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Prime hospital fined $95,000 for confidentiality breach

Monica Lam/California Watch Shasta Regional Medical Center in Redding 

A Prime Healthcare Services hospital in Redding has been fined $95,000 for publicizing a patient’s confidential medical files in an effort to discredit a California Watch news report.

The state Department of Public Health imposed the financial penalties on Prime’s Shasta Regional Medical Center on Nov. 9 for five offenses that occurred last year.

At the time, officials of the Ontario-based hospital chain were trying to undercut a California Watch story about aggressive Medicare billing practices at the Redding hospital.

In an attempt to rebut the story, the hospital's CEO sent an email to 785 people – virtually everyone who worked at the hospital – disclosing details from a 64-year-old diabetes patient’s confidential files, state investigators wrote in their report. The patient had been interviewed by California Watch for its story.

Earlier, the hospital CEO, Randall Hempling, took the woman’s medical files to the editor of the local newspaper, the Redding Record Searchlight, to dissuade him from reprinting California Watch's story.

All the disclosures were illegal because they were made without the patient’s knowledge or permission, the state said. The hospital “failed to prevent unlawful or unauthorized access” to the patient’s medical files, Debby Rogers, a deputy director at the health department, wrote in a letter to Prime.

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Prime spokesman Edward Barrera said the company believes it did nothing wrong and has filed an appeal.

“Shasta Regional Medical Center is committed to the privacy of its patients,” he wrote in an email. The company "believes that the disclosures, if any, were permitted under both federal and state law," he wrote.

The disclosures found to be illegal by the health department began as California Watch was inquiring about a reported outbreak of a dangerous nutritional disorder called kwashiorkor at the Redding hospital.

Experts say kwashiorkor usually afflicts children in the Third World during famines. But in 2009 and 2010, the Redding hospital billed Medicare for treating more than 1,000 senior citizens for kwashiorkor, records show. That’s about 70 times the state average, according to Medicare data analyzed by California Watch. 

The billings made the hospital eligible for Medicare bonus payments of more than $6,000 for each patient treated for the affliction, according to federal records.

In December, California Watch interviewed former hospital patient Darlene Courtois, a retired teacher’s aide from Shasta County.

Records obtained through the federal Freedom of Information Act showed that Shasta Regional Medical Center had billed Medicare for treating her for kwashiorkor. As a result, the hospital received a $6,700 bonus payment from Medicare.

But Courtois told California Watch that she had been hospitalized for complications of diabetes, not malnutrition. She described herself as overweight, not malnourished, and said she had never before heard the word "kwashiorkor." It means “weaning sickness” in the Ghanaian language of West Africa.

After a reporter called Prime for comment, hospital officials zeroed in on Courtois, the state report says.

Claiming that Courtois’ confidential files undercut her story, they took her records to the local newspaper and showed them to the editor. They also revealed parts of her medical files to reporters from two other news services, the report says.

After California Watch’s story was published in the San Francisco Chronicle and The Orange County Register, the hospital CEO emailed details from the woman’s medical file to the hospital’s staff in a further attempt to counter the story, according to the report.

Prime officials claimed that the confidential files showed Courtois had been given a nutritional consultation as a treatment for malnutrition. That substantiated the kwashiorkor billing, they claimed.

But Courtois denied receiving a nutritional consultation. When she requested her medical records from the hospital, she didn’t receive any information indicating that she was malnourished, she said.

Courtois’s daughter, Julie Schmitz, called the hospital “vindictive” for publicizing her mother’s files. She said she was pleased to learn of the fine.

“The only way to hit some people is to hit them in their pocketbook,” she said in a phone interview.

The health department report said the hospital’s general counsel, communications director, CEO and medical officer were involved in the disclosures found to be illegal by the department.

The report doesn’t identify them by name. Silas Lyons, editor of the Record Searchlight, has identified the hospital officials who brought Courtois’ records to the newspaper as Hempling, the hospital CEO, and Dr. Marcia McCampbell, its chief medical officer.

A California Watch analysis of state records shows that Prime hospitals have reported high rates of several unusual medical conditions that qualify for enhanced Medicare payouts.

At the same time, former employees of Prime say chain owner Dr. Prem Reddy has urged doctors and medical coders to log conditions that qualify for premium payouts when treating Medicare patients.

Three members of Congress have asked for a federal probe of suspected Medicare fraud at Prime. FBI agents have interviewed Courtois and have contacted former Prime employees. No charges have been filed.

Prime has denied wrongdoing, saying its Medicare billings are legal and proper.

Also on Nov. 9, the health department fined Shasta Regional Medical Center an additional $25,000 for an unrelated violation of patient confidentiality that occurred in February. In that case, “a Shasta employee accessed personal information for inappropriate reasons but not for sale or publication,” Barrera, Prime’s spokesman, wrote in an email.

The employee was fired, he wrote. The hospital believes the fine is excessive and is appealing, he wrote.

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