A Los Angeles hospital and its owners agreed to pay $42 million to settle a whistleblower’s False Claims Act lawsuit alleging they engaged in illegal kickback schemes and other improper financial arrangements that violated the Anti-Kickback Statute, the Stark Law, and the False Claims Act.
After investigating whistleblower Paul Chan’s claims about allegedly unlawful practices at Pacific Alliance Medical Center, the U.S. Department of Justice opted to back the lawsuit. Mr. Chan filed the suit in 2013 after having been employed by the acute-care hospital in a management position for about 10 weeks.
It wasn’t long after starting work at Pacific Alliance Medical Center that Mr. Chan noticed the hospital was providing kickbacks to physicians in exchange for their referrals of Medicare and Medicaid patients.
According to the whistleblower lawsuit, the kickbacks were disguised as above-market rates to rent office space in physicians’ offices and marketing arrangements in which the hospital paid physicians thousands of dollars every month to promote their practices.
“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 Pacific Alliance Medical Center hospital, all of which amounted to illegal kickbacks and were in violation of federal and California law,” the lawsuit asserted, according to the Whistleblower News Review.
Hospitals and other health care facilities are in violation of submitting false claims to the government when they bill Medicare, Medicaid, and other taxpayer-funded programs for services rendered by medical professionals with whom there is an improper financial relationship.
“This is another example of how the False Claims Act whistleblower provisions can help protect the public,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “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.”
Of the $42 million settlement, the U.S. government will get $31.9 million and the state of California will receive a $10 million recovery to its Medicaid program, MediCal.
Mr. Chan will receive a $9.2 million whistleblower award out of total settlement amount for his role in helping the U.S. and California recover healthcare funds.