Hospital owner Pacific Health Corp. said it will close its three remaining Southern California hospitals, citing the fallout from a federal fraud case last year in which the company admitted paying to recruit homeless people off skid row in Los Angeles and billing the government for unnecessary care.
The Tustin company said the three hospitals shutting down are Los Angeles Metropolitan Medical Center, Bellflower Medical Center and Newport Specialty Hospital. Last week, Pacific Health announced the closure of Anaheim General Hospital.
Overall, as many as 1,900 full-time and part-time employees could lose their jobs, according to the company.
Los Angeles Metropolitan, near downtown, is the largest facility with 212 beds; the other three combined have 461 beds. A company spokesman said it's possible the hospitals could be reopened at a later date by Pacific Health or a new owner.
The emergency rooms at Los Angeles Metropolitan and Bellflower closed Wednesday, and the company said it will continue to care for existing patients until they can be safely transferred to other facilities in consultation with state regulators. Healthcare officials said the ER closures would have the most immediate effect on patients and other hospitals, possibly adding to already long wait times at other medical centers.
The closures come amid what some experts predict will be a painful time for many small to mid-size hospitals that don't have the negotiating clout or resources of larger hospitals or giant health systems.
Health insurers are increasingly excluding certain hospitals and forming smaller networks of medical providers to help contain rising medical costs and give employers and consumers more affordable insurance options. The federal healthcare law also includes new penalties for patient readmissions and other funding cuts.
"There were circumstances unique to this system of hospitals that precipitated this announcement," said Jim Lott, executive vice president of the Hospital Assn. of Southern California. "Having said that, we are forecasting for hospital closures because of the changes brought about by the implementation of Obamacare."
Lott said about 40 hospitals in California may close over the next five to 10 years, which would represent nearly 10% of the 430 hospitals statewide.
There were signs of financial distress for Pacific Health last month when state officials fined the company more than $7 million for not paying employee wages and bouncing payroll checks.
The company faced even more serious charges last year when federal authorities accused Pacific Health of paying recruiters to round up homeless people from skid row in downtown Los Angeles in order to bill Medicare and Medi-Cal for unnecessary treatments.
In response, a unit of the company in August pleaded guilty in federal court to conspiring to defraud those government healthcare programs, and Pacific Health paid $16.5 million to resolve the case.
As part of that plea agreement, the company said it had paid more than $2.3 million in illegal kickbacks to patient recruiters from 2003 to 2008, and as a result some of its hospitals received nearly $16 million in improper payments from Medicare and Medi-Cal, the state's Medicaid program for the poor.
Gary Hopkins, a spokesman for Pacific Health, said its hospitals were not excluded from those government programs because of the settlement, but various legal matters continued to take a toll.
"Pacific Health Corp. has taken the difficult decision to suspend services at all three of its remaining hospitals as we work to resolve the legacy issues facing our company," Hopkins said. "These issues include the settlement we reached with the Department of Justice last year, as well as other legal matters from our past, which have made it impossible for us to continue operating in this especially challenging economic climate for all healthcare providers."
Hopkins said company officials are working with the California Department of Public Health and county emergency medical officials on an orderly transition for patients.
"We are committed to preserving safe continuity of care for the community and will maintain professional, medical and nursing staff on site during this transition period to facilitate the movement of patients to other local healthcare facilities," Hopkins said.