Hospital Chain to Pay $16.5 Million for Using Homeless to Defraud Medi-Cal

Monday, August 27, 2012

A Southern California hospital chain that has agreed to plead guilty to defrauding Medi-Cal of millions of dollars by recruiting homeless people to receive unnecessary medical care, will have all criminal charges dropped if it pays back $16.5 million by March 2017.

Pacific Health Corp. and its subsidiary, Los Angeles Doctors Hospital Inc. (LADH), admitted that from 2003 to 2008 they conspired with three LADH hospitals to pay “marketers” $2.3 million to pick up homeless people from L.A.’s Skid Row and elsewhere as part of the scheme.

“As a result of this illegal conduct, Medicare and Medi-Cal made nearly $16 million in improper payments to the PHC hospitals,” according to a statement from the U.S. Attorneys Office.

The three PHC hospitals are: Los Angeles Metropolitan Medical Center, Newport Specialty Hospital (formerly known as Tustin Hospital and Medical Center) and Anaheim General Hospital.  

Although the hospitals and the management groups will be off the hook if restitution is paid in full, marketer Estill Mitts will not be so lucky. Mitts agreed to a plea bargain for his recruiting activities between 2004 and 2007, and is scheduled to be sentenced October 15 by U.S. District Judge George H. King.

Judge King sentenced a Mitts co-defendant, Dr. Rudra Sabaratnam, in 2010 to two years in prison for a related scam. Sabaratnam, a Sri Lankan-born physician in L.A.’s tony Brentwood and former co-owner of City of Angels Medical Center, admitted paying Mitts to find homeless people for in-patient hospital stays that were then billed to government programs.

Sabartnam was also ordered to pay $4.1 million in restitution along with former co-owner Robert Bourseau, who was sentenced to three years in prison.

The scam unraveled when Los Angeles police spotted five patients dumped back on Skid Row in 2006 after their usefulness was over. They were each paid less than $100 to participate.

–Ken Broder


To Learn More:

Hospital Chain to Pay $16.5 Million in Kickback Case Involving the Homeless (by Tom Watkins, CNN)

Pacific Health Corporation and Three of Its Southland Hospitals Agree to Pay $16.5 Million in Cases Stemming from Illegal Kickback Scheme (Federal Bureau of Investigation)

Hospital Chain Accused of Kickback Scheme to Pay $16.5 Million (by Alexandra Zavis, Los Angeles Times)

Former LA-Based Hospital CEO Sentenced to Prison for Medicare Fraud (KPCC wire services)

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