Pacific Health Corp., subsidiaries pay $16.5 million to settle skid-row patient recruiter kickback allegations

by Ben Vernia | August 25th, 2012

On August 24, the Department of the Justice announced that California-based Pacific Health Corporation and several related entities had agreed to settle allegations that the company’s Los Angeles-area hospitals paid patient recruiters to solicit patients in LA’s skid row area. According to DOJ’s press release:

The United States has entered into a settlement agreement with Pacific Health Corporation (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 today. 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 (homeless beneficiaries) by ambulance from the “Skid Row” area in Los Angeles to the hospitals for treatment that often was medically unnecessary.

The hospitals, Los Angeles Metropolitan Medical Center (LA Metro); Newport Specialty Hospital, formerly known as Tustin Hospital and Medical Center; and Anaheim General Hospital, then allegedly billed Medicare and Medi-Cal for these services, violating rules that permit payment only for necessary treatment. The governments contended that these services were induced by illegal remuneration in violation of the Anti-Kickback statute (AKS), and the resulting billings to Medicare and Medi-Cal violated the False Claims Act.

Also as part of the resolution of this matter, a subsidiary of PHC, Los Angeles Doctors Hospital Inc., 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 Inspector General for the U.S. Department of Health and Human Services intended to deter future misconduct. PHC’s parent corporation, Health Investment Corporation, 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 Inc., 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 Mr. Bourseau and Dr. Sabaratnam, who were sentenced to three years and one month, and two years in prison, respectively, for their part in the scheme.

Prohibitions against illegal kickbacks are important to insure that financial motives do not undermine the integrity of the medical judgment of physicians and other health care workers.

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