Pacific Health Corporation (PHC) will pay $16.5 million to settle charges that engaged in an illegal kickback scheme.

The civil settlement resolves a U.S. and state investigation of three PHC-affiliated hospitals for engaging in a scheme in which the hospitals paid recruiters to deliver homeless Medicare or Medi-Cal beneficiaries by ambulance from the “Skid Row” area in Los Angeles to the hospitals for treatment that often was medically unnecessary.

The hospitals, Los Angeles Metropolitan Medical Center (LA Metro); Newport Specialty Hospital, formerly known as Tustin Hospital and Medical Center; and Anaheim General Hospital, then allegedly billed Medicare and Medi-Cal for these services, violating rules that permit payment only for necessary treatment.

A subsidiary of PHC, Los Angeles Doctors Hospital Inc., will plead guilty to a federal conspiracy charge arising out of the illegal kickback scheme.

The settlement arises out of the same investigation which in 2010 resulted in consent judgments against Intercare Health Systems Inc., formerly doing business as City of Angels Medical Center, and its former owners Robert Bourseau and Rudra Sabaratnam, for a similar illegal kickback scheme in Los Angeles.

Several individuals have pled guilty in connection with the scheme, including Bourseau and Sabaratnam, who were sentenced to three years and one month, and two years in prison, respectively, for their part in the scheme.