A federal judge has upheld a default judgment of $562 million in a False Claims Act lawsuit against a Los Angeles-area hospital chain and an ambulance company, according to the Los Angeles Times.

Pacific Health Corporation (PHC), which operated four hospitals in Los Angeles and Orange County, along with PROCare Mobile Response LLC, was accused of defrauding the federal Medicare and state Medicaid programs. There are serious doubts, however, about whether or not the judgment is even collectible, as both defendants have ceased operations and closed their doors.

Case Background

This particular Medicare fraud case goes back to 2012, when whistle blower Julie Macias, a psychiatric nurse, accused her employer, Los Angeles Metropolitan Medical Center (LAMMC) of overbilling state and federally-funded health care programs. According to her complaint, PHC-owned subsidiary Los Angeles Doctors Hospital Corporation, which operated the hospital, and been fraudulently billing Medicare and Medi-Cal for millions of dollars since at least 2004.

The fraudulent charges were allegedly made for what are known as 5150 holds. These holds allow a medical services provider to detain an individual involuntarily for up to 72 hours for observation if, in their professional opinion, the individual poses a threat to him or herself or others. A 5150 detainee must be evaluated and meet certain legal criteria before they can be held.

Whistle blower Macias told the court that the hospital had pressured those responsible for the evaluations to falsify data and do whatever was necessary in order to ensure people were held. If the 5150 could not be applied, Macias said the hospital would call upon PROCare Mobile to bring patients in, then falsify records in order to make it seem as if they had admitted themselves (most had dementia and no family, or were otherwise incompetent).

The Scheme Expands

In 2006, the whistle blower lawsuit alleged that the operation was expanded as some patients who had come for medical treatments or surgery were transferred to psychiatric wards, whether they needed psychiatric care or not. Those admissions were then billed to Medicare and Medi-Cal.

In 2008, federal investigators became aware of a scheme in which homeless persons were allegedly“dumped” at LAMMC and two other PHC-owned hospitals, where they were subject to unnecessary and even harmful procedures.

According to the investigation, the medical centers hired “runners” to recruit homeless people, promising them up to $30 after a 24-to-72 hour stay at the hospital. The runners were paid up to $40 for bringing in recruits eligible for Medicare. Others were reportedly taken from nursing homes involuntarily, using a 5150 hold. Again, records were allegedly falsified to make it appear that the patients had consented.

Whistle Blower Judgment Upheld

In 2016, U.S. District Judge Ronald Lew entered a default judgment against the defendants after they withdrew from defending the case. The amount includes an unspecified percentage for relator Macias and $11.3 million for her attorneys. However, PHC shut down operations in 2013, and the defendants cannot be located, meaning it’s unlikely the judgment can be collected. Nonetheless, Judge Lew upheld the judgment in June, and approved the attorney fees in August.

This article is not legal advice. It is presented
for informational purposes only.