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$65 Million Prime Healthcare Whistleblower Settlement

by Dave Scher | Aug 3, 2018 | Firm News

Whistleblower’s Fearless 7-Year Pursuit of Justice:

Los Angeles, CA- August 3, 2018— The 5th largest for-profit hospital system in the country has agreed to pay $65 million to settle civil charges of healthcare fraud against the government. Prime Healthcare has also agreed to abide by a Corporate Integrity Agreement with strict requirements and oversight to ensure it will follow Medicare rules in the future. Prime, headquartered in Ontario, CA, has 45 hospitals in 14 states. It was a long-fought battle against the healthcare giant lasting nearly a decade, but whistleblower Karin Berntsen is grateful to finally see Prime held accountable.

Partner Elaine Stromgren

Partner Elaine Stromgren

“Karin was fearless and determined in her pursuit of justice for patients and taxpayers,” said James Hoyer partner Elaine Stromgren, Berntsen’s attorney. “She put her career on the line against a powerful company, but through it all, she remained strong.”

A registered nurse and a Prime employee, Berntsen was exemplary in her commitment to expose the wrongs she witnessed. She first came forward in 2011 to tell the government that the company was improperly admitting patients and exaggerating diagnoses to increase corporate profits.

“The patients were becoming commodities. They were becoming dollar signs, not people,” Berntsen said. “Everything being done seemed to be solely to increase profit.”

Specifically, Prime was accused of violating the False Claims Act by fraudulently billing Medicare for medically unnecessary inpatient admissions.  Berntsen alleged that Prime intentionally and unnecessarily admitted patients to the hospital when they should have been managed as outpatient/observation cases.  Medicare pays a hospital approximately three to four times more when a patient is admitted, rather than placed under observation. The company was also accused of “upcoding” patients’ diagnoses to falsely make their illnesses appear more serious in order to increase Medicare payments.

Dogged Determination
Prime Whistleblower Karin Berntsen

Whistleblower Karin Berntsen

Throughout the litigation of this case, Berntsen battled serious illnesses.  She underwent a number of surgeries and hospitalizations, but her incredible spirit and determination carried her through. She never wavered from her commitment to hold Prime accountable.

“It wasn’t easy, but sometimes that makes you more determined,” Berntsen said. “The more obstacles I had, the stronger it made me.  I knew the taxpayers were being cheated and the patients were put at risk, so coming forward was just the right thing to do.”

“She never let her health concerns hold her back,” said attorney Stromgren. “Throughout it all, she did everything the government asked of her to help bring this case to a successful conclusion.”

Berntsen’s many important contributions included:  wearing a wire to secure key evidence of Prime founder and CEO Dr. Prem Reddy promoting the fraudulent conduct; producing important, detailed documents to support the case; reviewing lengthy transcripts and recorded conversations; meeting with government attorneys and investigators numerous times; assisting the government in analyzing subpoenaed documents; helping to identify and locate witnesses; and testifying for more than 12 hours at her deposition.

“Once I made the decision to go forward, I didn’t look back,” Berntsen said.  “In the end, every case that is successful, like ours, sends a message to other hospitals to think twice about intentionally doing this and committing fraud.”

The False Claims Act

This case was filed under the False Claims Act, which makes it possible for private citizens to bring civil actions on behalf of the government in order to recover taxpayer money when there is evidence of fraud committed. Under the law, the whistleblower is entitled to a share of the civil recovery.  As a reward for her contributions in bringing this case to a successful conclusion, the Department of Justice has awarded Berntsen the maximum relator’s share.  She will receive $17,225,000 million out of the settlement proceeds paid by Prime Healthcare and Dr. Reddy to the government.

“This award is a testament to the incredible contribution Ms. Berntsen has made over these many years in helping the government to recover such a substantial amount of money for the Medicare Program,” Stromgren said.

Becoming a Whistleblower

Ms. Berntsen is a registered nurse who has served as a patient safety officer.  She has also authored two published books on patient safety. In 2005, she was hired as the Director of Quality Improvement at Alvarado Hospital in San Diego and later became the Director of Performance Improvement. In 2010, Prime purchased Alvarado to expand its growing network of hospitals. The company was known for using aggressive tactics to purchase underperforming, financially distressed hospitals and then implementing measures to make them profitable.  Just one month after the purchase, Berntsen began to witness questionable changes aimed at increasing profits for Alvarado and other hospitals in the network.

She raised her concerns with supervisors, but it was made clear that she would lose her job if she continued to complain. With nowhere left to turn, Berntsen decided to come forward as a whistleblower. With the help of the James Hoyer law firm, Berntsen filed her False Claims Act suit in 2011, to try and stop the behavior she believed was defrauding Medicare and could potentially harm patients.

The whistleblower complaint alleged that Reddy changed billing practices and used several tactics to improperly influence the medical decisions of doctors including: removing the choice of “observation” from hospital forms; telling doctors what to write in patient medical charts to justify unnecessary admissions; establishing minimum quotas on the number of patients that had to be admitted; falsifying and upcoding patients’ medical diagnoses; and retaliating against doctors who tried to resist following Prime’s improper directives.

The Settlement

Payment of the settlement amount will be divided between Prime Healthcare and Dr. Reddy, personally.  Prime will pay $61.75 million and Dr. Reddy will pay $3.25 million.  In addition to the $65 million, Prime has also agreed to enter into a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of the Inspector General.  The CIA requires strict government oversight to ensure Prime follows Medicare rules in the future.  According to the DOJ news release:  “Under the agreement, Prime is required to retain an independent review organization to review the accuracy of the company’s claims for services furnished to Medicare beneficiaries.”

For Ms. Berntsen, the long fight was worth it, because it has helped to protect taxpayers and patients.

“I hope this settlement will serve as a reminder that you can’t break the Medicare rules.  It’s not fair to the taxpayer, and it’s not fair to the patient,” Berntsen said.  “Prime was doing many things it shouldn’t, and if we didn’t shine a light on it, it would have gotten worse.”

Multiple news outlets covered the settlement including: Associated Press, Wall Street Journal, Reveal News, The Washington Post, San Diego Union-Tribune, and several other publications.

James Hoyer, P.A. was assisted in its representation of Ms. Berntsen by the law firm of Wilbanks & Gouinlock, whose expertise contributed greatly to achieving the successful outcome in this case.  The United States Attorney’s Office for the Central District of California and the Civil Fraud Section of the Department of Justice in Washington, D.C. led the government’s prosecution of this case.

James Hoyer, P.A.  is an investigative firm specializing in whistleblower litigation. It was founded by former federal prosecutors who are experts in the business of fighting fraud against the government.

To learn more, please feel free to contact us.

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