Pacific Health, related entities agree to $16.5 million for kickbacks

The United States has entered into a settlement agreement with Pacific Health Corp. (PHC) and related entities in which they agreed to pay the government and the state of California $16.5 million for allegedly engaging in an illegal kickback scheme in Los Angeles, the Justice Department announced recently.

The civil settlement resolves a U.S. and state investigation of three PHC-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 Justice Department.

The hospitals are Los Angeles Metropolitan Medical Center (LA Metro); Newport Specialty Hospital, formerly known as Tustin Hospital and Medical Center; and Anaheim General Hospital. They allegedly billed Medicare and Medi-Cal for these services to the homeless, violating rules that permit payment only for necessary treatment, said Stuart Delery, the acting assistant attorney general in charge of the Justice Department’s Civil Division, in announcing the settlement.

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.

Also as part of the resolution of the same matter, a subsidiary of PHC, Los Angeles Doctors Hospital, has agreed to plead guilty to a federal conspiracy charge arising out of the illegal kickback scheme. In addition, the three hospitals, a fourth related hospital (Bellflower Medical Center), and their related entities have entered into a corporate integrity agreement with the Office of Inspector General for the Department of Health and Human Services intended to deter future misconduct. PHC’s parent corporation, Health Investment Corp., also is a party to the civil settlement and the corporate integrity agreement.

This settlement arises out of the same investigation which in 2010 resulted in consent judgments against Intercare Health Systems, formerly doing business as City of Angels Medical Center, and its former owners Robert Bourseau and Rudra Sabaratnam for a similar illegal kickback scheme in Los Angeles. Several individuals have pleaded guilty in connection with the scheme, including two who were sentenced to three years and one month, and two years in prison, respectively, for their part in the scheme.