Troubling Questions, Including New Allegations of Fraud, Should Be Grounds to Halt the Sale, Workers Say

[7-7-20] LOS ANGELES – A union of healthcare workers has filed a formal objection with the California attorney general to the sale of St. Francis Medical Center in Lynwood to Prime Healthcare, a corporation with a history of allegations involving Medicare fraud, bilking taxpayers, and misdiagnosing patients in a scheme to jack up their reimbursements and profits.

In written opposition submitted to the attorney general of California, whose office must approve the sale, Service Employees International Union – United Healthcare Workers West (SEIU-UHW) calls for a rejection of Prime’s acquisition of St. Francis, saying the sale is “not in the public interest” and likely to have a “negative impact on the availability and accessibility of healthcare in the community.” The filing calls on Verity Health System, the current owner of St. Francis, to find a new purchaser that will better serve the community.

“Prime’s shocking history of deceit, fraud and repeated elimination of health services that patients depend on is simply out of step with owning a hospital like St. Francis, which is a lifeline to the people of Lynwood and surrounding communities,” said Mauricio Medina, a certified nursing assistant at St. Francis and a member of SEIU-UHW. “My co-workers and I have endured multiple sales of our hospital and the dangers of treating patients with COVID-19, too often without the proper protective equipment. After all of that, it’s outrageous to think that our hospital will now be sold to a corporation with such a checkered past.”

The filing raises new issues beyond Prime Healthcare’s $65 million settlement in 2018 with the U.S. Department of Justice based on allegations of Medicare fraud.

As part of its settlement in 2018, Prime entered into a Corporate Integrity Agreement (“CIA”), a document outlining the obligations that a company involved in healthcare makes with a federal government agency or a state government as part of a civil settlement. But recent activities raise troubling questions about whether Prime is in violation of the CIA:

• The union’s filing with the attorney general reveals an arbitration in which Prime’s current chief medical officer, a certifying official under the CIA, was found liable for $1 million in punitive damages, plus compensatory damages, for claims of embezzlement and breach of fiduciary duty, including claims that he fraudulently diverted or attempted to divert Medicare reimbursements to his personal accounts. The arbitration award was confirmed in a judgment by the Los Angeles Superior Court.
• Among other legal proceedings, a whistleblower suit is pending in the Central District of California under the federal False Claims Act and other federal and state laws, where the court recently denied a motion to dismiss the case. The suit claims Prime illegally compensated a co-defendant doctor for referrals to a Prime-owned hospital, and that Prime has submitted inflated claims for medical devices to private insurers and government health programs. The case is set for trial in 2021.
• Prime also has disclosed that the company is currently under investigation by the IRS for the 2012 tax year and by the California Franchise Tax Board for the years 2009 to 2016. The disclosures were made in the company’s 2018 audited financial statements.

An analysis by SEIU-UHW further shows that Prime has a history of cutting services at hospitals it acquires, including maternity and cancer services.

“We cannot trust Prime. They turned their backs on this community just a few years ago because they would not go along with a requirement to retain all of the services our patients need,” Medina said, referring to 2015, when the attorney general approved Prime’s proposed acquisition of the Daughters of Charity Health System, which then included St. Francis Medical Center. Prime walked away, declaring that the attorney general’s conditions, which were designed to ensure the continuation of essential healthcare services, were too “onerous.”

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SEIU-United Healthcare Workers West (SEIU-UHW) is one of the largest unions of hospital workers in the United States, with 97,000 members, including approximately 1,000 at St. Francis. Learn more at www.seiu-uhw.org.

St. Francis Medical Center is a 384-bed general acute care hospital serving 1.7 million people.  It is a critically important provider of health and trauma care to the community of Southeast Los Angeles and a key safety-net provider. SFMC treats a substantially higher number of patients covered by Medi-Cal relative to hospitals in both Los Angeles County and California overall.  SFMC has reported positive net income for the past four fiscal years, ranging from $70.4 million in FY 2015 to $18.7 million in FY 2019.