Judge Dismisses Prime Healthcare Antitrust Conspiracy Lawsuit

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A federal judge dismissed a lawsuit filed by hospital chain Prime Healthcare Services that alleged Kaiser Permanente conspired with a health care workers union to drive Prime out of business.

The lawsuit cited the Sherman Antitrust Act, which is meant to limit monopolies, and claimed Kaiser and the union "joined forces" to drive up Prime's costs, in part, by forcing the chain to pay high wages to workers.

Judge Janis L. Sammartino filed an order granting Kaiser’s motion to dismiss Prime’s complaint Aug. 30. The order says the facts stated in Prime's complaint did not support an antitrust lawsuit. 

Sammartino wrote that she “finds that Prime Healthcare has not sufficiently pleaded specific facts suggesting a conspiracy.”

The judge gave Prime 21 days to file a new complaint. Prime spokesman Edward Barrera said Prime plans to do that “to address the issues raised by the court and looks forward to moving this case forward.”

The workers union, the Service Employees International Union United Healthcare Workers West, issued a statement last week from President Dave Regan: “This dismissal confirms that Prime’s lawsuit was simply an attempt to divert attention away from continuing allegations of potential Medicare fraud."

Kaiser declined to comment on the judge’s order.

Prime Healthcare, based in Ontario, Calif., owns 18 hospitals in four states, including 14 in California. The chain has expanded rapidly since its board chairman and chief executive, Dr. Prem Reddy, bought his first hospital in 2001, most recently buying hospitals in Texas, Nevada and Pennsylvania.

A California Watch investigation has shown that Prime has billed for outsized rates of rare and dire medical conditions that Medicare pays a premium to treat. Prime has defended its billing for conditions such as kwashiorkor, a rare form of malnutrition, even as FBI agents have interviewed a former patient and office clerks about the chain's billing practices.

Kaiser accused Prime in a lawsuit filed in 2010 of “illegal upcoding,” or exaggerating the severity of patient illnesses to draw more reimbursement. In the same lawsuit, Kaiser, which has about 6.8 million members in California, also accused Prime of capturing Kaiser patients in its emergency rooms and rendering unneeded care to generate hefty bills.

Prime has disputed the accusations and is fighting the case in Los Angeles County Superior Court.

The SEIU-UHW represents employees at some Prime hospitals and has had wage and layoff disputes with Prime. The union also has sent a researcher to speak at several public hearings about Prime's aggressive billing practices.

In November, Prime sued both the SEIU and Kaiser, alleging that they “share a common objective, to protect their respective business models from the competitive threat presented by Prime in the market.” The suit says the two “joined forces” in an “illegal conspiracy” to engage in unfair or deceptive conduct to eliminate Prime as a competitor.

Prime argued that because of Kaiser and the union, it has had to pay higher-than-competitive wages and has suffered a loss of "actual and potential customers, lost profits, and the loss of business goodwill resulting from the campaign to eliminate Prime from The Market."

In court records filed in response to the lawsuit, Kaiser noted that Prime’s complaint “fails utterly to plead any facts that might plausibly show there was ever any agreement between Kaiser and the SEIU to eliminate Prime from the market.”

Kaiser noted that the only formal agreements it has with the union is on collective bargaining, but that document "says nothing about driving Prime or any competitor out of business."

At the time the case was filed in the Southern District of California, the union called the case “frivolous,” and Kaiser described it as “deeply puzzling.”

View this story on California Watch

This story was produced by California Watch, a part of the nonprofit Center for Investigative Reporting. Learn more at www.californiawatch.org.

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