California-Based Hospital System Settles For $38 Million

F.J. Thomas

Los Angeles, CA ( – Recently one of the largest healthcare systems in the country that is also a member of the non-profit 501(c)(3) public charity Prime Healthcare Foundation settled to resolve allegations of kickbacks, billing for a suspended doctor, and submission of false claims. According to the California Department of Justice press release, Prime Healthcare Services based in Ontario, California, and two of its physicians agreed to pay out $37.5 million in the settlement.

Prime Healthcare operates 45 acute care hospitals in 14 states, and over 300 outpatient locations, equating to 2.6 million patient visits annually. Cardiologist and Prime Health Chief Executive Officer Prem Reddy has agreed to pay out $1.7 million in settlement in addition to the $33.7 million restitution by Prime Health. Cardiologist Siva Arunasalam who was employed by Prime Health will also pay $2 million.

The Justice Department alleges that Prime Health purchased Arunasalam’s practice with the intent of referring patients to its Desert Valley Hospital in Victorville, California, paying well above reasonable purchase price. Additionally, the employment agreement made between Prime Health and Arunasalam was based on volume and referrals to the Desert Valley Hospital, resulting in an inflated compensation.

Between 2015 and 2017, the Desert Valley Hospital allegedly billed for services under Arunasalam’s Medicare ID number that were actually performed by George Ponce, MD whose federal privileges had been revoked.

According to the case, several of Prime Health’s hospitals allegedly over billed federal and state payers, as well as the U.S. Department of Labor’s Office of Workers’ Compensation Programs, for implantable medical hardware.

The lawsuit was filed by Martin Mansukhani who is a former executive of Prime Health. A second lawsuit was filed by Marsha Arnold and Joseph Hill who were former billing employees at the Shasta Regional Medical Center location in Redding, California. Mansukhani will receive $9.9 million from the settlement.

In addition to the payout, Prime Health and Reddy have entered into a five-year Corporate Integrity Agreement with the U.S. Department of Health and Human Services. The agreement requires the maintenance of a compliance program, as well as independent review of agreements made for Prime Health or its subsidiaries and affiliates.

In 2018, Reddy and Prime Health settled in a separate unrelated case for $65 million to resolve false claims allegations involving 14 of the health systems hospitals. The allegations in that case included allegations of up-coding of diagnoses and procedures.

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