White Memorial Medical Center in Los Angeles has agreed to pay $14.1 million to settle allegations that it paid illegal kickbacks to physicians to get their patient referrals.
The settlement announced Friday by the U.S. Justice Department stemmed from a whistle-blower complaint filed under seal in 2008 by two Los Angeles doctors who objected to the hospital’s practices.
The two internal-medicine physicians, Hector Luque and Alejandro Gonzalez, will share $2.8 million as their portion of the settlement.
Federal officials alleged that White Memorial violated anti-kickback laws by overpaying certain physicians and giving them other improper inducements in return for patient referrals to the hospital.
For instance, prosecutors said, White Memorial paid referring physicians above fair market value to provide teaching services at its family practice residency program.
Regulators pay close attention to the financial relationships between hospitals and doctors out of concern that patients will receive unnecessary tests and treatments, often at the expense of taxpayer-supported health programs.
“Kickbacks and other unlawful financial arrangements cost taxpayer dollars and undermine the integrity of medical judgments,” said Stuart Delery, acting assistant attorney general for the Justice Department’s civil division.
White Memorial said it cooperated fully with the government investigation and that the settlement related to financial relationships that were entered into more than a decade ago.
“We settled this matter to avoid a lengthy litigation process which would have taken our focus away from serving our community,” said hospital spokeswoman Alicia Gonzalez.
White Memorial is part of Adventist Health in Roseville, Calif., which runs 19 hospitals and more than 150 clinics in California, Oregon, Hawaii and Washington. The 353-bed nonprofit hospital near downtown Los Angeles was founded by the Seventh-day Adventist Church in 1913.
The doctors who sued also alleged that the hospital forgave loans to physicians and paid for travel and other costs doctors incurred to recruit other physicians to their medical practices.
The allegations centered primarily on White Memorial and its relationship with two Southern California physician groups, Family Care Specialists and White Memorial Medical Group, according to the doctors’ lawyers.
“If you are giving sweetheart deals to doctors so they send patients to the hospital, the patient may not be getting ideal care,” said Eric Havian, a San Francisco attorney who represented the whistle-blowers.
“The decision is based on money rather than the best care. These two doctors wouldn’t play ball,” he said.
Under the settlement, the federal government will receive $11.5 million and the California Department of Health Care Services will get the remaining $2.6 million. Luque and Gonzalez will receive a share of those settlement amounts.
Under federal law, individuals, usually employees or other insiders in a company or a government agency, can file a lawsuit alleging fraud, corruption or other wrongdoing by supervisors or the institution without fear of retaliation. The government then can decide to join the suit, putting its force behind the action.
Federal officials have been trying to crack down on fraud and abuse in Medicare and other public healthcare programs to recover some of the billions of dollars lost annually.
In recent years, prosecutors have used whistle-blower complaints to win major settlements from drug makers, health plans and medical providers.