California Healthcare Provider Paying $37M to Settle Whistleblower Lawsuits

Southern California-based Prime Healthcare Services and two of its doctors will pay $37.5 million to settle whistleblower lawsuits that claimed the hospital system paid kickbacks to one of the physicians and bought his practice for more than it was worth, prosecutors said.

Prime Healthcare entered into the settlement with federal and state prosecutors to resolve alleged violations of the False Claims Act, the U.S. Attorney’s Office said in a statement. The agreement resolves allegations that Prime and its founder Dr. Prem Reddy overpaid to purchase Dr. Siva Arunasalam’s physician practice and surgery center because the company wanted the cardiologist to refer patients to its Desert Valley Hospital in Victorville.

“The purchase price, which was substantially negotiated by Reddy, exceeded fair market value and was not commercially reasonable,” the statement said.

“Doctors have a sworn duty to do no harm and to put their patients’ interests first,” said Acting U.S. Attorney Tracy Wilkison said in a statement. “Kickbacks designed to increase the number of patient referrals corrupt the doctor-patient relationship and needlessly waste this nation’s health care resources.”

Under the settlement agreement, Arunasalam will pay $2 million. Reddy has already paid $1,775,000, and Ontario-based Prime has paid $33,725,000, prosecutors said.