Hospital Pays $42 Million to Settle Kickback Allegations

A whistleblower lawsuit alleged that the hospital submitted Medicare and MediCal claims for services provided to patients referred by physicians with whom the facility had improper financial relationships.

This article is excerpted from a story originally published on the Credentialing Resource Center, August 28, 2017.

To settle allegations brought forward in a whistleblower lawsuit, the owners and operators of Pacific Alliance Medical Center (PAMC) in Los Angeles will pay $42 million. PAMC Ltd. and Pacific Alliance Medical Center Inc. allegedly violated the False Claims Act by submitting claims to Medicare and to MediCal, California’s Medicaid program, for services provided at the hospital to patients referred by physicians with whom the facility had improper financial relationships.

According to the U.S. Department of Justice, the lawsuit alleged that PAMC violated the anti-kickback statute and the Stark Law, which put restrictions on financial relationships between hospitals and physicians who refer patients to them. The relationships PAMC had with the referring physicians included “arrangements under which the defendants allegedly paid above-market rates to rent office space in physicians’ offices, and … marketing arrangements that allegedly provided undue benefit to physicians’ practices.”

The lawsuit was filed by Paul Chan, a PAMC manager, under a provision of the False Claims Act that allows private citizens to bring suit on behalf of the United States. Of the total $42 million settlement, about $32 million will be paid to the federal government. Chan will receive $9.2 million of the federal government’s share. The remaining $10 million will be paid to the state of California.