Care and Coding at Prime Healthcare Services - SEIU-UHW ...

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Care and Coding at
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Analysis by SEIU-UHW
January 2011
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SEIU-UHW’s October, 2010 analysis of newly-available 2009 Medicare bills filed by Prime Healthcare
demonstrates that Prime billed the public for serious medical conditions at startling rates. These findings
come on the heels of uniquely high rates of septicemia billed by Prime to the public in 2008. In addition to
septicemia, the report highlights extreme rates of malnutrition billed by Prime hospitals.
Coding and Care at Prime: 2009
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 Primeoperated
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.
Contents
• SEIU-UHW
• Septicemia Rates, 2009 Update
• Medicare Reimbursement, 2009 Update
• Dubious Distinction, 2009 Update
• Major Complications and Comorbidities at Prime, Background
• Malnutrition at Prime Hospitals, 2009
• Recap
• Conclusion
1

SEIU-UHW
SEIU United Healthcare Workers-West (SEIU-UHW) is the largest healthcare union in the western U.S. with
more than 150,000 members. SEIU-UHW is part of the 2.2 million-member Service Employees International
Union (SEIU).
The opening pledge in the SEIU Mission Statement of the SEIU Constitution and Bylaws states a broad
vision and goal for our Union:
“We are the Service Employees International Union, an organization of more
than 1 million members united by the belief in the dignity and worth of
workers and the services they provide and dedicated to improving the lives of
workers and their families and creating a more just and humane society.”
SEIU is engaged in a labor dispute with Prime. Not surprisingly, we often find that the same corporate
employers who fail to treat their employees with dignity, respect and fairness are also failing to be
responsible corporate citizens in other areas. As one of the largest progressive advocacy groups in North
America, SEIU believes it is important to call attention to these other areas where corporations have been
poor corporate citizens – such as the environment, industry regulation, shareholder accountability, patient
care standards, tax compliance, global standards, anti-corruption and anti-fraud issues – for two reasons.
First, workers and their communities often suffer as a consequence of irresponsible and unethical
corporate behavior in these areas. Second, poor treatment of workers is generally a symptom of a larger
problem of a misguided corporate culture. It is extremely difficult to change irresponsible labor policies in
isolation from a larger reform of corporate practices. Building alliances with other reform-minded groups
on a domestic and global scale promotes the ability to achieve reform of corporate labor policies.
In conducting a corporate accountability campaign, we work alone and with community allies and
governmental agencies to responsibly investigate and expose to public view inappropriate corporate
conduct of whatever type and thus positively impact a broad range of CSR issues 1 . As a union with
resources and commitment to building a more just and humane society, we believe our CSR campaigns
carry out an important role by influencing companies to become more responsible corporate citizens.
When that happens, workers are empowered to play a vital role in not only improving their own working
conditions, but also addressing broader community concerns.
2
1
“The term ‘corporate social responsibility’ or CSR has been coined to define how companies behave
in social, environmental and ethical contexts. Corporate social responsibility is about integrating the
issues of the workplace, the community and the marketplace into core business strategies. Driving
this emerging field are customers who choose products with a good reputation, investors who put
money into a company with an exemplary record and firms which invest in the future or training
of their employees and gain loyalty and commitment in return.” (from the Yale University School of
Management website, 2006)

SEIU-UHW represents hundreds of caregivers at four of Prime’s 14 hospitals. Prime’s anti-worker and antilabor
policies have produced a terrible record of callous treatment of workers’ rights and community
needs. Labor disputes have arisen at Prime facilities at Garden Grove, Shasta Regional, and Centinela
Medical Center, among others. The Union has proceeded to interest arbitration, to district court, and to
bankruptcy court battling Prime and its tactics. The Union has also filed numerous Unfair Labor Practice
charges with the National Labor Relations Board regarding Prime’s activities. At Prime hospitals, the
company has cut the workforce, reduced wages and benefits, and attacked worker protections that were
once guaranteed by collective bargaining agreements.
In this report, as always, SEIU-UHW stands up for fair treatment of California hospital workers, and integrity
in dealing with patients, caregivers and the public.
Septicemia Rates, 2009 Update
These findings are presented as an update to the 2008 data, and follow the same methodology discussed
in our recent report, “Septicemia at Prime Hospitals”. Key findings are comparable:
Federal Fiscal Year 2008 Federal Fiscal Year 2009
q 7 of the 12 hospitals with the highest
q 5 of 6 hospitals with the highest
septicemia rates in the U.S. operated by
septicemia rates in the U.S. were
Prime
operated by Prime
q 11 of 12 Prime hospitals with the
highest septicemia rates were in the
top 5%, nationally
q Prime’s septicemia rate was 70%
higher than the second-highest
comparable health system
q 11 of 13 Prime hospitals with the highest
septicemia rates were in the top 5%,
nationally
q Prime’s septicemia rate was 50% higher
than the second-highest comparable
health system, and 5 standard deviations
above the mean
3

Prime’s Shasta Regional Medical Center (SRMC), acquired by Prime around November 1, 2008, provides a
remarkable before-and-after picture: the septicemia rate doubled when Prime took over.
4

Septicemia rates at all 13 Prime hospitals in 2009, listed below, indicate that septicemia rates remain at
extremely high levels. Only one Prime hospital, Centinela, falls below the 90th percentile; following Prime’s
takeover, Shasta leapt into the top 4%.
5

Medicare Reimbursement, 2009 Update
In our analysis of 2008 billing data, SEIU-UHW estimated potential excess Medicare reimbursement to
Prime at $18 million. Using the same methodology, the potential excess reimbursement in 2009 was over
$28 million, bringing the two-year total to $46 million.
As discussed below, startling rates of serious medical complications in addition to septicemia - including
severe malnutrition - contribute to the high severity levels billed by Prime. The average severity level
among Medicare patients treated at Prime was 4 standard deviations above the mean. The second-highest
severity level among all comparable U.S. health systems was just over 2 standard deviations above the
mean. In other words, for general medical care, Prime was the best-paid hospital system in the United
States by an extraordinary margin. These results are shown graphically in the figure below.
6

As in the 2008 analysis, to obtain an apples-to-apples comparison we removed centers of care that are
not comparable between hospitals; the result includes Medicare patients 65 and older admitted to a
short term acute care hospital and treated for a medical (i.e., non-surgical) DRG in a non-specialty Major
Diagnostic Category (e.g.: HIV, cancer, burns, major trauma). By “comparable” health system, we mean
all 94 health systems that had at least 10,000 qualifying fee-for-service Medicare stays in federal fiscal year
2009. Prime had 18,576 qualifying stays.
7

Dubious Distinction, 2009 Update
How extreme rates lead to false quality scores
Prime has won numerous awards for its quality of care, awards it recently touted when confronted with
the high rates of septicemia reported by SEIU-UHW. See, for example, the health system’s October 12,
2010, press release, “Prime Healthcare Responds to Union’s (SEIU) Smear Campaign”. 2 The first Prime
response is:
By all objective measures, Prime Healthcare hospitals provide excellent patient care. Prime Healthcare was the only
for-profit health system to be recognized as a Top 10 Health System in the Nation by Thomson Reuters and several of
its hospitals, including Desert Valley Hospital, West Anaheim Medical Center, and Montclair Hospital Medical Center,
have been ranked among the Top 100 Hospitals in the Nation by Thomson Reuters. Thomson Reuters has concluded
that if all Medicare beneficiaries received care like they do at Thomson Reuters’ Top 10 Health Systems and Top 100
Hospitals (like Prime Healthcare hospitals), more than 47,000 patients would survive each year and nearly 92,000 patient
complications would be avoided annually. At the same time, Chino Valley Medical Center, Centinela Hospital Medical
Center, Desert Valley Hospital, and Garden Grove Hospital & Medical Center received HealthGrades 2010 Emergency
Medicine Excellence Award which places these hospitals among the Top 5% of all hospitals for outstanding emergency
medicine services, and 10 of Prime Healthcare’s hospitals received 5 out of 5 stars in HealthGrades 2010 Quality Report
for Sepsis.
Our previous report, “Septicemia at Prime Hospitals,” discusses how inaccurate reporting of high patient
acuity leads to inflated quality scores. The easy explanation is simply that you don’t die if you
aren’t really sick.
For example, if a hospital systematically reports that patients have life-threatening septicemia, but the
patients actually have urinary tract infections or other relatively minor conditions, two things happen: (1)
the patients have a remarkably good survival rate; and (2) many patients get out of the hospital quicker
than is typical of patients who really do have a life-threatening condition.
On the other hand, if the patients actually have the serious conditions reported by the hospital, and
the same two outcomes are seen, that really would indicate high quality care. How can we distinguish
between the possibilities The question has dramatic implications for Prime’s patients:
If the high severity levels billed by Prime are accurate, Prime has remarkably short stays and
low mortality rates. In that case, analysts relying on Prime’s Medicare bills have the answer right, and
Prime’s awards would be deserved.
On the other hand, if the severe diagnoses billed by Prime are inaccurate, as shown
below, Prime has an unusually high rate of short stays, paired with a typical, overall mortality rate of 4.3%.
Insofar as Prime’s high rate of short stays is more likely to reflect a low acuity case mix, Prime’s industryaverage
mortality rate would provide poor evidence of high-quality care.
8
2
http://www.prnewswire.com/news-releases/prime-healthcare-responds-to-unions-seiu-smear-campaign-104808464.html.
Accessed October 13, 2010.

To help understand what is really happening at Prime hospitals, (1) we look at Prime’s mortality rates for
septicemia and compare it to Prime’s overall mortality rate, and (2) we look at the number of very short
inpatient hospital stays at Prime hospitals, and compare it with the average acuity level Prime reported.
Survival rates: Septicemia versus Overall
Survival rates among septicemia patients at Prime hospitals were extremely high in 2009, but the overall
mortality rates were typical. The overall rates employ our apples-to-apples medical, non-specialty patient
cohort, but otherwise treat all patients equally – in case the diagnostic information provided by Prime
cannot be believed.
9

Short Stays versus Patient Acuity
Among the same large cohort of comparable patients 3 , Prime had one of the highest rates of very short
inpatient stays among all U.S. health systems. The figure below contrasts Prime’s high rate of one and twoday
hospital stays with the uniquely high severity level it billed Medicare for the same patients.
Interpreting the Results
There is a stark contrast between Prime’s excellent mortality rates for the reported conditions and
the unimpressive overall mortality rates at Prime. There is also a hard-to-swallow contrast between the
extraordinary acuity levels reported by Prime when compared with its high rate of very short stays.
This information, compounded with improbably high levels of severe conditions and complications
reported by Prime, strongly underscore the possibility that serious conditions are often overbilled by Prime.
If that proves to be true, Health Grades and Top 100 hospitals have been hoodwinked by the very same
severe diagnoses that win Prime the most favorable Medicare reimbursement in the U.S.
10
3
The measure excluded patients who died in the hospital, or were transferred to or from another short
term acute care hospital.

Major Complications and Comorbidities at Prime: Background
In addition to high rates of septicemia repeated in 2009, Prime had exceptional rates of additional serious
medical complications in their Medicare bills. Such complications, when reported on Medicare bills, result
in significantly enhanced Medicare reimbursement. These complications fall into two levels, which are
“Complications and Comorbidities” and the more serious “Major Complications and Comorbidities” (MCCs).
A May 2010 letter 4 from MedPAC explains:
Compared with the prior DRGs, the MS-DRGs distinguish very costly cases with major complications or comorbidities.
Many of the 326 base DRGs—types of conditions or procedures—are split into 3 MS-DRGs instead of 2 DRGs under
the old system. In addition, CMS thoroughly revised the lists of secondary diagnoses that qualify as a complication or
comorbidity (CC) or major CC (MCC).
An example
These changes created more patient categories and greater differentiation in the relative weights and payment rates
among cases with and without CCs or MCCs. These changes also created financial incentives and opportunities to
document and code diagnoses more carefully and completely because hospitals would receive higher payments if their
cases with qualifying CCs and MCCs were reported accurately.
One base DRG is “Simple pneumonia & pleurisy”. This DRG is split into three MS-DRGs, with
differing reimbursement.
MS-DRG Description MS-DRG
Weight
Typical Payment:
Weight x
$5,546.20
193 Simple pneumonia & pleurisy w MCC 1.4327 $7,946.04
194 Simple pneumonia & pleurisy w CC 1.0056 $5,577.26
195 Simple pneumonia & pleurisy w/o CC/MCC 0.7316 $4,057.60
In this case, the difference between reporting an MCC versus no CCs amounts to enhanced payment of
$3,888.44 – a nearly 100% boost.
4
Letter is at http://www.medpac.gov/documents/IPPS_2011_MedPAC_Comment.pdf, accessed October
13, 2010. See page 7 for background info on MS-DRGs.
11

This is typical; the reimbursement boost is often greater than 100%. For example, the base DRG,
“Infectious & parasitic diseases w O.R. procedure”:
MS-DRG Description MS-DRG
Weight
Typical Payment:
Weight x
$5,546.20
853 Infectious & parasitic diseases w O.R. procedure w MCC 5.4328 $30,131.40
854 Infectious & parasitic diseases w O.R. procedure w CC 2.9172 $16,179.37
855 Infectious & parasitic diseases w O.R. procedure w/o CC/MCC 1.814 $10,060.81
With thousands of dollars on the line, the incentive to report CCs and MCCs are tremendous.
Medicare’s list of CCs and MCCs are available in tables 6J and 6I, respectively, on the CMS website:
http://www.cms.gov/acuteinpatientpps/ffd/itemdetail.aspitemid=CMS1230673
Malnutrition is a good example of one group of conditions that appear in both of these tables. There
are a number of malnutrition-related diagnosis codes that qualify as CCs, and three that qualify as MCCs:
Kwashiorkor, Nutritional Marasmus, and Other Severe Malnutrition. In our analysis of malnutrition at Prime
we look both at total malnutrition rates, and at severe malnutrition rates. The severe malnutrition rates
reflect malnutrition codes with MCC status, and the total malnutrition rates identify malnourished patients
by both the CC and MCC malnutrition codes.
12

Malnutrition at Prime Hospitals, 2009
Malnutrition rates at Prime-operated hospitals are the highest in the United States. Key findings on
malnourished patients treated at Prime, as reported in the company’s Medicare bills 5 :
• The highest malnutrition rate in the U.S. was seen at Prime’s Huntington Beach Hospital: 36.3%
• 11 Prime hospitals are in the top 4% for highest Total Malnutrition rate, nationally
• All Prime hospitals are in the top 7% for highest Total Malnutrition rate, nationally
• 12 of the 13 fall into the top 4% for highest Severe Malnutrition rate, nationally
• Prime’s Severe Malnutrition rate, at 7.7%, is seven times the national average of 1.1%
All Malnutrition – California Comparisons
• 8 of the 9 hospitals with the highest malnutrition rates in California were operated by Prime
• Prime operated 10 out of the top 40 hospitals with the highest malnutrition rates, nationally
Severe malnutrition – California Comparisons
• 10 of the 11 hospitals with the highest malnutrition rates in California were operated by Prime
• Overall, 28% of all severe malnutrition cases treated in California were treated at Prime hospitals
in 2009, even though Prime saw less than 4% of inpatients in the same period
5
The following analysis can be replicated using the following methodology: all fee-for-service Medicare
inpatients 65 and older are included, provided: (1) they did not die at the hospital; (2) they were not
transferred to or from another short-term acute care hospitals; and (3) they did not leave the hospital
against medical advice. Numerator conditions were identified by the presence of a relevant ICD-9 diagnosis
codes in any position (e.g., 360, 361 or 362 for Severe Malnutrition). The complete list of CCs
and MCCs categorized as malnutrition in AHRQ’s Clinical Classification Software were employed for
the “Total Malnutrition” metric. Data source: 2009 Medicare MedPAR LDS.
13

A complete listing of malnutrition rates at Prime hospitals in 2009 follows:
15

We have been unable to identify an alternative hypothesis to explain the rates of severe malnutrition
among Prime patients, other than inaccurate billing. The dramatic increase in kwashiorkor-afflicted
and other severely malnourished Medicare seniors residing in the propinquity of Redding, California is
particularly difficult to explain.
Recap
Septicemia, malnutrition and other major complications of care at Prime have resulted in the best
Medicare reimbursement in the country. Evidence continues to mount that the diagnoses billed by
Prime, and leading to this highly favorable reimbursement, are being billed inaccurately. If that proves to
be the case, Prime received an estimated excess reimbursement of $46 million or more from Medicare in
2008 and 2009.
Compounding the problem, the very quality awards Prime raises as a defense to the widely-publicized
reports on its extreme septicemia rates appear to stem from those very rates, along with extremely high
rates of other serious complications, including severe malnutrition.
Conclusion
Our 2009 findings underscore SEIU-UHW’s recent request that state officials stop issuing licenses to
Prime Healthcare until all state and federal investigations have concluded. Whatever explains
the numbers presented here — false documentation, extraordinary rates of infections and major
complications, or a combination of factors — caregiver safety, patient safety, and the future of
California healthcare are at stake.
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