Prime Healthcare Services Settles Lawsuit with Department of Managed Health Care

May 26, 2010

Prime Healthcare Services (PHS) recently settled its long standing dispute with the Department of Managed Health Care (DMHC) related to a single instance of alleged "balance billing" as to Kaiser commercial enrollees.  At the time, "balance billing" was not illegal.  PHS' hospitals do not "balance bill," did not and do not report HMO enrollees to credit reporting agencies, and never collected a penny from the alleged "balance billing."  However frivolous the lawsuit, PHS felt it was in the best interest of all involved, including the taxpayers of the State of California, to resolve this matter.  The donations to community clinics provided for in the settlement are part of PHS' long standing commitment to community clinics.  PHS has already donated hundreds of thousands of dollars to community clinics and operates three free clinics in the Inland Empire.  The donation of $600,000 to the community clinics and $600,000 to the Prime Healthcare Services Foundation for the development of community clinics is but a small portion of PHS' planned charitable giving in 2010.  PHS' hospitals provided more than $120 Million in charity care to the uninsured and indigent in 2009 and PHS' founder, Dr. Prem Reddy, has donated hundreds of millions of dollars to charity.

Now that no "balance billing" is the law (which PHS supported so as to keep patients out of the middle of disputes between HMOs and providers), the root cause of balance billing (i.e., unfair payment practices by HMOs) must be addressed.  Unfortunately, the DMHC and its Director, Lucinda Ehnes, have done nothing to address the unfair payment practices of HMOs.  To the contrary, Director Ehnes has used her tenure as Director of the DMHC to create a "safe haven" for HMOs and their unfair business practices.  A culture has developed at the DMHC where HMOs feel protected and free to commit unfair payment practices knowing that the DMHC will take no action.  This leaves the providers on the frontline of healthcare delivery (hospitals and emergency physicians) to fall victim to the HMOs' unfair practices.  In these economic times where the ranks of the uninsured seeking care in emergency departments is ever increasing, the escalating abusive practices of HMOs are putting the already fragile healthcare safety net at risk of failure.  Many hospitals are financially faltering and closing their doors as a result.  The department that is supposed to curb these abusive practices has gone "native" and become the protector of HMOs.  If the DMHC does not take action to address such unfair practices, the healthcare safety net will be threatened.

PHS is the largest for profit hospital system in California and was recently ranked among the Top 10 Health Systems in the Nation by Thomson Reuters for quality patient care.  PHS is the only for profit system to receive this recognition and the only health system west of the Mississippi to be among the Top 10.