Pacific Alliance Medical Center is a Los Angeles hospital owned and operated by PAMC Ltd. and Pacific Alliance Medical Center Inc. The latter two have agreed to settle allegations that the hospital made false claims to Medicare by conducting improper financial arrangements with referring doctors.

The Justice Department said $31.9 million will go to the U.S. Federal Government and $10 million will go to the State of California.

False Claims to Medicare Case Rewards Whistleblower

Whistleblower Paul Chan, a former manager with the defendants, filed this False Claims Act lawsuit. The False Claims Act enables a private citizen such as Chan to file suit on behalf of the United States government and to collect a share of any money recovered through the action, known as the qui tam provision.

Oftentimes, the U.S. government will join the lawsuit, but in this false claims to Medicare case, the government allowed Chan to pursue the lawsuit. Chan’s portion of the recovery will be $9.2 million.

Despite the substantial settlement amount, the agreement does not make any determination of liability.

Allegations were that the defendants submitted false claims to Medicare and MediCal for services provided to patients who were referrals from doctors who were tied to the defendants through improper financial arrangements.

The false claims to Medicare case says the defendants allegedly paid above-market rental prices for office space inside the doctors’ offices. That allegation, in addition to marketing tactics that weighed heavily in favor of these same doctors, led to charges the relationships were in violation of the Anti-Kickback Statute and the Stark Law that prohibit inappropriate financial relationships between hospitals and referring doctors.

Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division said, “This is another example of how the False Claims Act whistleblower provisions can help protect the public fisc. 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,” such as false claims submitted to Medicare.

To protect the doctor-patient relationship and to ensure the quality of care provided, inappropriate financial relationships between federal fund receiving hospitals and doctors are prohibited by federal law. Acting U.S. Attorney Sandra R. Brown, Central District of California, commented on this policy, stating that “[p]atients deserve to know their doctors are making health care decisions based solely on medical need and not for any potential financial benefit.”

Special Agent in Charge Christian J. Schrank of the Department of Health and Human Services, Office of Inspector General (HHS-OIG) noted that 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, “Working with our law enforcement partners, we will continue to crack down on such deals, which work to undermine impartial medical judgement, drive up health care costs, and corrode the public’s trust in the health care system.”

If you or someone you know is witness to attempts to defraud the federal government, like false claims to Medicare, you may be able to file a whistleblower lawsuit.

The False Claims to Medicare lawsuit is United States ex rel. Chan v. PAMC, Ltd., et al., Case No. 13-cv-4273 (C.D. Cal.).