Pacific Alliance Medical Center to pay $42M over alleged kickback scheme

(Story updated at 6 p.m. ET)

Owners of the Pacific Alliance Medical Center agreed to pay $42 million to settle False Claims Act allegations that they violated the False Claims Act by providing kickbacks to referring physicians, the U.S. Department of Justice announced Wednesday.

The owners of the acute-care hospital in Los Angeles, PAMC Ltd. and Pacific Alliance Medical Center, allegedly made marketing arrangements that provided undue benefit to physicians' practices and paid above-market rates to rent space in physicians' offices. They will pay $31.9 million to the federal government and $10 million to California for allegedly submitting false claims to Medicare and Medi-Cal, the state's Medicaid program.

"This recovery should help to deter other healthcare providers from entering into improper financial relationships with physicians that can taint the physicians' medical judgment, to the detriment of patients and taxpayers," Chad Readler, acting assistant attorney general for the department's civil division, said in a statement.

Pacific Alliance said it is confident it has put the safeguards in place to ensure its marketing policies and practices comply with the law.

"It was important for us to put this matter behind us, without any admission of liability, so we can continue to focus instead on the essential, life-saving work we do in our community every day," the company said in a statement.

A manager at the medical center, Paul Chan, tipped authorities off to the alleged scheme with a False Claims Act lawsuit. He will receive more than $9.2 million of the federal government's share.