Los Angeles Hospital Pays $42 Million to Settle Qui Tam Suit

daan-stevens-282446-copy-300x191The U.S. Department of Justice announced on June 28 that PAMC Ltd. and Pacific Alliance Medical Center Inc. have agreed to pay $42 million to settle allegations that they violated provisions of the False Claims Act. The two companies, which operate together as Pacific Alliance Medical Center in Los Angeles, allegedly had unlawful financial relationships with doctors.

Qui Tam Suit Against Pacific Alliance Medical Center

The qui tam lawsuit against the defendants was filed by Paul Chan, who was a manager with one of the defendant businesses. A qui tam suit is a civil lawsuit brought by a private citizen on behalf of the government. The private citizen, known as the relator during the suit, provides information regarding the claims that is not available to the public. If the government receives a settlement or jury award in relation to the relator’s allegations, then he receives part of the monetary recovery. In this case, Chan is set to receive more than $9.2 million.

The Allegations

Chan alleged that the defendants violated the federal False Claims Act by submitting false claims to Medicare and Medi-Cal, the state’s Medicaid program. He stated the defendants would submit invoices to these programs for services provided to patients by physicians the defendants had improper financial relationships with. In general, the hospital and physicians had a system set up that they both improperly financially benefitted from. More specifically, these improper relationships consisted of:

  • The defendants allegedly paying above-market rates to rent office space in the physicians’ offices
  • The defendants allegedly creating marketing arrangements that provided undue benefit to the physicians’ practices.

These arrangements sent more patients to the physicians’ practices, increasing their revenue. In turn, this turn enabled the physicians to recommend more patients to the defendant’s facility. This cyclical relationship allowed both groups to improperly profit in violation of the law. Chan alleged these improper arrangements violated the anti-kickback laws and the Stark Law, which limit the financial relationships hospitals can have with doctors who refer patients to them.

“Federal law prohibits improper financial relationships between hospitals that receive federal health care funds and medical professionals – this is to protect the doctor-patient relationship and to ensure the quality of care provided,” stated Acting U.S. Attorney Sandra R. Brown for the Central District of California. “Patients deserve to know their doctors are making healthcare decisions based solely on medical need and not for any potential financial benefit.”

The Pacific Alliance Medical Center Settlement

The defendants have agreed to compensation the federal government and California $42 million. About $31.9 million goes to the federal government to reimburse it for false claims to Medicare, with a portion of $9.2 million set aside for the relator, Chan. About $10 million will be paid to California for false claims paid to Medi-Cal.

Do You Have Information About False Claims?

If you work for a company within the medical industry and believe you have information of improper financial relationships or false billing, contact our California qui tam lawyers of Brod Law Firm at (800) 427-7020.

(image courtesy of Dean Stevens)