American Hospital Association and California Hospital Association challenge Department of Justice's prosecution of False Claims Act cases against hospitals

(October 27, 2016 – Ontario, CA) - Amicus briefs filed by the American Hospital Association (AHA) and the California Hospital Association (CHA) in the False Claims action involving Prime Healthcare Services, Inc. state the government’s regulation of hospital admissions inappropriately challenges the clinical decisions of physicians and is unjust to patients, hospitals and physicians.

The briefs by the two largest hospital associations in the country call for reform of the federal government’s enforcement of the Medicare regulation determining whether patients require inpatient admission or observation care.

“This case represents the latest in a series of attempts by auditors and government attorneys to retrospectively review medical judgments and clinical predictions that physicians make every day against a necessarily ambiguous standard that the Medicare agency itself has struggled unsuccessfully to refine and clarify,” states the AHA amicus brief.

The AHA and CHA briefs raise considerable doubt as to the validity and veracity of the government’s actions against hospitals on retrospective governmental review of complex medical decisions. The “second guessing” of physicians’ medical judgment by auditors and government entities negatively affects patient care and puts patients at risk, the briefs argue.

The AHA represents more than 5,000 hospitals, health care systems, and other health care organizations. The CHA represents more than 400 hospitals, health systems members and more than 94 percent of the patient beds in California.

As the AHA states in its brief, “The AHA has an interest in Medicare patients—in ensuring that the elderly and infirm among us have access to the benefits to which they are entitled so they receive the care they need. In this context, this case is significant for hospitals, physicians, and patients, beyond the issues of False Claims Act (FCA) jurisprudence.”

In its complaint filed last May, the United States Department of Justice alleged that Medicare patients could have been treated under observation status rather than as inpatients. However, Prime Healthcare stated that physicians, not hospitals, determine medical necessity for admission using their independent medical judgment in the best interests of patients.

Prime Healthcare later filed a motion to dismiss the complaint based on the fact that the government could not define why claims were considered false when decisions were made by treating physicians who believed their patients required admission to the hospital.

“Health care providers, both hospitals and physicians, want to comply with the law and, consistent with the law's requirements, do the best for their patients. But unless the law is clear, it is unjust to subject them to enforcement actions,” states the CHA amicus brief.

Despite the admission decisions of physicians, government regulators retrospectively reviewed medical records to claim that the same care could have been provided under observation status, which is a lower acuity of care at a higher cost to patients.

The AHA and CHA briefs describe this regulation as an overreach of the government’s authority into the practice of medicine which places patients at risk and unfairly targets physicians’ decisions and hospitals. This is an issue faced by all hospitals across the country and Prime Healthcare is just one of many health systems that have been subjected to this overreaching governmental regulation of the practice of medicine.

According to the CHA brief, “This difficult situation is compounded when medical professionals, exercising sound and reasonable clinical judgment, are second-guessed long after the fact by auditors and enforcement agencies.”

CHA’s amicus brief further states, “… there are harmful consequences to patients when health care providers are subjected to enforcement actions in circumstances where regulatory standards are unclear and even conflicting. When faced with conflicting and unclear standards, violation of which can result in the destruction of their reputations and business, in addition to severe penalties and enormous defense costs, it stands to reason that health care providers of necessity will, in many cases, be forced to abandon their best professional clinical judgment in favor of the path of least resistance that protects them from such risk. This is not in the patient's best interests.”

Furthermore, the CHA and AHA briefs argue that the government’s approach is at odds with the Medicare program’s insistence that it does not regulate the practice of medicine. It also adversely impacts Medicare beneficiaries who are not provided the inpatient care that they need and are forced to pay much more for that care when incorrectly placed on observation.

The United States District Court is expected to rule on this motion within the next 30 days.

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About Prime Healthcare: Prime Healthcare is an award-winning national hospital system with 43 acute-care hospitals providing nearly 43,000 jobs in 14 states. Eleven of the hospitals are members of the Prime Healthcare Foundation, a 501(c)3 public charity. Based in California and one of the largest hospital systems in the country, Prime Healthcare is committed to ensuring access to quality healthcare. Prime Healthcare and its hospitals have been recognized as among the “100 Top Hospitals” in the nation 36 times and among the “15 Top Health Systems” three times, and Prime is the only "10 Top Health System" west of the Mississippi. Prime Healthcare hospitals are annually recognized as “Top Performers on Key Quality Measures” by The Joint Commission. For more information, please visit

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