Prime Healthcare, Reddy part of $37.5 million settlement over alleged kickbacks

For-profit Prime Healthcare and two of its doctors have agreed to pay the federal government $37.5 million to settle allegations of kickbacks involving implantable medical devices and the health system’s purchase of a surgery center.

The settlement agreement announced Monday is a joint resolution with the U.S. Department of Justice and the California Department of Justice. It centers on alleged violations of the federal False Claims Act and California’s False Claims Act.

The settlement holds that Dr. Prem Reddy, Prime’s founder and CEO, must pay almost $1.8 million. Dr. Siva Arunasalam, a California interventional cardiologist, must pay $2 million and Prime must pay $33.7 million. The U.S. will get $35.5 million of the proceeds and California will get $2 million. Prime and Reddy paid $65 million to settle previous unrelated allegations of false claims and overbilling in 2018.

Prime, based in Ontario, Calif., allegedly paid kickbacks when it overpaid to buy Arunasalam’s practice and surgery center because the company wanted him to refer patients to its Desert Valley Hospital in Victorville, Calif. The Justice Departments hold that the purchase price, negotiated primarily by Reddy, exceeded fair market value and were not commercially reasonable.

Prime also allegedly overcompensated Arunasalam via an employment agreement with the High Desert Heart Vascular Institute based on the volume and value of his patient referrals to the Victorville hospital.

The government also said that between 2015 and 2017, both the vascular institute and Arunasalam used Arunasalam’s billing number to bill Medicare and Medicaid for services provided by Dr. George Ponce, even though his billing privileges had been revoked and they knew doing so was improper.

Certain Prime hospitals also allegedly billed Medicaid, the Federal Employees Health Benefits Program and the U.S. Department of Labor’s Office of Workers’ Compensation programs for false claims based on inflated invoices for implantable medical hardware.

“Offering illegal financial incentives to physicians in return for patient referrals undermines the integrity of our healthcare system by denying patients the independent and objective judgment of their healthcare professionals,” Brian Boynton, acting assistant attorney general in the DOJ’s civil division, said in a statement. “Today’s settlement demonstrates the department’s commitment to protect federal healthcare programs against such violations, as well as other efforts to defraud these important programs.”

Prime and Reddy have entered into a five-year corporate integrity agreement with the HHS Office of Inspector General. The agreement requires Prime to maintain a compliance program and hire an independent review organization to review arrangements entered into by or on behalf of its subsidiaries or affiliates.

The settlement resolves two whistleblower lawsuits filed in federal court in Los Angeles. One was filed by Martin Mansukhani, a former Prime executive. The second was filed by Marsha Arnold and Joseph hill, who were formerly employed in the billing office at a Prime hospital in Redding, Calif.


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