The FBI is interviewing witnesses about billing practices at Prime Healthcare Services, the hospital chain that has charged Medicare for treating elderly patients with rare medical conditions at far higher rates than other California hospitals.
The FBI would neither confirm nor deny an investigation, but at least two former Prime medical coders say they were approached by the agency to discuss the chain’s billing practices, which have been the subject of a yearlong California Watch investigation.
Former Prime back-office coders Anneke Doty and Danika Fedeli both confirmed that an FBI special agent contacted them about statements they made in October to California Watch. At that time, the coders detailed how the billing practices changed soon after Prime acquired one San Diego hospital.
Help us do more.
Doty said before a scheduled meeting with an FBI agent that she planned to describe the same details she discussed in news interviews. After the meeting, Doty said, friendly but firm, “I can’t talk to you anymore.”
Fedeli confirmed, “I was contacted.”
The inquiries from the FBI might signal that scrutiny of Prime is intensifying. The Ontario-based hospital chain, which owns 14 California hospitals and one hospital in Texas, already has been the subject of state and federal investigations for the way it handles its billings.
California Watch has analyzed millions of patient admission records contained in state data to identify a pattern at Prime hospitals of billing for rare and serious medical conditions that typically generate bonus payments to hospitals.
Doty and Fedeli both worked at Alvarado Hospital Medical Center in San Diego and attended a meeting in late December 2010 – just weeks after Prime took over. The former coders had told California Watch that Dr. Prem Reddy, who owns the Prime chain, urged doctors in attendance to document rare medical conditions that entitle hospitals to more taxpayer dollars than common maladies.
A spokesman for Prime said the chain is unaware of an FBI probe.
“Prime Healthcare Services is an award-winning management company, and federal accreditation agencies frequently audit its hospitals and laud their practices,” said spokesman Edward Barrera. “No federal agency has contacted us, nor are we aware of any federal review. Any scrutiny will show that our hospitals are committed to following all state and federal laws and regulations.”
The Medicare program, which is the subject of vigorous national debate over mounting costs, pays hospitals based on complex formulas that reward them for treating the toughest cases.
Exaggerating a medical bill, called “upcoding,” is illegal. Prime has maintained that it has never engaged in the practice. The chain has emphasized that physicians, not executives, are responsible for diagnosing patient medical conditions. Chain leaders also have broadly labeled former employees who have questioned company practices as disgruntled.
The state Department of Public Health conducted a probe of Prime septicemia cases after research by the Service Employees International Union revealed that some chain hospitals reported the nation’s highest rates of the bloodstream infection.
Regulators concluded earlier this year that they lacked evidence to cite the chain for documentation shortcomings. However, a department official said the inspection findings were forwarded to agencies that focus on billing reviews for Medi-Cal and Medicare.
In the California Watch story published in October, former coders Doty and Fedeli recalled that Reddy urged physicians to document autonomic nerve disorder in cases in which patients have fainted.
Fainting is one symptom of the rare disorder. Affected patients also may experience erectile dysfunction, major constipation and other symptoms.
Hospitals billing Medicare can earn about $7,000 for treating fainting patients who also have multiple complications. Hospitals documenting the nerve disorder can earn about $12,500 for patients with one major complication.
Patient billing data at Alvarado Hospital Medical Center is not yet publicly available. But at other hospitals, the chain reported higher rates of the conditions Reddy mentioned at the December 2010 meeting.
Other Prime hospitals reported, for instance, that they saw autonomic nerve disorder nearly 90 times more often than other California hospitals.
While only 468 total cases of the condition were reported in 2010 by California hospitals, 77 percent of those, or 360 cases, were reported by Prime hospitals.
In addition to the nerve disorder, Fedeli and Doty recalled that Reddy encouraged doctors to document “accelerated hypertension” in cases in which doctors see blood pressure above a certain threshold.
Fedeli said medical coding software recognized the term as “malignant hypertension,” which is a sudden and severe form of high blood pressure that can cause the eyes to bleed. The National Institutes of Health estimates that the condition afflicts about 1 percent of hypertension patients.
A California Watch analysis of Medicare billing data found that California hospitals report that 2.6 percent of hypertension patients had the malignant form in 2010. At hospitals owned by Prime, the rate was nearly five times higher, at 19 percent.
Last December’s meeting spurred former Alvarado coding manager Joseph Ingrande, who declined to comment for this report, to leave. He submitted a resignation letter to hospital executives: “After personally being a part of Prime Health Care activities, I have seen actions and procedures taken that I believe to be inappropriate. … I cannot with good (conscience) be a part of these activities which could potentially put me in legal jeopardy with (Medicare).”