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Southern California Hospital System Sues Kaiser Permanente for Managing Bills Rather Than Managing Care

CHINO, Calif., Feb. 13 /PRNewswire/ -- Prime Healthcare Services announced today that eight of its hospitals have filed lawsuits in four different Southern California counties against Kaiser Permanente seeking more than $25 Million for Kaiser's failure to properly pay thousands of claims for emergency medical services provided to Kaiser's HMO members. Under both federal and California law, each of these hospitals were required to provide medical screening examinations to each patient who sought emergency care and such further stabilizing care as was necessary to stabilize the patient's emergency medical condition regardless of the patient's insurance status. Kaiser, as well as other HMOs, is required to reimburse the hospitals for the reasonable and customary value of the emergency services provided. Although Prime Healthcare's hospitals provided emergency care to thousands of Kaiser's enrollees, Kaiser failed to properly reimburse Prime Healthcare's hospitals for the emergency services provided to its members. Instead, Kaiser has routinely denied claims in their entirety, paid only small portions of the claims, and/or reimbursed the hospitals at rates which are far below the reasonable and customary value of the emergency services. For example, Kaiser has failed to pay any portion of Sherman Oaks Hospital's $1.6 Million claim for emergency burn services provided to a critically-injured Kaiser member at the world-renowned Grossman Burn Center who was hospitalized for more than thirty days.

Given the rising costs of providing healthcare and the dramatic increase in the number of uninsured and underinsured patients, many hospitals have been forced to close, file bankruptcy, or limit services. Since 2001 more than 17 hospitals throughout Southern California have closed due to financial constraints and several others were forced to file bankruptcy. As noted by Roger Krissman, Chief Financial Officer of Prime Healthcare Services, "it is especially important that HMOs like Kaiser fairly and properly reimburse providers of emergency medical services because otherwise more hospitals may be forced to close". Mr. Krissman commented further that "Prime Healthcare had no choice but to file lawsuits against Kaiser in order to ensure continued access to healthcare for the members of the communities in which its hospitals are located."

In contrast to financially distressed hospitals, Kaiser reported profits of $1.3 Billion in 2006 and $2.5 Billion in 2007. This is not surprising given that although insurance premiums have increased; the amount of revenue spent on patient care has remained the same or decreased. Rather than spending the increased premiums on patient care, HMOs are using the money on increased layers of bureaucracy and middle management whose job it is to refuse necessary patient care, deny provider claims or find other ways to not pay provider claims properly. According to Dr. Prem Reddy, a board certified Cardiologist and Chairman of Prime Healthcare Services, "HMOs, including Kaiser, ought to be focused on effectively managing patients' care; but unfortunately, they are focused on managing bills". Also, in order to implement a process of working efficiently with Kaiser, Dr. Hassan Alkhouli, Medical Director of Prime Healthcare's Orange County Hospitals, attempted numerous times to arrange for a meeting with Kaiser's utilization managers to address utilization issues but his telephone calls went unanswered.

According to Prime Healthcare, Kaiser's tactics to avoid properly paying claims include making repeated and unnecessary demands for medical records, denying reimbursement for emergency medical services under the guise that the care was not medically necessary even though the Prudent Layperson Standard is met on every occasion, retrospectively reviewing claims for emergency care, and demanding the transfer of Kaiser members to Kaiser's hospitals with no regard to the patients' medical condition and safety. Dr. James Lally, Medical Director of Chino Valley Medical Center, expressed frustration with Kaiser because "I am pressured by Kaiser to transfer patients when I do not believe that the patient is stable for transfer". Dr. Humberto Silva, Medical Director of Desert Valley Hospital's Emergency Department, noted that "Kaiser insists on the transfer of patients down the treacherous Cajon Pass even though doing so may sometimes be life-threatening". Dr. Luis Noronha, Medical Director of Desert Valley Hospital, has "personally witnessed Kaiser calling patients' families urging them to request transfer to a Kaiser facility even though the patient is not stable".

Many providers believe that Kaiser's aggressive and intractable approach is part of a larger decision on Kaiser's part to pad its bottom line by simply denying payments due to outside providers by hook or crook. Kaiser has been sued in both Northern and Southern California by hospitals seeking reimbursement for services provided to Kaiser members as referenced by legal proceedings commenced by Alvarado Hospital Medical Center, Providence Medical Center, South Coast Medical Center, Glendale Adventist Medical Center, Simi Valley Hospital, and North Bay Medical Center to recover amounts due for healthcare services. Prime Healthcare also believes that several other prominent hospitals are engaged in legal disputes with Kaiser and may be filing similar lawsuits in the near future.

Kaiser's profits are even greater than other for-profit HMOs because it is not required to pay taxes on a single penny of its earnings as it enjoys the status of being a non-profit entity. The only real difference between Kaiser and other for-profit health plans is that Kaiser is not required to pay taxes. Even though Kaiser is a non-profit entity, it provides very little, if any, charity care at the hospitals it owns and the emergency departments in these hospitals see very few Medi-Cal patients and uninsured patients. In contrast to Kaiser's hospitals, Prime Healthcare's hospitals consistently provide millions of dollars in charity care every year which, in almost all cases, exceed the amount of charity care provided by other neighbor hospitals including non-profits.

Prime Healthcare has a history of acquiring financially distressed and struggling hospitals and providing the resources and expertise necessary to improve the infrastructure at these hospitals and implement proven patient care protocols which ensure the hospitals' survival and continued access to care by those community members who rely on the hospitals for care. Prime Healthcare has successfully turned around each hospital it has acquired while at the same time guaranteeing community members access to high quality medical care for years to come. Prime Healthcare's success depends not only on its resources and expertise but also on receiving proper reimbursement for the care it has rendered. Unfortunately, Kaiser refuses to properly reimburse Prime Healthcare's hospitals for the care they provide to Kaiser members. Prime Healthcare has been engaged in negotiations and mediation processes for over two years in resolving its claims' disputes with no success. Prime Healthcare's attempts to resolve the disputes through Independent Dispute Resolution Process (IDRP) as recommended by the Department of Managed Healthcare (DMHC) were thwarted as Kaiser declined to participate in the voluntary program repeatedly. Prime Healthcare's request to submit the disputes to a binding judicial arbitration procedure has also been repeatedly denied by Kaiser. Therefore, Prime Healthcare is left with no choice but to pursue the litigation henceforth.

Kaiser's behavior not only threatens the ability of Prime Healthcare to meet its mission of turning around financially struggling community hospitals but also threatens community hospitals throughout the State of California. Prime Healthcare believes that many other community hospitals are similarly concerned with this dilemma as to how to deal with this proverbial 800-pound gorilla that endangers their survival. Prime Healthcare cannot sit idly by while the future of community hospitals is put at risk by HMOs like Kaiser. Therefore, Prime Healthcare encourages other providers, both physicians and hospitals, to join Prime Healthcare in its efforts to force Kaiser to pay fair and reasonable reimbursement. Unless all hospitals, physicians and other providers join together to fight Kaiser's aggressive, unreasonable, and intractable approach to claims processing and reimbursement, Kaiser's sheer size may allow it to obtain an unfair advantage and continue its improper behavior.

For further information about Prime Healthcare Services, please contact Jana Retes at (760) 241-8222. For further information about the lawsuits filed by Prime Healthcare Services, please contact Michael J. Sarrao, Prime Healthcare's General Counsel, or Radha A. Savitala, Prime Healthcare's Assistant General Counsel, at (909) 464-8896.

SOURCE Prime Healthcare Services
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