LOS ANGELES (AP) -- Prime Healthcare Services, one of the nation's largest hospital systems, agreed Friday to pay $65 million to settle allegations of Medicare overbilling in California.
The company and CEO Prem Reddy agreed to settle a whistleblower lawsuit alleging that 14 of its hospitals unnecessarily admitted patients and also "upcoded" patient diagnoses, exaggerating their illnesses in order to receive more Medicare money.
The U. S. attorney's office said hospitals generally receive higher payments from Medicare when a patient is admitted rather than placed under observation.
Ontario, California-based Prime has 45 hospitals in 14 states, including 17 in California.
Karin Berntsen, a registered nurse working for Prime, sued the company in 2011, alleging it violated the federal False Claims Act with fraudulent billings.
"The patients were becoming commodities. They were becoming dollar signs, not people," Berntsen said in a statement. "Everything being done seemed to be solely to increase profit."
In a statement, Prime said the government didn't find any improper conduct or wrongdoing by the company.
"This matter dealt with the technical classification of the category under which patients were admitted and billed," the company said. "Physicians, not hospitals, direct the level of care needed for their patients. Prime continues to support physicians in the care they determine is best."
Under the settlement, Prime will pay $61.75 million and its CEO will pay $3.25 million.