Prime Healthcare Services alleges extortion campaign by SEIU

Prime Healthcare Services (PHS), the largest for-profit hospital system in California and the only for-profit system among Thomson Reuters' Top 10 Health Systems in 2009, announced today that it has been the victim of an extortion campaign by the Service Employees International Union – United Healthcare Workers West (SEIU) over the past year.  According to PHS' officials, SEIU's extortion campaign began approximately 12 months ago when PHS rejected SEIU's demands for a "quick" deal for SEIU members at PHS' Centinela Hospital Medical Center so that SEIU could avoid a challenge from NUHW, an upstart union formed by disgruntled SEIU members.  SEIU initially threatened to expose "dirt" on PHS, disseminate reports based on Medicare data, and claim that these reports showed that Medicare patients were acquiring serious blood infections like septicemia at PHS' hospitals even though SEIU knew that the Medicare data identified conditions present on admission; not hospital acquired conditions.

SEIU stepped up its extortion campaign in February 2010 by having CtW Investment Group (CtW), an investment fund created by SEIU and other unions, make false and misleading statements to Medical Properties Trust (MPT), a publicly traded real estate investment trust which serves as PHS' landlord and/or lender at several of its hospitals.  In a February 2, 2010 letter to MPT's Board of Directors, CtW falsely claimed that PHS' hospitals did not comply with California's earthquake safety laws, had infection control problems, had engaged in Medicare, fraud, and faced potential losses of millions of dollars.  After MPT received CtW's letter, it conducted its own investigation into the allegations and found them to be baseless.  

In April 2010, SEIU included both the SEC and State Senator Denise Ducheney, a long-time supporter of the SEIU, in its extortion campaign against PHS.  In an April 2, 2010 letter to the SEC, CtW repeated its false claims against PHS and urged the SEC to interfere with MPT's planned stock offering.  In an April 16, 2010 letter to MPT, State Senator Ducheney, at the request of SEIU, repeated the false claim that PHS' hospitals were not in compliance with California's earthquake safety laws even though publicly available data demonstrated that the majority of PHS' hospitals are seismically compliant through 2030 and PHS already has OSHPD approved plans to bring all of its hospitals to 2030 standards within the next two years.

In June 2010, SEIU went so far as to threaten to put Dr. Prem Reddy, PHS' Founder and Chairman, and Lex Reddy, MBA, MHA, PHS' CEO, in jail unless PHS accepted SEIU's contract demands at Centinela Hospital Medical Center and agreed to a "neutrality agreement" for PHS' other hospitals which would eliminate employees right to intelligently vote as to whether or not to be represented by the SEIU.  Refusing to be intimidated by such criminal behavior tactics, PHS rejected SEIU's demands and unequivocally told the SEIU that it will not be extorted.  

After its threats of criminal charges did not work, SEIU published a "study" about septicemia rates at PHS hospitals and falsely claimed that the "study" demonstrated that patients were acquiring serious blood infections like septicemia while at PHS' hospitals and/or that PHS was engaging in "upcoding" by improperly assigning a diagnosis of septicemia.  Even though the "study" was based on a number of faulty assumptions and relied on manipulated data, it was used as a basis for federal and state legislators to call for investigations of PHS.  On July 8, 2010, Congressman Henry Waxman and Pete Stark relied upon SEIU's bogus study to request that the Office of Inspector General (OIG) open an investigation into PHS and the allegations set forth in SEIU's bogus "study."  At the same time, State Senator Elaine Alquist and State Assemblyman William Monning relied on SEIU's bogus study to demand that California's Department of Public Health (CDPH) investigate PHS and not issue any new hospital licenses to PHS.  Armed with these letters from Congressmen Waxman and Stark, Senator Alquist, and Assemblyman Monning, SEIU turned to California Watch, a Sacramento based news organization, to publish an article about SEIU's study and the investigations demanded by these elected officials.  On October 11, 2010, California Watch published an article which repeated many of the false and misleading statements found in SEIU's bogus study.  After California Watch's article was released, PHS finally had the opportunity to review SEIU's bogus study and confirmed that SEIU had manipulated data to achieve higher septicemia rates at PHS hospitals, failed to recognize other health systems, including those at which SEIU members work, with similar patient demographics had septicemia rates similar to those at PHS hospitals, and falsely claimed that the Medicare data used to generate the study identified infections acquired at the hospital.  

As a result of California Watch's October 11, 2010 article and requests from the OIG and/or CDPH, two Medicare accreditation agencies, the Healthcare Facilities Accreditation Program (HFAP) and the Joint Commission conducted unannounced surveys at 10 of PHS' hospitals in late November and early December 2010 to investigate the allegations of Medicare fraud and infection control issues raised by SEIU's study.  All of these surveys included a detailed review of randomly selected medical charts by highly qualified surveyors (physicians and nurses) to determine whether the clinical indicators of septicemia were present and resulted in findings that there was no evidence to support the allegations of Medicare fraud.  Likewise, the surveys did not identify any serious infection control problems at PHS' hospitals as claimed by SEIU.  In addition to surveys by HFAP and Joint Commission, several of PHS' hospitals have undergone Patient Safety Licensing Surveys by CDPH in the past 60 days and no material deficiencies were noted in any of these surveys.  Dr. Prem Reddy was especially pleased with the result of these recent surveys as they "reaffirmed PHS' commitment to providing excellent patient care and vindicated the doctors, nurses, and other staff members who work hard each and every day to provide the best possible care to the thousands of patients who arrive at PHS' hospitals every day in need of medical care."    

Frustrated with its inability to force PHS to accept its demands, SEIU has now turned to a "study" about malnutrition rates at PHS hospitals and is encouraging California Watch to publish a story based on the new study.  Like its study on septicemia rates, SEIU's malnutrition study is flawed and relies on the manipulation of data to arrive at desired results.  Since malnutrition leads to increased mortality and morbidity, PHS' hospitals regularly assess the nutritional status of all hospitalized patients, especially elderly patients as several national studies have concluded that malnutrition is prevalent in 60 to 80% of the elderly population that seeks hospital care.  "Unfortunately, SEIU's extortion campaign is interfering with best clinical practices and the independent judgment of well qualified physicians," said Dr. Hassan Alkhouli, a board certified critical care specialist, who practices in several Orange County hospitals.  

PHS will continue to stand up against SEIU and has made a criminal referral to the United States Attorneys' Office regarding SEIU's activities.  At the same time, PHS urges all interested parties to carefully scrutinize SEIU's propaganda and any articles which rely on such propaganda and urges elected officials to investigate SEIU's activities before they have disastrous consequences on the healthcare delivery system.

PHS has acquired financially distress hospitals that were in bankruptcy, near bankruptcy, and/or on the verge of closure and turned them around into well performing community hospitals that provide quality health care to all members of the community and serve a critical role in the healthcare safety net.  Rather than attacking PHS, SEIU and those misinformed politicians should be applauding PHS' efforts to save community hospitals and employing more than 8,000 California workers.