$65 Million False Claims Act Settlement Against Prime Healthcare: A Landmark Whistleblower Case

In a significant victory against healthcare fraud, U.S. ex rel. Berntsen vs. Prime Healthcare, et al. resulted in a $65 million False Claims Act (FCA) settlement announced on August 3, 2018. The case, filed in 2011 in the United States District Court for the Central District of California, was brought forward by whistleblower Karin Berntsen, a former employee at Prime Healthcare’s Alvarado Hospital in California.

Whistleblower Allegations: Medical Necessity & Upcoding Fraud

At the time of the lawsuit, Prime Healthcare operated 14 hospitals in California, all of which were named as defendants. Berntsen’s complaint, based on firsthand knowledge, exposed two fraudulent billing schemes:

1. Medical Necessity Fraud: Prime Healthcare billed Medicare for inpatient admissions that were medically unnecessary, circumventing standard requirements to maximize reimbursements.
2. Upcoding Fraud: The hospital chain inflated billing codes to charge for services at a higher reimbursement rate than what was actually provided.

Government Intervention & Whistleblower-Led Claims

The United States government intervened in the medical necessity fraud allegations, while Berntsen and her legal team pursued the upcoding claims. The settlement resulted in:

• $45 million recovered for improper inpatient admissions.
• $20 million recovered for upcoding violations.

For her instrumental role in exposing this fraud, Karin Berntsen was named the 2018 “Whistleblower of the Year” by the Taxpayers Against Fraud Education Fund.

Prime Healthcare CEO Held Personally Liable

One of the most significant aspects of this settlement was the personal financial liability of Prime Healthcare’s CEO, Dr. Prem Reddy. Of the $65 million total settlement, $3.25 million was required to be paid directly by Dr. Reddy. The Government’s Complaint in Intervention specifically cited multiple instances of misconduct where Dr. Reddy was personally involved, underscoring the severity of the allegations.

Corporate Integrity Agreement & Future Oversight

The magnitude of the fraud prompted the imposition of a Corporate Integrity Agreement (CIA)—a government-mandated oversight mechanism designed to ensure compliance and prevent future misconduct within Prime Healthcare. The CIA introduces additional reporting requirements and safeguards to hold the hospital system accountable.

A Major Win in Healthcare Fraud Enforcement

This $65 million FCA recovery is part of a long history of successful False Claims Act cases led by Wilbanks & Gouinlock, which has repeatedly taken on large hospital chains engaged in systemic fraud. This case serves as a powerful reminder of the importance of whistleblowers in protecting taxpayer dollars and ensuring integrity in the healthcare system.

If you have information about healthcare fraud and need guidance on False Claims Act litigation, contact Wilbanks & Gouinlock today to learn more about your legal options.

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If you have information about healthcare fraud, contact our office for a free, confidential consultation:

• Fill out our consultation form by clicking here.
• Email us at info@wilbanksgouinlock.com.
• Call (404) 842-1075, ext. 123 or 122.

This article is for informational purposes only and should not be considered legal advice.