The owners of Los Angeles hospital Pacific Alliance Medical Center will pay $42 million to settle allegations they had "improper financial relationships" with referring physicians, the Justice Department has announced.
PAMC, Ltd. and Pacific Alliance Medical Center Inc. own the hospital. The agreement, which was finalized this week requires the owners to pay $31.9 million to the United States and $10 million to the State of California, the DOJ said.
The settlement resolves allegations made in a "whistleblower" lawsuit that the defendants submitted or caused the submission of false claims to Medicare and MediCal for services to patients who had been referred by physicians "with whom the defendants had improper financial relationships," according to the DOJ. Those relationships included the defendants allegedly paying above-market rates to rent office space in physicians' offices, and marketing arrangements that allegedly provided "undue benefit" to physicians' practices, the DOJ said.
The lawsuit was filed by Paul Chan, who worked as manager by one of the defendants. Per the False Claims Act, citizens who sue on behalf of the United States are entitled to a portion of the recovery. Mr. Chan is slated to receive more than $9.2 million for his share of the recovery, the DOJ said.
"This settlement is a warning to health care companies that think they can boost their profits by entering into improper financial arrangements with referring physicians," said Special Agent in Charge Christian J. Schrank of the Department of Health and Human Services, Office of Inspector General.