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Company is under federal and state investigation for allegations of fraud, high rates of life-threatening infections

By Miriam Raftery


November 18, 2010 (San Diego’s East County) – Prime Healthcare Services, Inc. has acquired Alvarado Hospital, a 306-bed facility east of San Diego State University, from Plymouth Health. But the buyer's troubled trackrecord raises concerns about the quality of patient care and more.



Prime has a record of turning around money-losing hospitals by raising fees, slashing payrolls and services, a 2007 Los Angeles Times investigation found. The company cancels contracts with managed care insurers to negotiate higher reimbursements, leading to complaints that Prime is driving up healthcare costs.


But on October 12th, the Times reported that the U.S. Department of Health and Human Services launched an investigation into allegations that septicemia infection rates among Medicare patients at hospitals run by Prime were triple the national average. California's Attorney General has also initiated a probe into whether Prime engaged in fraud to bilk Medicare.


Service Employees International Union (SEIU) investigator Adam Weisberg has alleged that the infections reported may be fraudulent. “Most likely they are billing extravagances,” he said, the San Diego Union-Tribune reports today. “If these are real, there’s a real problem. If they aren’t there’s a possibility of fraud.” The billings amounted to $18 million, according to the Los Angeles Times.

Prime has denied the charges and claims the allegations are the result of a “smear campaign” by SEIU to “extort concessions” in labor negotiations, according to a news release issued by the company on October 12.

Medi-Cal auditors are also probing Prime Healthcare for waste, fraud and abuse charges including lease payments on a Beverly Hills residence, use of a private helicopter and depreciation on a Bently sedan. Prime has indicated it may appeal those findings, the Times reported.

In May, Prime Healthcare Services agreed to l pay $1.2 million to settle an investigation by state regulators for improperly balance billing HMO patients for services not covered by insurers, according to the San Francisco Gate.

Plymouth had struggled to turn around the hospital’s troubled track record. Despite some improvements medically, operationally and financially, Plymouth laid off some workers earlier this year. “We do not believe that the business model of the stand-alone hospital is viable in today’s changing healthcare arena,” said Dr. Pejman Salimpour, a principal with Plymouth Health.

Before Plymouth acquired Alvarado Hospital in 2007, former owner Tenet Healthcare underwent a federal investigation into allegations that physicians were paid kickbacks for referring patients to Alvarado, charges that ultimately were not proven. Plymouth fought to attract new doctors and improve the hospital’s reputation. But despite investment to improve equipment, services and operation, the stand-alone hospital could not compete with major hospital chains such as Sharp Healthcare and Scripps Health.

“We are pleased that Plymouth Health elected to sell Alvarado to Prime Healthcare,” stated Prem Reddy, MD, chairman of the board at Prime, according to a company press release. He pledged to “uphold Plymouth’s commitment to high quality care” and to “enhance the quality outcomes in a cost-effective manner.”

Prime operates 13 hospitals in California, as well as three medical groups. The company, founded in 2001, has had successes as well as troubles. On five different occasions, hospitals run by Prime have been named among the Thompson Reuters Top 100 Hospitals nationally. Thompson Reuters evaluated non-federal hospitals in 10 performance categories: mortality, medical complications, patient safety, average length of stay, expenses, profitability, patient satisfaction, adherence to clinical standards of care, post discharge mortality and readmission rates for acute myocardial infarction, heart failure, and pneumonia.