Los Angeles-Based Pacific Alliance Medical Center Closing

Pacific Alliance Medical Center
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Hospitals to Close in L.A.

The Pacific Alliance Medical Center (PAMC) will be shuttering when its lease expires, leaving 638 employees without jobs. The hospital is being closed due to California’s seismic standards, which would require massive reinvestment into the facility.

The hospital was also the target of a federal whistleblower lawsuit that saw the company pay a settlement of $42.0 million, compounding the problems faced by the medical center.

The current building fails the California seismic standards, and PAMC said that it would not be “economically viable for us to invest nearly $100.0 million to build a hospital on land that we would not own.”

The award-winning hospital will officially close when the lease expires on December 11. Both the hospital and administrative offices will be closed. “PAMC will remain appropriately staffed until it closes, ” said the company. “We will assist any inpatients and their physicians in transitioning their care to another area hospital prior to closing.”

Pacific Alliance Medical Center to Pay $42 Million to Settle Allegations 

The lawsuit and subsequent $42.00 payout by PAMC came about due to the company submitting false claims to Medicare and Medi-Cal (the California’s Medicaid program) in a kickback scheme. The reimbursement dollars were then used to pay above-market rents for space in physicians’ offices and enter into marketing arrangements with the physicians’ firms.

The lawsuit was levied by federal agencies, with the U.S. Justice Department charging PAMC. The final ruling resulted in $31.9 million being paid to the federal government while an additional $10.0 million went to State of California.

“This recovery should help to deter other health care providers from entering into improper financial relationships with physicians that can taint the physicians’ medical judgment, to the detriment of patients and taxpayers,” said Acting Assistant U.S. Attorney General Chad Readler in an official statement at the time of the ruling.

The false medical claims at the hospital were not said to be related to PMAC having to close, and the company is confirmed to have paid the settlement in full, according to the U.S. Department of Justice.

The company had not been on solid financial footing for some time, however. The 638 layoffs are coming after PAMC reported a $12.2 million net loss and a negative operating margin of 17.9% in the first quarter of 2017.

One Other Los Angeles Medical Center to Close

Besides the PAMC, several other L.A. hospitals have fallen on tough times. The Gardens Regional Hospital & Medical Center closed earlier in the year after being forced to file for bankruptcy. The non-profit had found an interested buyer, but the state’s attorney general’s office stopped the purchase when the buyer, Strategic Global Management Inc., refused to comply with all the mandates set out by the state attorney.

One of the main sticking points was that the new operator would have to provide $2.25 million a year in charity care for six years. Strategic Global Management tried to have that sum reduced but, when that proved unsuccessful, they dropped out of the deal. The hospital then filed for bankruptcy, causing job losses and the shuttering of the 137-bed facility.

“With its remaining cash on hand dwindling and no other buyer willing to acquire Gardens’ assets as a going concern, the debtor has determined in its best business judgment that it must close the hospital,” the bankruptcy motion reads.

The Gardens Regional Hospital & Medical Center, which employed more than 200 medical professionals, mostly served low-income patients. In 2015, it admitted more than 2,850 people, according to court documents.

Sources

Deal to save struggling hospital collapsed over funding for uninsured patients,” Los Angeles Times, January 18, 2017.

Pacific Alliance Medical Center to Pay $42 Million Settlement Over Alleged Kickback Scheme,” Los Angeles Business Review, June 28, 2017.

Pacific Alliance Medical Center to close in December,” Modern Healthcare, October 11, 2017.

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