WASHINGTON – The Kerlan Jobe Orthopaedic Clinic in Los Angeles has agreed to pay $3 million to settle allegations that it received illegal kickbacks from the HealthSouth Corporation, according to the Justice Department.

According to federal investigators, HealthSouth paid kickbacks to Kerlan Jobe in the form of stock option grants, donations to the Kerlan Jobe Foundation, loan forgiveness on an equipment lease and a disproportionately high ownership interest in a jointly owned ambulatory surgery center. In exchange, investigators said, the sports medicine clinic allegedly referred patients to HealthSouth facilities.

"People are entitled to trust the advice they receive from their healthcare providers," said Tony West, Assistant Attorney General in charge of the Department of Justice’s Civil Division. "When kickbacks are involved, the integrity of that advice is undermined."

As a condition of continued participation in government healthcare programs, Kerlan Jobe is required to enter into a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services to address financial relationships with referral recipients.

In a December 2007 settlement, HealthSouth paid approximately $14.7 million to resolve liability for improper financial relationships with Kerlan Jobe and an Alabama sports medicine clinic.

"Lining the pockets of physicians corrupts clinical judgment and will not be tolerated," said George Cardona, Acting U.S. Attorney for the Central District of California. "This settlement serves as a reminder that federal healthcare program beneficiaries’ referrals should be based on quality of care for the patient, not the financial benefit for any physician or healthcare company."