Hospitals to close after allegations of recruiting homeless for unnecessary care

The hospitals involved in a controversy in recent years involving the fraudulent recruiting of indigent patients will close. Hospital owner Pacific Health Corp. (PHC) in Tustin, CA, announced recently that it will close its three remaining Southern California hospitals.

Pacific cited the fallout from a federal fraud case in 2012 in which the company admitted paying to recruit homeless people off Skid Row in Los Angeles and billing the government for unnecessary care. The company’s announcement said the decision to close hospitals stemmed from “the settlement we reached with the Department of Justice last year, as well as other legal matters from our past, which have made it impossible for us to continue operating in this especially challenging economic climate for all healthcare providers.”

The four Pacific hospitals that will have services suspended are Bellflower Medical Center, Los Angeles Metropolitan Medical Center, Newport Specialty Hospital, and Anaheim General Hospital. The closures will cause as many as 1,900 full-time and part-time employees to lose their jobs, according to the company.

State officials fined Pacific Health more than $7 million in March 2013 for not paying employee wages and bouncing payroll checks. In 2012, Pacific entered into a settlement agreement in which they agreed to pay the government and the state of California $16.5 million for engaging in an illegal kickback scheme in Los Angeles.

The civil settlement resolved a U.S. and state investigation of three Pacific Health-affiliated hospitals for engaging in a scheme in which the hospitals paid recruiters to deliver homeless Medicare or Medi-Cal beneficiaries by ambulance from the Skid Row area in Los Angeles to the hospitals for treatment that often was medically unnecessary, according to information from the U.S. Department of Justice. The government contended that these services were induced by illegal remuneration in violation of the anti-kickback statute and the resulting billings to Medicare and Medi-Cal violated the False Claims Act. (For more on that story, see Healthcare Risk Management, October 2012, p. 119.)

As part of that plea agreement, the company said it had paid more than $2.3 million in illegal kickbacks to patient recruiters from 2003 to 2008, and as a result, some of its hospitals received nearly $16 million in improper payments from Medicare and Medi-Cal, the state’s Medicaid program for the poor.