Roxborough Memorial Hospital, Lower Bucks Hospital, and Dr. Reddy entered into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). It requires the company to retain an independent review organization to review the accuracy of the company’s claims for services furnished to Medicare beneficiaries.

Prime and Dr. Reddy paid the United States $65 million dollars in August 2018 to settle similar Medicare fraud allegations arising out of 14 Prime hospitals in California, as part of a separate lawsuit in the Central District of California, the press release said.