SEIU United Healthcare Workers - West


Holding Prime Healthcare Accountable

A growing coalition of community leaders and healthcare workers—members of Service Employees International Union-United Healthcare Workers West (SEIU-UHW)—are standing up for quality patient care and shining a light on Prime Healthcare’s business practices and their impact on our communities.

Five of the six hospitals with the highest septicemia rates in the United States were all operated by Prime Healthcare Services, Inc.—out of some 2,900 U.S. hospitals. Prime’s septicemia rates have led the U.S. Department of Health and Human Services and the California Department of Justice to open official investigations into Prime to determine whether the chain’s surge in life threatening septicemia cases is authentic or really a multimillion-dollar Medicare fraud, according to the LA Times.

A startling eight of the nine hospitals with the highest malnutrition rates in California were operated by Prime, and all Prime hospitals were in the top 7% for highest total malnutrition rate nationally in 2009. Particularly noteworthy is the rate at which Prime diagnoses elderly patients with kwashiorkor, a form of severe malnutrition found chiefly among impoverished children during famines in developing nations. The federal Medicare system pays bonuses for treatment of malnutrition and enhanced bonuses for treating kwashiorkor.

Even before these concerns were exposed Prime CEO Prem Reddy had a track record of buying poor hospitals and profiting at the expense of patients, caregivers and communities.

Reddy uses aggressive legal and financial tactics to seize control of hospitals over local objections. It’s not hard to see why communities fight Reddy takeovers of local hospitals. He:

  • cancels contracts with insurers, leaving thousands of patients without a nearby in-network hospital
  • puts patients in the middle of the billing disputes that serve as “the largest example of this egregious practice we’ve seen,” according to the top state regulator
  • cuts services like mental health care, chemotherapy and birthing centers he considers unprofitable; and slashes pay and benefits for workers, often laying off scores of experienced caregivers.

A Primer on One of California’s Largest For-Profit Hospital Chains

Take a look at Prime’s strategy for making money:

Learn more about the surge in septicemia that prompted state, federal investigations

Prime’s Strategy for Making Money

Prime operates 14 hospitals, all in California. The average U.S. hospital barely breaks even, but Prime’s facilities are tremendously profitable. In 2010, Prime made a profit of over $247 million.


From Redding to Riverside, Prime has engaged in aggressive tactics to take over ailing community hospitals, from acquiring hospitals’ debts to gain leverage in bankruptcy proceedings to engaging in backroom negotiations to position itself as a purchaser. Communities are beginning to take note and mount opposition to Prime takeovers. In November 2010, Prime attempted to purchase bankrupt Victor Valley Community Hospital in Victorville. In a San Bernardino Sun op-ed, community leaders wrote, “We believe that concerns about Prime Healthcare’s practices are too serious to allow the company to purchase Victor Valley Community Hospital without scrutiny and under circumstances that have not been put to a public debate.” Prime's bid to take over the hospital was rejected by the board.

Community leaders in the High Desert came together to expose Prime and oppose purchase of their bankrupt hospital in November 2010.
Community leaders in the High Desert came together to expose Prime and oppose purchase of their bankrupt hospital in November 2010.


Insurance companies are required by California law to pay for emergency services, even at out-of-network providers. This law protects patients in an emergency—patients who don’t necessarily have time to get to an in-network provider. Prime strains these well-intentioned California laws by canceling all contracts with providers and demanding top dollar for emergency room services. Once admitted, managed care providers allege that Prime tries to limit transfers of insured patients in order to maximize reimbursement. A side effect of this behavior is that community access to routine hospital care is reduced.


When a patient’s insurance company paid Prime for care patients received, instead of working out disputes about the payment amount with the insurer, the company allegedly went right to the patient to demand payment, according to a lawsuit filed by the California Department of Managed Healthcare (DMHC) in 2008. This practice, known has “balance billing,” has now been unanimously ruled illegal by the state supreme court. According to the DMHC director Cindy Ehnes, Prime Healthcare was one of the worst offenders. The lawsuit was settled May 11, 2010; terms of the settlement required Prime to repay patients who were billed improperly, and to make $1.2 million in charitable donations including $100,000 to six community clinics.


Despite making record profits in these hard economic times, Prime has proposed in collective bargaining with SEIUUHW, its largest healthcare workers’ union, massive wage cuts for new hires at its Centinela Hospital in Inglewood – starting new CNAs at poverty wages of $8.50 an hour. The company wants to increase the cost of family healthcare from free to as much as $6,600 per year, forcing employees to drop family members from healthcare because they cannot afford it. Prime also wants to eviscerate the committee that enables caregivers to advocate effectively for quality patient care.

Hundreds of workers were laid off when Prime took over Centinela Hospital in 2007. And within 24 hours of Prime’s official takeover of Shasta Regional Medical Center in 2008, over 150 workers were fired without notice. Prime denies responsibility to this day, saying the layoffs happened in the hours before Prime took over.

Healthcare workers at Centinela and other hospitals bought by Prime are speaking out for quality care and jobs.


In October 2010, the Los Angeles Times, California Watch, and numerous local media outlets revealed that federal and state authorities are investigating whether a surge in septicemia throughout Prime’s hospitals represents a serious health problem or potential multi-million dollar Medicare fraud. Septicemia is a life-threatening blood infection.

Investigations were spurred by an exhaustive SEIU-UHW analysis of 2008 Medicare billing records for 2,900 U.S. hospitals showing that Prime-operated hospitals have the highest rates of septicemia in the nation.

These elevated rates translate to higher reimbursements for Prime from the federal Medicare program. Federal investigators are pursuing whether there’s a serious public health risk at Prime hospitals or whether the company is committing fraud against our Medicare program, reaping potential overpayments of $46 million in 2008 and 2009.

Alarmed by SEIU-UHW’s initial findings on septicemia rates, U.S. Congress members from California, Pete Stark and Henry Waxman, plus California State Senator Elaine Alquist and Assemblymember Bill Monning, respective chairs of the state’s Senate and Assembly Health Committees, requested investigations into Prime’s practices.

Two possible explanations for Prime’s extraordinarily high septicemia rates are offered by the SEIU-UHW report. One is a system-wide pattern of up-coding, whereby Prime potentially billed Medicare for more serious conditions than warranted, and received higher reimbursements as a result. The other is that every single Prime hospital actually does suffer from an infections crisis.

“Either possibility is deeply concerning to us,” Congressmen Stark and Waxman wrote.

Alquist, who has authored recent infection-related legislation in California, states in her letter to the California Department of Public Health (DPH) that a timely investigation by the department is crucial as, “Prime is a fast-growing system and continues to pursue new hospitals.”

She further requests that, “Until these investigations are complete ... you withhold approval of any additional facility licenses for Prime or Prime-related facilities.” Assemblymember Monning closed his letter with a similar recommendation to the department, “Until all of these investigations are complete, I join Senator Alquist in asking that you withhold any additional facility licenses for Prime or Prime-related entities.”


In February 2011, California Watch, the San Francisco Chronicle, and numerous other media outlets revealed that malnutrition rates at Prime hospitals are among the highest in the United States, and that inaccurate billing and potential Medicare fraud appear to be the cause.

In 2009, Prime claimed that about 25% of its Medicare patients suffered from some form of malnutrition, triple the state average. Especially alarming is the rate at which Prime diagnoses elderly patients with kwashiorkor, a form of severe malnutrition found chiefly among impoverished children during famines in the developing nations.

In March 2011, California Senate Health Committee Chair Ed Hernandez (D-West Covina) asked the California Department of Public Health to conduct an investigation into Prime’s Medicare claims related to malnutrition. Senator Hernandez also asked Dr. Howard Backer, interim state health director, to delay issuing new operating licenses to Prime until the probe is complete.

Septicemia, malnutrition and other major complications of care at Prime have resulted in the highest Medicare reimbursement in the country. Evidence continues to mount that the diagnoses billed by Prime leading to these highly favorable reimbursements are being billed inaccurately.

For background: State and Federal Government Correspondence on Prime Healthcare

Care & Coding

As in 2008, in 2009, Prime Healthcare’s hospitals had the highest septicemia rates in the United States. At the same time, the rates of other serious complications have soared at Prime hospitals, and this report highlights the extraordinary rates of malnutrition reported by Prime in its Medicare bills.

Prime Healthcare, a system that treated less than 4% of all California’s Medicare inpatients in 2009, billed Medicare for 28% of the severely malnourished patients in the state.

This report highlights our key findings, explains how high septicemia and complication rates at Prime- operated hospitals lead to heightened Medicare reimbursement for Prime, and estimates potential Medicare overpayments at $28 million for the year, bringing the two-year total to $46 million.

Download the Report [PDF] A growing coalition of community leaders and healthcare workers—members of Service Employees International Union-United Healthcare Workers West (SEIU-UHW)—are standing up for quality patient care and shining a light on Prime Healthcare’s business practices and their impact on our communities.

If you are a patient, employee, physician, or community member with a story about Prime, share your story here:


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