Prime Healthcare, Founder and Doctor Pay $ 37.5 Million to Settle Whistleblower Case Alleging Bribes, Stark Violations, and Fraud

LOS ANGELES, July 19, 2021 / PRNewswire / – Prime Healthcare, its founder and CEO, Dr. Prem Reddy, and one California cardiologist agreed to pay a total of $ 37.5 million to the federal government and the state of California to resolve a whistleblower complaint filed by Phillips & Cohen LLP who alleged that the hospital chain paid bribes to the cardiologist, buying his practice and surgical center for far more than they were worth.

Phillips & Cohen partnered with Cotchett Pitre & McCarthy (CPM) to litigate the case.

This appears to be the most important settlement in a case alleging kickbacks paid by a chain of hospitals to a single doctor. Prime operates one of the largest hospital systems in the country.

Significantly, government funds were clawed back in litigation led by the whistleblower and his attorneys, as permitted under Federal False Claims Law and California False Claims Law. The government investigated the case but did not resume the case, or “intervene”, within the deadline set by the court.

According to the complaint, Prime and its subsidiaries:

  • Purchase of Dr Siva Arunasalam’s cardiology business, High Desert Heart Institute (HDHI), and its surgical center in Victorville, California, in 2015 for an amount that was at least three times their total fair market value.
  • Paid Dr Arunasalam a “heavily inflated” salary in return for referring patients to Prime Healthcare’s Desert Valley Hospital in Victorville and the closure of its independent practice and its surgical center.
  • Submitted falsified bills to government healthcare plans to demand higher prices for implantable medical devices such as pacemakers than Prime Healthcare actually paid. Higher prices meant higher reimbursement for Prime Healthcare.

“Doctors are allowed to sell their practices to hospitals and other competitors, but the payment must match fair market value,” said Edward H. Arens, whistleblower lawyer and partner at Phillips & Cohen in its San Francisco Office. “Throwing inflated sums of money at doctors for their medical practices and salaries as a hidden means of obtaining patient referrals is prohibited.”

The complaint alleges that Dr Reddy and Dr Arunasalam “knew and intended that [Dr. Arunasalam] would receive a disproportionate salary and above-market payment for his practices in exchange for referring his patients to [Desert Valley Hospital] where they would receive the same services at higher prices.

“Fraud drives up health care costs for all of us,” said Justin T. Berger, partner of CPM. “Whistleblowers are a powerful brake on corporate greed and runaway health care spending. This regulation illustrates the power and importance of whistleblowers in our civil justice system.”

Whistleblower lawsuit alleges Prime, Dr Reddy and Dr Arunasalam violated the Strict law, the anti-recoil law, the U.S. Misrepresentation Act and the California Misrepresentation Act. Dr. Reddy is the Chairman of the Board and Chairman of Prime as well as its Founder and CEO.

On the total settlement, Prime will pay $ 33,725,000, Dr Reddy will pay $ 1,775,000 and Dr Arunasalam will pay $ 2 million over an extended period.

The whistler, Martin mansukhani, was Regional CFO of Prime from 2012 to 2017. Phillips & Cohen filed a qui tam lawsuit on its behalf in 2018 in Federal District Court of Riverside, California.

“Our client raised concerns with senior management about the asset purchase agreement and the employment contract, but it was ignored and then shelved,” Arens said.

To carry out its so-called implantable device reimbursement program, Prime centralized its billing and collections using a small team of employees.

“We claim that an office has become a ‘forgery factory’ that has systematically altered invoices and purchase orders to make it appear that Prime Healthcare has spent more on implants than it actually has.” , said Molly knobler, a whistleblower lawyer at Phillips & Cohen.

Mansukhani said he was happy his concerns were recognized and the case resolved.

“This result would not have been possible without the skilled and experienced whistleblower lawyers I had by my side and a strong whistleblower law,” Mansukhani said.

Arens and Berger praised the government lawyers and investigators who investigated the case and participated in the settlement. They understand the lead lawyer Marie Bonkowski and deputy prosecutors of the United States Abraham Meltzer and Jack ross the United States Department of Justice and the Deputy Attorney General for Oversight Nicolas paul from the California Department of Justice.

When whistleblowers are pursuing qui tam cases themselves, they are entitled under misrepresentation laws to 25% to 30% of federal recovery and 25% to 50% of California. Mansukhani will respectively receive 28% and 44% of the sums recovered.

SOURCE Phillips & Cohen LLP

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