Hospital chain accused of kickback scheme to pay $16.5 million

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A Los Angeles-based hospital chain has agreed to pay the government $16.5 million to settle allegations that its subsidiaries paid illegal kickbacks for patients recruited from among the homeless and provided them unnecessary services in an attempt to defraud Medicare and Medi-Cal, according to court documents.

The U.S. attorney’s office for the Central District of California said it would drop criminal conspiracy charges filed Thursday against Pacific Health Corp. if payment is completed by March 2017, among other conditions.

A Pacific Health subsidiary, Los Angeles Doctors Hospital Inc., has agreed to plead guilty to conspiracy charges, according to prosecutors. The company provided payroll services to three hospitals that allegedly paid nearly $2.4 million in kickbacks to two patient recruiters and submitted $15.9 million in improper claims to Medicare and Medi-Cal between 2003 and 2008, prosecutors said.


Attorneys for the defendants did not return calls seeking comment late Thursday. But Los Angeles Doctors Hospital and Pacific Health acknowledged the alleged conspiracy in agreements filed Thursday afternoon in U.S. District Court.

The agreements include $15.9 million in restitution and additional damages outlined in a civil settlement between the government and Pacific Health, its parent company, Health Investment Corp., and the three hospitals: Los Angeles Metropolitan Medical Center, Anaheim General Hospital and Newport Specialty Hospital — formerly known as Tustin Hospital and Medical Center .

The first payment installment was received Wednesday, according to a statement from the U.S. attorney’s office.

Pacific Health and its affiliates also agreed to comply with standards and oversight designed to ensure corporate integrity, to replace managers who participated in the alleged conspiracy, and to cooperate with additional investigations and prosecutions stemming from the case, court documents said.

A number of individuals and organizations have faced charges in connection with the multi-agency investigation.

Estill Mitts, who operated a downtown Los Angeles center that recruited homeless people to receive unnecessary health services, pleaded guilty in September 2008 to conspiracy to commit healthcare fraud, money laundering and tax evasion.


Intercare Health Systems Inc., which previously operated as City of Angels Medical Center, and former owners Robert Bourseau and Dr. Rudra Sabaratnam were also the subject of consent judgments for paying kickbacks to Mitts and others.