In settlement of Anti-Kickback Statute and Stark Law allegations, California hospital pays $42 million

by Ben Vernia | August 24th, 2017

On June 28, the Department of Justice announced that a California hospital had agreed to pay $42 million to settle allegations, originally brought by a whistleblower, that it had entered into financial relationships with referring physicians that violated the Stark Law and Medicare’s Anti-Kickback Statute. According to the government’s press release:

AMC Ltd., and Pacific Alliance Medical Center Inc., which together own and operate Pacific Alliance Medical Center, an acute care hospital located in Los Angeles, California, have agreed to pay $42 million to settle allegations that they violated the False Claims Act by engaging in improper financial relationships with referring physicians, the Justice Department announced today. Of the total settlement amount, $31.9 million will be paid to the Federal Government, and $10 million will be paid to the State of California.

The settlement announced today resolves allegations brought in a whistleblower lawsuit that the defendants submitted false claims to the Medicare and MediCal Programs for services rendered to patients referred by physicians with whom the defendants had improper financial relationships. These relationships took the form of (1) arrangements under which the defendants allegedly paid above-market rates to rent office space in physicians’ offices, and (2) marketing arrangements that allegedly provided undue benefit to physicians’ practices. The lawsuit alleged that these relationships violated the Anti-Kickback Statute and the Stark Law, both of which restrict the financial relationships that hospitals may have with doctors who refer patients to them.

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The Government announced that the whistleblower, a former manager employed by one of the defendants, will receive $9.2 million of the federal government’s $31.9 million share of the settlement (a 28.8% relator’s share).

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