Hospital Firm Settles Medicare Fraud Case
A Houston hospital company said Tuesday it agreed to pay $7.3 million to settle allegations that two of its hospitals in Southern California defrauded the Medicare program.
In a confidential case unsealed Tuesday, the U.S. government contended that Paracelsus Healthcare Corp. made claims for unnecessary medical services and services not provided through its hospitals in Buena Park and Bellflower.
The government claimed Paracelsus improperly paid companies providing psychiatric programs through its 53-bed Orange County Community Hospital in Buena Park. One program was set up for gays and lesbians and the other for residents of board-and-care facilities.
Prosecutors also alleged the company’s 85-bed Bellwood General Hospital, in Bellflower, paid kickbacks to physicians and medical groups to receive patient referrals.
Paracelsus signed an agreement to take steps to avoid problem billings, according to prosecutors. The company admitted no wrongdoing.
The fraud allegations originated in a “whistle-blower” lawsuit filed three years ago. The whistle-blowers were top hospital executives--Alan Leavitt, the Orange County hospital’s chief executive from October 1992 to February 1994, and Timothy Hill, Bellwood’s chief executive from July through September of 1994.
The federal government later joined the civil case, which was unsealed Tuesday after the settlement was signed.
Deborah Frankovich, Paracelsus’ senior vice president, said the lawsuit concerned alleged activities under a previous administration at the company.
Paracelsus, formerly privately owned and based in Pasadena, merged in 1996 with Champion Healthcare Corp. of Houston. The combined operation moved there and is managed by former Champion executives.
The publicly held company is the majority owner of a partnership that operates Bellwood General and Orange County Community. It also leases out a hospital in Orange that used to be part of Orange County Community.
Paracelsus has been trying to sell the hospitals since 1996, Frankovich said.
Two years ago, Paracelsus reached a separate settlement with Aetna Life Insurance Co. in a massive lawsuit in which the hospital operator was accused of fraudulent billing for psychiatric services for private patients in Orange and Los Angeles counties.
Paracelsus reported a loss of $233.3 million for 1996 and restated earnings for the previous five years, eliminating Medicare revenue it reported but never received and increasing bad-debt expense at some hospitals. The company’s chairman, president and chief financial officer quit over the matter.
The agreement was announced after the stock market closed. Paracelsus stock closed at $2, unchanged, on the New York Stock Exchange.
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Bloomberg News contributed to this report.
