In a case quite similar to a case we settled, the Pacific Alliance Medical Center, a hospital in Los Angeles, has agreed to settle allegations that it paid illegal kickbacks to doctors and submitted false claims to Medicare and Medicaid. The hospital has agreed to pay $31.9 million to the federal government, which includes $9.2 million for a former manager who blew the whistle. The company will also pay $10 million to the state of California.
The hospital disguised the kickbacks it was paying to doctors by subleasing space from them at above-market rates. The hospital and the company that operates it also set up a shared marketing agreement with physicians, paying them thousands of dollars a month in referral fees.
“These payment agreements included sublease contracts and marketing assistance contracts that greatly exceeded fair market value and were specifically contingent upon the volume of referring providers’ admissions” to the hospital, the complaint reads. That means they amounted to illegal kickbacks.
Christian Schrank, a spokesperson for the federal Department of Health and Human Services’ Office of the Inspector General, explained the problem with these improper financial arrangements. They compromise the impartiality of doctors, increase the overall cost of healthcare, and damage the public’s trust in healthcare institutions.
“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,” he added.
In this case, the whistleblower filed under the qui tam provisions of the False Claims Act, which allows citizens to file lawsuits on behalf of the U.S. and, in many cases, state governments. The incentive is that the whistleblower can share in any recovery. Here, the whistleblower pursued the case without intervention by the U.S. and won himself a share amounting to $9.2 million.
“This is another example of how the False Claims Act whistleblower provisions can help protect the public fisc,” said Acting United States Attorney Sandra R. Brown with the Justice Department. “This recovery should help to deter other health care providers from entering into improper financial relationships with physicians that can taint the physicians’ medical judgment, to the detriment of patients and taxpayers.”