After billing Medicare for treating more than 1,100 cases of a rare affliction, a Prime Healthcare Services hospital in Redding abruptly stopped last year, state health records show. The change occurred soon after California Watch published a story about aggressive billing practices at the hospital.

    About six months after it took control of the Shasta Regional Medical Center in Redding in late 2008, Prime began billing Medicare for treating senior citizens it diagnosed with kwashiorkor, a dangerous nutritional disorder usually seen among children during famines in developing countries. At its height, the hospital's billing for the malady surged to nearly 70 times the state average.

    The previous high rates of kwashiorkor diagnoses made the hospital eligible for about $6,000 in Medicare bonus payments for each of the more than 1,100 cases of kwashiorkor it reported over a two-year period, according to federal records. That’s $6.9 million in all.

    Prime said in a statement that its Medicare billings are legal and accurate. It declined to respond to follow-up questions.

    Other hospitals in the Prime Healthcare chain also have geared back on billing Medicare for treating kwashiorkor, according to California Watch’s analysis of data from the Office of Statewide Health Planning and Development, which details Medicare cases at general hospitals in California.

    An expert on Medicare fraud said the sudden drop in kwashiorkor billings strongly suggests they were incorrect to begin with. 

    “Obviously, they felt the heat from the story, and obviously they decided to clean up their act,” said Jamie Bennett, a lawyer at the Maryland firm Ashcraft & Gerel, who investigated Medicare billing fraud during 20 years as a federal prosecutor.

    “Someone told (the hospital) the billings were incorrect and they stopped – it’s the only explanation,” Bennett said.

    In its statement, Prime said the drop in reports of kwashiorkor was the result of "certain changes in Medicare coding guidelines" for documenting malnutrition among elderly patients. As a result, cases that formerly had been classified as kwashiorkor on Medicare billings now are billed as other forms of severe malnutrition, spokesman Edward Barrera wrote. 

    But a Medicare spokeswoman said the agency has not changed its guidelines regarding kwashiorkor. And the billing data for Prime hospitals does not show an increase in other forms of severe malnutrition – only the steep drop in kwashiorkor.

    For example, in 2010, Shasta Regional Medical Center billed Medicare for treating 727 cases of kwashiorkor and 484 cases of other forms of severe malnutrition, the analysis shows. In 2011, it reported 106 cases of kwashiorkor. But the number of billings for other forms of severe malnutrition increased by six, to 490.

    Prime is a chain of 20 hospitals that is based in San Bernardino County. In recent years, Prime hospitals have reported high rates of several unusual conditions that qualify for enhanced Medicare payouts, according to the data.

    Some former Prime employees claim that Dr. Prem Reddy, the chain’s founder, has urged doctors and medical coders to pad computerized bills submitted to Medicare for reimbursement with conditions that qualify for premium payouts.

    Prime insists its billings are accurate, a reflection of its concern for patient care. But in the past two years, three members of Congress have asked Medicare to investigate Prime for a form of suspected billing fraud called upcoding, in which a provider files false claims via computerized billing codes to reap enhanced reimbursement.

    Among the unusual conditions in Prime’s Medicare billings was kwashiorkor. According to the records, the reported outbreak at Shasta Regional Medical Center began and ended abruptly.

    In 2008, the year Prime took over, the hospital reported eight cases of kwashiorkor – a rate of 0.23 percent, slightly higher than the statewide rate of 0.17 percent. In the first six months of 2009, the hospital reported two cases of kwashiorkor, according to a quarterly breakdown of hospital admission reports.

    Kwashiorkor exploded after that: In the final six months of 2009, the hospital reported 301 cases of kwashiorkor. That was 16.7 percent of all the Medicare patients treated there, a rate 66 times the state average.

    The rise in kwashiorkor cases at Shasta came around the time that the American Hospital Association, which advises hospitals on proper use of diagnostic codes, noted in a 2009 advisory that kwashiorkor is "extremely rare in the United States" and should be coded only when a physician specifically documented the condition.

    In 2010, Shasta’s rate was even higher: The hospital claimed 727 seniors suffered from kwashiorkor, 19.4 percent of all the Medicare patients treated. In the first quarter of 2011, Shasta billed Medicare for 100 cases of kwashiorkor.

    California Watch published its first report on the outsized rates in February 2011, quoting experts who questioned whether senior citizens in Northern California actually were suffering from kwashiorkor.

    After that, the reports plummeted: The hospital reported six cases for the rest of the year.

    The trend was similar at other Prime hospitals in California. Nine Prime hospitals that previously had billed Medicare for treating kwashiorkor reported no cases in 2011. Only one reported an increase: Garden Grove Hospital Medical Center in Orange County reported 28 cases in 2010. In 2011, it increased to 58 cases, 3.3 percent of its Medicare patients.

    Bennett, the former fraud prosecutor, said the reported fluctuations in kwashiorkor cases were too extreme to reflect a genuine health care trend.

    “You don’t have 100 cases in one quarter and none in the next,” she said.

    Two medical experts told California Watch that they had similar concerns.

    “I wouldn’t expect the trend to dramatically change,” said Dr. Matthew Butteri, a medical professor at UC Irvine and expert in geriatric medicine. It was “very hard to believe,” he said in a phone interview.

    He said the data likely reflected “a coding phenomenon, rather than a trend in nutrition and disease – a phenomenon of how doctors and health care workers write in the charts and (how) a documentation specialist attempts to label the degree of malnutrition.”

    Elaine Morrato, an epidemiologist and professor at the Colorado School of Public Health, said the timeline made her suspect "a change in diagnostic coding practice."  

    “Without more information, I cannot assess whether the change in coding corrected an intentional (perhaps fraudulent) billing practice or corrected an honest error in diagnosis,” she wrote in an email.

    Christina Jewett contributed to this report.

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