Adventist Health and White Memorial Medical Center In Los Angeles Pay $14.1 Million to Resolve False Claims Act Allegations Involving Physician Referral Payments

On May 3, 2013, a qui tam federal lawsuit filed by Los Angeles physicians Hector Luque and Alejandro Gonzalez was settled with Adventist Health System/West, dba Adventist Health, and its affiliated hospital White Memorial Medical Center. 

The qui tam lawsuit was originally filed in June 2008 under seal in the Eastern District of California. Negotiations have been ongoing for some time, and on May 3, 2013, the United States and the State of California intervened on the day the settlement was announced and the lawsuit was unsealed. The lawsuit is captioned U.S. ex rel. Hector Luque et al. v. Adventist Health et al. USDC Case No. 2:08CV1271 (E.D. Cal.). 

Under the terms of the settlement, the have agreed to pay the United States and the State of California $14.1 million to settle claims that they violated the False Claims Act. The Justice Department announced the settlement.  Adventist Health is headquartered in Roseville, Calif., in the Eastern District of California, and operates 19 hospitals and over 150 clinics in California, Hawaii, Oregon and Washington.  White Memorial Medical Center is a teaching hospital located in East Los Angeles (Boyle Heights) with a significant percentage of patients on Medi-Cal and Medicare, and it is the focus of the lawsuit.

The settlement resolves allegations that White Memorial improperly compensated physicians who referred patients to the White Memorial facility by transferring assets, including medical and non-medical supplies and inventory, at far less than fair market value.  The lawsuit alleged that lines of credit to physicians were not paid back. Additionally, Defendant White Memorial allegedly paid referring physicians teaching stipends at its family practice residency program for those who referred patients above fair market value the complaint alleged that, in contrast, those physicians who received patient referrals from the hospital, such as Ob-Gyns, did not receive any teaching stipends.

The United States alleged that these payments violated the Anti-Kickback Act and Stark Statute, and by extension, the False Claims Act.  Approximately $11.5 million of the settlement will be paid to the U.S. Government, most of which will benefit the Medicare Trust Fund.   The remaining $2.6 million will be paid to California’s Department of Health Care Services.  The two physician whistleblowers in this case will collectively receive $2,839,219 of the recovery. 

As part of the settlement, White Memorial has entered into a comprehensive five-year Corporate Integrity Agreement with the Office of Inspector General of the U.S. Department of Health and Human Services to ensure its continued compliance with federal health care benefit program requirements.

This case shows the important of having loans, stipends, purchases and other business arrangements by physicians and health care providers reviewed by counsel. At least if the agreements have been reviewed and cleared by counsel, any potential issues can be flagged in advance and it can help avoid qui tam or criminal investigations since there is the defense of reliance on the advice of counsel.  

Posted by Tracy Green, Esq. Please email Ms. Green at tgreen@greenassoc.com or call her at 213-233-2260 to schedule a complimentary telephonic or in person consultation.  

Any questions or comments should be directed to Tracy Green an experienced physician attorney, health care litigation attorney, and health care fraud attorney. The firm website is: http://www.greenassoc.com/