Pacific Health Corporation has agreed to pay $16.5 million to resolve allegations that its hospitals recruited homeless patients and provided them with unnecessary health care services in an effort to defraud Medicare and Medi-Cal, according to court documents filed last week, the Los Angeles Times reports (Zavis, Los Angeles Times, 8/24).
Medi-Cal is California's Medicaid program.
Details of Kickback Scheme
The civil settlement comes in response to federal and state investigations into the actions of three PHC hospitals:
- Anaheim General Hospital.
- Los Angeles Metropolitan Medical Center; and
- Newport Specialty Hospital.
According to the Department of Justice, the hospitals paid recruiters to bring via ambulances Medicare and Medi-Cal beneficiaries from Los Angeles' "Skid Row" area by ambulance to hospitals, where they received unnecessary services in violation of rules that permit payments only for necessary services (DOJ release, 8/24).
In agreements filed with the U.S. District Court, PHC admitted that the chain and the three hospitals paid more than $2.3 million to the "marketers" from 2003 to 2008.
"As a result of this illegal conduct, Medicare and [Medi-Cal] made nearly $16 million in improper payments to the PHC hospitals," the U.S. attorney for central California said.
Settlement Details
PHC and Health Investment Corporation, its parent company, paid the first installment of the $16.5 million fine last week, according to Assistant U.S. Attorney Wendy Weiss (Watkins, CNN, 8/24).
Although PHC was charged for its role in the scheme, it entered into a deferred prosecution agreement in which the changes will be dropped after six years if the hospital system meets its terms (Carlson, Modern Healthcare, 8/24).
Meanwhile, DOJ says that the three hospitals and PHC's Bellflower Medical Center entered into a corporate integrity agreement with HHS Inspector General to prevent future misconduct (DOJ release, 8/24).
The chain and its hospitals did not admit liability for its participation in the scheme (Modern Healthcare, 8/24). However, Los Angeles Doctors Hospital, a PHC subsidiary, did agree to plead guilty to a federal conspiracy charge in the kickback scheme, according to DOJ (DOJ release, 8/24).
PHC Response
In a statement, a spokesperson for PHC said the hospital chain is "pleased that we will now be able to put these matters behind us and focus exclusively on our primary mission -- providing excellent and compassionate care to the communities we serve."
The statement added, "We believe that ultimately our hospitals will be stronger as result of this agreement. PHC's new leadership team affirms its unwavering commitment to ethical business practice and full compliance with the law" (Modern Healthcare, 8/24).