Day Before AG Decides Sale of Daughters Hospitals, Judge Finds Prime Hospital in Contempt of Court

[Feb. 20, 2015] OAKLAND, Calif. – Just one day before Attorney General Kamala Harris decides if it is fit to purchase Daughters of Charity Health Systems, a Superior Court Judge in San Bernardino has found a Prime Healthcare hospital in contempt of court on 14 of 15 counts of needlessly admitting emergency room patients into Prime’s Chino Valley Medical Center in violation of the court’s order to notify the patients’ personal physicians.

Judge Janet M. Frangie found that Prime and Dr. James M. Lally, Chino Valley’s chief medical officer, were “cavalier” in their compliance with the judge’s earlier preliminary injunction prohibiting them from admitting stabilized emergency room patients. She said the defendants “knowingly and willfully” manipulated the language in the preliminary injunction to justify admitting them without contacting the patients’ physicians.

By admitting patients rather than holding them for observation or releasing them to their personal physicians, Prime hospitals can receive significantly higher reimbursement rates and fees from insurers.

Harris is to decide today whether she will reject or approve the sale of Daughters of Charity to Prime.

“This is just one more example to put on the massive pile of evidence that Prime Healthcare is unfit to purchase a hospital system like Daughters of Charity whose mission is to serve the community, especially low-income people,” said Dave Regan, president of SEIU-United Healthcare Workers West (SEIU-UHW). “This example comes just one day before the attorney general makes her determination, and it would not surprise me at all if many more examples tumble out in the days after the decision. This is a company that simply is incapable of playing by any set of rules.”

Inland Pulmonary Medical Group (IPMG) filed the suit against Prime, charging that Lally, on behalf of Chino Valley Medical Center, instructed IPMG doctors to admit patients into the hospital rather than keep them for observation. Hospital reimbursement rates for observation are far less than rates for admitting patients into the hospital.

When IPMG founder Dr. Frank Hsu and the medical group’s other physicians refused to comply with Dr. Lally’s directives, Lally instructed the doctors who staff the emergency room at Chino Valley Medical Center to “freeze out” IPMG from providing any patient care and refrain from making any contact with IPMG despite patients’ needs and IPMG’s contractual obligations to treat the patients, IPMG alleged.

In its complaint, IPMG wrote that Prime’s business model is centered on a “scheme that games California’s managed care system…[and] actively discourage[es] IPMG [physicians] from exercising [their] independent medical judgment with respect to [their] patients.”

Daughters of Charity consists of Seton Medical Center, Daly City; Seton Coastside, Moss Beach; O’Connor Hospital, San Jose; Saint Louise Regional Hospital, Gilroy; St. Vincent Medical Center, Los Angeles; and St. Francis Medical Center, Lynwood.

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