U.S. Attorney Kerry Harvey said a related criminal investigation into the arrangement and a whistle-blower lawsuit are continuing.
"They were doing certain interventional procedures ... that would not have justified payment," Harvey told The Associated Press.
St, Joseph London President Greg Gerard said in a statement that the hospital agreed to the settlement without an admission of wrongdoing to avoid the expense and uncertainty of litigation. Gerard said the doctors involved no longer practice at the hospital.
"The past few years have demonstrated the resilience and commitment of the team at St. Joseph London," Gerard said. "Now that this chapter has closed, we are eager to move forward."
The Commonwealth of Kentucky also is a party to the agreement and will receive $365,851, which represents the state's share of the government's recovery of Medicaid funds. The Medicaid program is funded jointly by the federal and state governments.
Federal prosecutors said several doctors at the hospital performed procedures for unneeded coronary stents, pacemakers and diagnostic catheterizations, then billed the federal programs. The doctors were affiliated with the Cumberland Clinic, a physician group that entered an exclusive arrangement with St. Joseph in 2008 to provide cardiology services to the hospital's patients.
Hospitals generally receive between $10,000 and $15,000 for medical procedures such as heart stents.
A message left for the Cumberland Clinic was not immediately returned Tuesday.
The settlement also covers allegations that St. Joseph violated the federal Stark Law and Anti-Kickback Statute by entering into a sham agreement with doctors at the Cumberland Clinic. Harvey said the agreements served as an inducement for doctors to refer patients to St. Joseph.
One of the doctors, Sandesh Rajaram Patil, 51, is serving a 30-month prison sentence at the federal prison in Beaumont, Texas. Patil pleaded guilty to federal healthcare fraud offense in October.
The investigation grew out of a whistleblower lawsuit three Lexington cardiologists filed under the federal False Claims Act. The law contains a provision allowing doctors Michael Jones, Paula Holllingsworth and Michael Rukavina to split $2.4 million of the settlement. Harvey said St. Joseph also self-reported several violations.
"It's been a long, extensive investigation. There are a number of complicated medical issues. These things take time," Harvey said. "Obviously, this settlement brings this case to fruition."
In connection with this settlement, St. Joseph has agreed to enter into a Corporate Integrity Agreement with the Department of Health and Human Services, Office of Inspector General, which obligates the hospital to undertake substantial internal compliance reforms and commit to a third-party review of its claims to federal healthcare programs for the next five years.
"Hospitals that place their financial interests above the well-being of their patients will be held accountable," Stuart Delery, Assistant Attorney General for the Civil Division of the U.S. Justice Department, said in a written statement.
