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Prime Healthcare

Hospital chain to pay $275,000 to settle federal patient-privacy case

Prime Healthcare Services says it will pay $275,000 to settle allegations that it broke federal privacy laws by publicizing a patient’s confidential hospital records in an effort to rebut a news report.


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Doctors claim Prime hospital kept them from patients

A dozen Southern California doctors are accusing the leadership of a Prime Healthcare Services hospital of refusing to notify them about their patients because they won’t engage in profit-driven practices, according to a request for a restraining order filed this week.

The San Bernardino County physician group suing Chino Valley Medical Center and its director say it has been asked to needlessly admit patients from the emergency room into hospital beds, according to the lawsuit filed Wednesday in San Bernardino County Superior Court. The group’s doctors also have been urged to document patient conditions as more complex or severe than they are, the filing says.

The doctors suing the hospital maintain that both practices are meant to drive up hospital bills. The result of their refusal to go along, they say, is that they’re not receiving what they characterize as legally mandated notifications when their patients land in the hospital.


The physicians have asked the judge to lift the alleged freeze in communication, saying it puts fragile patients in danger. A hearing is set for April 19 on the temporary restraining order.


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Mixed results for legislation linked to medical care, fraud

In the week following Gov. Jerry Brown's deadline for passing or vetoing hundreds of bills, those affected are examining successes and defeats that touch on cancer care, emergency rooms, prescribing, elder care and compensation to victims of corporate fraud.

Those celebrating include a group of elder advocates who sought more autonomy for the state’s elder care ombudsman. Another group of patients was disappointed, though, seeing Brown veto a bill that would have lowered the price of pills that fight cancer, bringing them in line with the cost of IV infusion treatments.

One of the bills that Brown vetoed would have changed payments related to emergency room care. The bill stemmed from a Feb. 24 legislative hearing that focused on emergency room and billing practices of Prime Healthcare. Critics have claimed the hospital chain is inflating costs through its emergency room and billing practices.

Two health care providers, Kaiser and Heritage Provider Network, have accused Prime of "trapping" their patients in Prime hospitals to charge more for treating patients from outside their health care networks. Both groups are involved in ongoing lawsuits with Prime over the matter.


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Prime Healthcare expands, but not in California

In recent months, Southern California-based Prime Healthcare Services has bought financially troubled hospitals in Nevada, Texas and Pennsylvania.

But the rapidly expanding hospital chain hit a speed bump on its home turf in San Bernardino County, where a bankruptcy judge bypassed Prime's nonprofit foundation and steered the sale of 101-bed Victor Valley Community Hospital to a local investment group.

Judge Catherine Bauer’s decision, reached last week, was a setback in Prime’s long-running legal fight to acquire the bankrupt nonprofit hospital in Victorville, east of Los Angeles – and, perhaps, to continue its expansion in the Golden State.


At one pivotal point last year, state Attorney General Kamala Harris refused to approve the sale of the Victor Valley hospital to Prime, declaring that wouldn’t be in the public interest.

Prime accused Harris of caving in to political pressure from the Service Employees International Union, which represents health care workers and has been locked in bitter contract struggles with Prime. Then, as lawyers dueled in court, Prime's foundation began operating the hospital under terms of a controversial consulting agreement.

Prime spokesman Edward Barrera said the chain's goal all along has been to keep Victor Valley Community Hospital open. "Toward this goal, the Foundation will continue to do what it can to save this hospital," he said in a statement.

Prime is an 18-hospital chain known for turning around financially troubled hospitals by cutting costs and boosting revenues.


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Prime hospital cited for patient confidentiality violation

A Prime Healthcare Services hospital in Redding broke state law when it publicized a patient’s confidential medical files in an effort to discredit a California Watch news report, state regulators say.

The state Department of Public Health on Tuesday issued five "deficiencies" against Shasta Regional Medical Center for what were described as repeated breaches of patient confidentiality last year.

At one point, the hospital CEO sent an e-mail to 785 people – virtually everyone who worked at the hospital – disclosing details from a 64-year-old diabetes patient’s confidential files, state investigators found.

Federal and state law forbids hospitals from disclosing a patient’s medical files without permission.

By state law, hospitals can be fined as much as $250,000 for breaching a patient's confidentiality.

The health department considers the issue of financial penalties after deficiencies are corrected, a spokesman said. Deficiencies are violations of laws or regulations applying to state hospitals. 

The hospital did nothing wrong and has filed an appeal, said Prime spokesman Edward Barrera. The company "continues to believe that the disclosures, if any, were permitted under both federal and state law," he said in an e-mail.


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Prime hospital’s stent placements violated state regulations

For years Desert Valley Hospital in San Bernardino County has performed numerous stent procedures without a full license to do so. State inspectors have cited the hospital repeatedly.

Monica Lam/California Watch Charleen Kerkes said she thought about suing after her husband died at Desert Valley Hospital. She decided against it after an attorney asked to exhume her husband’s body to perform an autopsy. 

Dale Kerkes was lean and tanned at 71. In retirement, he turned a backyard hillside into a terraced garden and built a two-story garage.

On the morning of April 28, 2008, he and his wife, Charleen, saw his doctor to check into his occasional heart palpitations. Neither expected problems.

But during a stent placement to prop open a blocked artery, Dale Kerkes died on the operating table at Desert Valley Hospital.

Desert Valley had a limited cardiac license, which means it was allowed to place stents only in emergencies, such as after heart attacks. State hospital regulators determined several months later that the San Bernardino County hospital placed Kerkes "at great health risk” by performing the procedure without the trained staff or specialized equipment required.

Since then, in response to inspections, the hospital repeatedly pledged to follow state regulations and enforce its own policies.

Yet regulators found repeat violations when they examined the cases of another patient who died and two who were injured during cardiac care at Desert Valley.

A fourth patient, whose case was not examined by the state, was injured after a stent treatment that a lawsuit alleges should not have been performed at Desert Valley.


The state Department of Public Health – the agency that documented recurring problems and unmet promises – in March granted Desert Valley a full cardiac license for its new heart center. Public Health officials declined to be interviewed for this story but said in a written statement they conducted two thorough inspections and found no deficiencies.

Charleen Kerkes, who had hoped her husband’s death would lead to changes, feels defeated. “I do think my husband died in vain,” she said. “It’s disappointing.”

Charleen Kerkes, as well as other patients and family members, said they were not told that until March 20, Desert Valley Hospital had a limited license for cardiac surgeries. Nearby St. Mary Medical Center was in fact the only local hospital with a full license at that time.

The move to expand Desert Valley’s cardiac license came as the hospital’s interventional cardiologist, Dr. Siva Arunasalam, faces a trial over accusations that he performed heart surgeries for financial gain while working at St. Mary almost a decade ago. Arunasalam is not an employee of Desert Valley; its medical executive committee granted him admitting privileges that allow him to treat patients.

Families of Desert Valley patients also said they didn’t know Arunasalam had been banned in 2005 from operating at St. Mary. The hospital’s medical executive committee revoked his privileges, citing “hostile and disruptive conduct” that included “dishonesty” and disregard for patients’ welfare, according to court records.

Medicare records from Dale Kerkes’ procedure at Desert Valley, which Charleen Kerkes shared with California Watch, show that 40 minutes after Arunasalam deployed a stent, someone shouted, “code blue.”

Charleen Kerkes said she feared the worst when she saw another physician in street clothes sprint toward the operating room. In an instant, she lost the man who brought her coffee in bed each morning for 40 years.

“It was a nightmare,” she said.

After her husband’s death, Charleen Kerkes considered filing a lawsuit. She said she decided against it when an attorney who reviewed photos of the procedure asked to dig up her husband’s body to commission an autopsy.

Arunasalam, who has been treating patients at Desert Valley since 1995, declined to be interviewed and said through an attorney that he could not discuss individual cases due to patient confidentiality.

Desert Valley is owned by Prime Healthcare Services, which has been the subject of a yearlong California Watch investigation that uncovered a pattern of billing Medicare for rare ailments that generate lucrative bonus payments for the hospital chain. In recent months, FBI agents have questioned former Prime employees and a former patient about the firm’s billing practices.

Desert Valley implanted 118 stents in 2010, according to information supplied by Prime. That was four times the statewide average for hospitals with a limited heart care license, a California Watch analysis of hospital billing datashows.

Hospitals earn from $5,500 to $16,300 for stent procedures, depending on whether the case is done on an inpatient basis. For many patients, stents are not the only tool to manage clogged arteries. Leading medical research shows that medications and lifestyle changes can be just as effective as stents.

Prime Healthcare spokesman Edward Barrera said Desert Valley, which Prime bought in 2001, “has followed and continues to follow all applicable laws and regulations.” He said it is important “to remember that there are unexpected complications with coronary interventions at all hospitals that no one can predict or prevent.”

Barrera said two patients died during stent procedures in 2011 at Desert Valley. Statewide, the California Watch analysis shows that about 2 percent of patients undergoing a stent procedure die, about the same percentage for Desert Valley last year.

Kathleen Billingsley, chief deputy director of policy and programs at the state Department of Public Health, wrote hospital executives in November saying the new heart center would not be approved until the department is “assured of the absence of systemic health and safety issues in the hospital.”

Since then, state authorities said they performed extensive examinations of the hospital and its cardiac services, on Feb. 14 and March 20. Because the hospital was in compliance with regulations on both of those days, the full cardiac care license was granted, according to the public health department.

Inspections find repeated deficiencies

Of the 57 hospitals in the state with a limited heart care license, five facilities implanted more stents than the number Desert Valley says it placed recent years.

But only Desert Valley has been cited repeatedly for its heart care, state inspection records show. Since 2007, the state has found deficiencies in cases involving 40 patients seen in Desert Valley’s cardiac lab.

The California Department of Public Health has inspected Desert Valley Hospital dozens of times since 2007. During five reviews of cardiac care, it cited lax enforcement of hospital policies or failures to warn patients of surgical risks.

In response to Kerkes’ death, regulators inspected Desert Valley in July 2008 and determined that   the hospital violated state regulations by implanting a stent “they were not licensed to provide.” An inspection in 2011 found that Arunasalam had performed a stent procedure that, for the second time, violated state regulations and resulted in a patient’s death. 

Monica Lam/California Watch Desert Valley Hospital in Victorville was the first in the Prime Healthcare chain. State health inspectors have found repeat violations at its cardiac lab. 

Hospitals that don’t correct violations face penalties ranging from loss of their state operating licenses to severance of Medicare funding. After each violation at Desert Valley, state public health officials have required the hospital to submit a “corrective action plan,” but they have not sanctioned the facility.

The key difference between hospitals with a limited cardiac license and a full open-heart surgery license is staffing and equipment. Limited-license hospitals are expected to diagnose heart conditions through imaging procedures and intervene only in emergencies.

Hospitals with a full license operate with a heart-lung machine and staff trained to crack open a patient’s chest and perform an emergency operation in case of complications.

The state is studying whether to allow coronary stent placements at limited-license hospitals. Legislators are expected to vote on any proposed changes.

But for now, “you’re not allowed to do it,” said George Smith, past president of the California chapter of the American College of Cardiology and an adviser for the state study overseen by the Department of Public Health.

Regulations defied

Although Desert Valley was allowed to implant stents only in emergencies, state inspectors found several cases over the last four years that did not meet that criterion.

As part of the July 2008 inspection in the Kerkes case, public health authorities found that the hospital performed stent procedures on 18 other patients in defiance of regulations. Some stent cases were scheduled ahead of time, records show, and some took place amid no evidence of an emergency.

Inspectors returned to the hospital in October 2008 and discovered that Arunasalam had injured a patient by delaying care, records show. On July 31, 2008, a 43-year-old uninsured patient suffered a heart attack, an emergency condition that would have allowed Desert Valley to implant a stent.

But instead of rapidly treating the man or transferring him to another hospital, Arunasalam waited too long, and the patient’s heart muscle became severely damaged, the inspection report says. The patient may need a heart transplant, Arunasalam wrote in the medical record and noted, “Overall prognosis was poor.”

In response to inspectors’ questions, Arunasalam said that after the July inspection, a Department of Public Health doctor told him to “let patients die before performing cardiac interventions,” according to an inspection report. Arunasalam – who has been licensed in California since 1989 – had scrawled on the medical records of several other patients that their care was “suboptimal” due to the state health department “protocol,” according to the inspection report.

Desert Valley administrators say they told Arunasalam to stop citing protocols that “did not exist.”

Again, the hospital pledged to change. An outside reviewer would look at all coronary stent cases, a new cardiac lab director would be appointed, and an attorney would train the hospital governing board on its oversight duties, according to a February 2009 report Desert Valley Hospital submitted to Medicare.

Former patient sues

Three months later, in May 2009, Steve Wong, a 54-year-old machine operator at a Rancho Cucamonga textile warehouse, received two stents in a procedure that left him in need of a heart transplant, according to a lawsuit Wong filed against Desert Valley and Arunasalam.

Courtesy Steve Wong Steve Wong went to Desert Valley Hospital with chest pain. His attorneys allege that the hospital and Dr. Siva Arunasalam made mistakes that badly damaged his heart.

Ilan Heimanson, Wong’s attorney, said a cardiologist paid to review the case found that Arunasalam should have implanted one stent and transferred Wong to a better-equipped hospital to implant the second one. Instead, Arunasalam placed stents in both vessels and did not prescribe medication strong enough to prevent major bloodclots, court records contend.

Both Desert Valley Hospital and Arunasalam said in court filings that their conduct in the case did not cause damage to Wong’s heart. “(Wong’s case) is replete with speculation and wrongfully attempts through smoke and mirrors to place responsibility on DVH personnel,” attorneys for the hospital wrote.

Arunasalam testified in a deposition that he placed Wong's stents because the case was a true emergency. Wong’s team did not prove that Arunasalam caused any injuries, according to the cardiologist’s attorneys.

Wong has said he wasn’t aware that Desert Valley was limited in the cardiac care it could provide. He testified in a deposition that he’s expected to live two to six more years unless he gets a heart transplant.

“I am scared of this operation because I had a narrow escape on my last operation,” he testified, noting that he hadn’t gotten on a transplant wait list or discussed it with his wife. “I’m not prepared myself emotionally.”

In November, San Bernardino County Superior Court Judge Steven Malone denied Arunasalam’s motion to be dismissed from Wong’s lawsuit. Malone cited Wong’s medical expert, who said Arunasalam should have returned Wong to the operating table as soon as it became apparent that he had a postoperative heart attack.

Public health inspectors made no note of Wong’s case or other catheterization lab deficiencies in a 90-page report documenting a wide-ranging inspection in August 2009. Department of Public Health spokeswoman Anita Gore said authorities did not receive a complaint about the case.

Prime spokesman Barrera said Prime could not comment on details of the case, but stated, “We are completely confident that we will prevail based on the facts.” Barrera said the hospital “cannot interfere with the clinical judgment of a highly trained cardiologist” as to which case is an emergency.

Doctor faces civil trial

Arunasalam attracts hundreds of patients with cardiac troubles to his medical office, the High Desert Heart Institute in San Bernardino County. Records show that he is board certified in internal medicine and cardiology and obtained his medical degree at Emory University in Atlanta.

During a 2005 employment trial that covered a wide range of practices at Desert Valley, Arunasalam testified on behalf of Prime chain owner and fellow cardiologist Dr. Prem Reddy. On the witness stand, Arunasalam dismissed doctors’ accusations against Reddy, saying the hospital owner is the only area cardiologist he trusts.

That same year, the state Medical Board filed an accusation to revoke Arunasalam’s license, alleging gross negligence and failure to keep adequate medical records. Thomas Douvan, an attorney for Arunasalam, said the case was dismissed.

Arunasalam faces a civil trial in coming weeks over St. Mary’s accusations that from 2002 to 2004, he implanted 59 medically unnecessary defibrillators in patients. A cardiac defibrillator is implanted to regulate the heartbeat. The hospital says it discovered the cases during an internal audit and refunded Medicare the $1.4 million it was paid for the procedures.

Arunasalam has denied all accusations in court records, saying Medicare never deemed the procedures improper. Also, his attorneys said St. Mary administrators attempted to ruin Arunasalam’s reputation because he planned to build a competing heart hospital.

Despite Wong’s case and others cited by inspectors, Desert Valley continued to implant stents in cases that did not meet emergency criteria.

Courtesy the Smith family William "Ned" Smith, 72, died during a stent procedure at Desert Valley Hospital. State inspectors say he did not sign a consent agreeing to the procedure.

William "Ned" Smith, 72, died during a stent procedure at Desert Valley Hospital.On Dec. 30, 2010, William “Ned” Smith, 72, of Hesperia died during a stent placement at Desert Valley, just weeks before the Air Force veteran was planning a vacation to a vintage air show with his wife.

Patricia Smith, who was married to Ned Smith for 48 years, said Arunasalam did not explain the hospital’s limited license status to the couple. She also said he told her that he was only going to examine her husband’s heart. Smith said she didn’t know a stent was placed until after her husband had died.

A Medicare report shows that when Arunasalam began the procedure, Ned Smith was pain-free and had stable vital signs.

A report approved by Arunasalam that Patricia Smith shared with California Watch says one of her husband’s arteries was perforated, which set off uncontrolled bleeding. According to the report, Arunasalam said he tried to plunge a needle into Ned Smith’s chest to draw out the excess blood, but the effort failed.

Patricia Smith said she remembers seeing Arunasalam emerge from the cardiac lab, somberly shaking his head. “I started crying, ‘No, no, no, this can’t be right,’” Smith said.

Smith said Arunasalam told her family that Ned Smith’s vessels may have been fragile because of his diabetes. Patricia Smith said she is upset that no one at Desert Valley told her that nearby St. Mary Medical Center had the staff and equipment to attempt to rescue her husband if something went wrong.

“He’s not God,” she said of Arunasalam. Smith and her son have shared her husband’s medical records with an attorney who has not yet filed suit.

Inspectors discovered Ned Smith’s case while investigating another Desert Valley complaint late last year. Inspectors determined that the hospital put patients in “immediate jeopardy” of injury or death when Arunasalam performed interventions in cases that didn’t meet the hospital’s definition of a cardiac emergency. In addition to Smith, another patient was rushed to a local hospital after a vessel ruptured during an October stent placement.

In November, the Department of Public Health said in yet another report that the hospital had once again failed to hold doctors accountable for violating hospital policies. And Desert Valley, the report said, had failed to send all of its stent cases for review by outside parties, breaking a promise to regulators.

Patricia Smith, who reviewed state inspection reports, said she is concerned patients at Desert Valley’s new heart center might not get clear explanations of surgical risks.

“I feel like they will take more advantage of the system by opening up the heart center,” she said. “They will have free reign.”

This story was edited by Denise Zapata. It was copy edited by Nikki Frick.

2007 inspection regarding unreported heart interventions

2008 inspection after the death of Dale Kerkes, patient 2

2008 inspection in which doctor claims state advised to 'let patients die'

2011 inspection covering informed consent failures, William "Ned" Smith's death

Letter from Department of Public Health deputy director to former Prime Healthcare chief executive Lex Reddy

Letter from former Prime Healthcare chief executive Lex Reddy urging the state to license the open-heart surgery center

Testimony of Siva Arunasalam during 2005 trial. The case was a dispute between hospital owner, Prem Reddy, and two nurse managers.

St. Mary Medical Center medical executive committee accusation against Dr. Siva Arunasalam

Trial brief by Dr. Siva Arunasalam denying accusations about allegedly "unnecessary" defibrillators

Trial brief by St. Mary Medical Center alleging that Dr. Siva Arunasalam implanted defibrillators that did not meet Medicare conditions for coverage

This story was edited by Denise Zapata. It was copy edited by Nikki Frick.


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Lawmakers move to curb hospitals from 'capturing' patients

The emergency room practices of a major California hospital chain have prompted new legislation to reduce what critics describe as a pattern of "capturing" insured patients in order to boost bills.

Sen. Ed Hernandez, D-West Covina, chairman of the state Senate Health Committee, is carrying the bill limiting how much hospitals are paid after they admit a certain rate of out-of-network, privately insured patients. Because current state law is so vague, hospitals can charge insurers top dollar for treating patients from outside their medical networks.

Hernandez, who was co-chairman of a Feb. 24 legislative hearing in Los Angeles, said the proposed bill comes after his office heard “about a growing business practice in the hospital world where unscrupulous hospitals avoid contracts with health plans, filter patients with commercial insurance through their ER, and bill higher ‘out-of-network’ charges to maximize profits.”

“This practice goes against the very idea of managed care, which is not only bad for our health care system, it harms patients,” Hernandez said in a statement.

He said he introduced the bill to "remove the economic incentive for a hospital to operate in this manner.”


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Lawmakers alarmed by hospital chain's practices

LOS ANGELES – If a Kaiser Permanente customer ends up in the emergency room of another hospital, Dr. John Shohfi and his team of Kaiser doctors and nurses expect to be informed.

They're on call 24 hours a day, coordinating care when Kaiser patients are treated elsewhere.

But when Prime Healthcare Services took over a chain of Southern California hospitals, Shohfi testified today, there was a noticeable change in his relationship with Prime and its doctors.

“No calls,” said Shohfi, an emergency room physician. “They just stopped calling.”

Two health care providers, Kaiser and Heritage Provider Network, have accused Prime of "trapping" or "capturing" their patients in Prime emergency rooms and hospitals in order to charge more for treating patients from outside their medical networks.


Shohfi's testimony came during a hearing in Los Angeles arranged by Sen. Ed Hernandez, D-West Covina, and Assemblyman Bill Monning, D-Monterey, chairmen of the Legislature's health committees. The lawmakers said they were troubled and disturbed by Shohfi's testimony.


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Prime Healthcare CEO abruptly steps down

The president and chief executive officer of Prime Healthcare Services resigned yesterday, leaving as FBI agents are questioning former employees about the firm's billing practices and state legislators prepare to question the company's attorney in a Los Angeles hearing tomorrow regarding hospital reimbursement.

Prime confirmed the resignation in a statement released today.

Lex Reddy, who is the brother-in-law of Prime's owner and board chairman, Dr. Prem Reddy, began working as a clerk for Prem Reddy’s medical group in 1995. During the last 11 years, Prem Reddy, a cardiologist, built the 16-hospital Prime chain with Lex Reddy at the helm.


According to a company statement, Prem Reddy will take over as interim chief executive. “Lex Reddy has been an important part of our success, and he will be missed,” Prem Reddy said in a statement.

No reason was given for the departure.

A joint Senate and Assembly health committee hearing tomorrow is expected to feature testimony from Prime's general counsel and from critics of the firm’s patient admission practices. The Kaiser Health Plan and Heritage Provider Network, which have representatives scheduled to speak, have sued Prime, accusing the firm of "trapping" or "capturing" their patients and rendering unnecessary care for profit.


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Prime Healthcare drops bid for N.J. hospital

Prime Healthcare Services pulled its bid to buy a New Jersey hospital last week, saying it was deferring to the wishes of local elected officials who wanted to see the hospital remain a locally operated nonprofit.

The proposed deal met strong resistance from a health workers union and a community group that aired concerns over Prime’s business model.

Prime leaders and Christ Hospital attorneys also faced tough questions from health regulators and the New Jersey attorney general’s office, including queries about billing practices based on findings of a yearlong investigation by California Watch. The nonprofit investigative news operation has identified a pattern at Prime Healthcare of billing Medicare for treatment of rare conditions among its elderly patients – conditions that enable the chain to reap lucrative bonus payments.

“They were getting hit from all sides,” said Jeanne Otersen, public policy director for Health Professionals and Allied Employees, a union that represents 400 nurses at Christ Hospital.


Prime spokesman Edward Barrera said in an e-mail that the chain already had shared a great deal of information with state health regulators and “was in the process of finalizing its responses.”

“The queries played no role in Prime Healthcare’s decision to withdraw,” according to Barrera.


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