Bernsten, who was Alvarado's director of performance improvement, said the hospital was asked not to admit patients for observations, which brings in less reimbursement than listing them as inpatients. The complaint alleged this allowed the hospital to rake in an extra $4 million from Medicare. The suit assumes a similar practice at Prime's other 14 hospitals across the state, the U-T San Diego reported Saturday.
"It defies common sense that Alvarado Hospital has been engaged in a false claims scheme when the entire Prime Healthcare system has been under this type of heightened and aggressive regulatory scrutiny for years," Prime general counsel Troy Schell told the newspaper.
The U.S. Attorney's Office in Los Angeles was investigating and told the judge it's not prepared to join the case yet.
"Our decision not to intervene at this time should not be construed as a statement about the merits of the case," spokesman Thom Mrozek said. "Indeed, the government retains the right to intervene at a later date upon a showing of good cause."
Healthcare consultant Nathan Kaufman said the federal government has cracked down in recent years to make sure hospitals are not overbilling by making patients seem sicker.
"Most hospitals are aggressive, but if you get overly aggressive in these gray areas, then it becomes problematic," Kaufman said.