RI Healthcare System’s Key Player is Under Investigation by DOJ and Bonds Are Downgraded
Tuesday, May 30, 2017
One of the keys to stabilizing Rhode Island’s fragile hospital system is the acquisition by Prime Healthcare Services of Pawtucket-based Memorial Hospital from Care New England (CNE).
Prime, however, is in the midst of growing financial turmoil and is facing a newly announced investigation by the U.S. Department of Justice.
Memorial - Center of CNE Debt
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTMemorial Hospital’s financial collapse is one of the reasons why CNE is piling up debt and recently announced its agreement to be purchased by Massachusetts-based mega healthcare group Partners.
De facto, the sale of Memorial to Prime is critical to the Partners’ acquisition of the remaining assets of CNE, which include Women & Infants, Kent Hospital, and Butler Hospital. Presently, CNE is on pace to lose in excess of $60 million annually and simply run out of cash to operate without an immediate deal.
As GoLocal first reported, financially troubled Care New England signed an agreement in April with Massachusetts-based Partners Healthcare to explore a potential merger.
Founded in 1994 by Brigham and Women's Hospital and Massachusetts General Hospital, Partners HealthCare is a massive collection of services including community and specialty hospitals, a managed care organization, a physician network, community health centers, home care and other health-related entities.
Partners generated nearly $12 billion in revenue in 2014 - it dwarfs all of the healthcare groups in Rhode Island combined, as Lifespan, RI’s largest healthcare group, generates approximately $2 billion a year.
But, the likelihood of Partners purchasing CNE with Memorial is unlikely. In preparation of the Partners and CNE deal, both companies announced major layoffs.
SLIDES: See 7 Implications of the CNE-Partners Merger BELOW
Prime’s Problems Are Getting Worse
New Jersey Business reports that Prime’s financial situation is deteriorating "amid a turbulent financial time for Prime Healthcare Services, including a downgrade in its credit rating from S&P Global Ratings to a B-.”
The implications of Prime’s financial decline not only impacts Memorial and CNE’s future, but also has implication for Woonsocket-based Landmark Hospital. That hospital is not without its own controversy as Prime is seeking to take Landmark from for-profit to not-for-profit status to save about $1.6 million a year in property tax payments to Woonsocket.
Prime’s financial scrambling is taking place across the country. “S&P recently downgraded Prime’s credit rating, calling the company’s management and governance “weak, reflecting a history of disputes with unions representing employees at certain hospitals, as well as the ongoing whistleblower investigation, partially joined by the U.S. Department of Justice, into the company's Medicare billing practices,” wrote New Jersey Business.
“S&P added that there are significant issues regarding internal controls over financial reporting, which has resulted in reporting delays that partially spurred the second recent downgrade.”
More Troubles:
In October of 2016, the Los Angeles Times reported:
In a ruling last week, the National Labor Relations Board ordered Prime Healthcare Services, the owner of several Southern California hospitals, to pay back wages to laboratory technicians, clerks and pharmacists, among other employees.
The chain owes $6.5 million to 500 workers at Encino Hospital Medical Center and Garden Grove Hospital and Medical Center, according to the union representing them, the SEIU-United Healthcare Workers West.
In May of 2016, the U.S. Department of Justice issued a statement about their investigation of Prime:
“The United States has intervened in a lawsuit against Prime Healthcare Services Inc. (Prime); the company’s founder and chief executive officer, Dr. Prem Reddy; and 14 Prime hospitals in California that alleges Emergency Departments at Prime facilities improperly admitted patients to the hospitals and submitted false claims to Medicare, the Justice Department announced today.
The lawsuit alleges that Dr. Reddy directed the corporate practice of pressuring Prime’s Emergency Department physicians and hospital administrators to raise inpatient admission rates, regardless of whether it was medically necessary to admit the patients. The lawsuit alleges that Prime’s corporate officers, at Reddy’s direction, exerted immense pressure on doctors in the Emergency Departments to admit patients who could have been placed in observation, treated as outpatients or discharged. As a result of these medically unnecessary admissions from the Emergency Departments, Prime hospitals allegedly submitted false claims to federal health care programs, such as Medicare.
In January, Modern Healthcare reported:
"A federal judge denied a motion by Prime Healthcare Services to dismiss a whistle-blower lawsuit alleging the hospital chain fraudulently billed Medicare.
U.S. Magistrate Judge Patrick Walsh ordered that the lawsuit, which the U.S. Justice Department joined in May, contains “sufficient facts” to sue Prime under the False Claims Act."
Related Slideshow: 7 Implications and Unintended Consequences of a Care New England and Partners Merger
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