Southern California Medical Center (SCMC) and Universal Diagnostic Laboratories (UDL), along with their key executives, have agreed to pay $10 million to resolve allegations of submitting false claims to Medicare and California’s Medicaid program (Medi-Cal). The settlement, which addresses serious allegations of kickbacks and self-referrals, comes after a lengthy investigation into the practices of SCMC and UDL, both based in Southern California.
The defendants in the case include Dr. Mohammad Rasekhi, founder and chief medical officer of SCMC and co-owner of UDL, and Sheila Busheri, the CEO of both SCMC and UDL. SCMC operates six clinics across Southern California, while UDL provides laboratory testing services in the region. The settlement also includes payments under the False Claims Act, which allows whistleblowers to bring forward claims of fraud and share in the recovery.
Allegations of Fraudulent Practices
The U.S. government’s allegations focus on three key practices:
- Kickbacks for Referrals to SCMC Clinics: The defendants were accused of paying marketers kickbacks to refer Medicare and Medi-Cal beneficiaries to SCMC’s clinics in violation of the Anti-Kickback Statute (AKS), a federal law that prohibits offering or paying remuneration for referrals of federal health care program beneficiaries.
- Kickbacks for Referrals to UDL: The defendants allegedly paid kickbacks to third-party clinics in the form of above-market rent, discounted services, and write-offs of patient balances in exchange for referring patients to UDL for laboratory tests. This, too, violated the AKS.
- Self-Referrals for Laboratory Tests: SCMC allegedly referred Medicare and Medi-Cal beneficiaries to UDL for lab tests, in violation of the Stark Act, which prohibits physicians from referring patients to services for which they or an immediate family member have a financial interest, unless an exception applies. The laboratory services provided by UDL were considered “designated health services” under the Stark Act.
These practices, if proven, undermine the integrity of the Medicare and Medi-Cal programs by compromising the judgment of healthcare providers and placing financial interests above patient care.
Significant Financial Penalties, Whistleblower Action & Additional Settlement
The settlement resolves claims under the False Claims Act, which allows the government to seek damages for fraudulent conduct that impacts federally funded programs. As part of the agreement, the defendants have agreed to pay a total of $10 million, a sum that will resolve the allegations related to false claims submitted to both Medicare and Medi-Cal.
As part of the settlement, California will receive approximately $4 million to address the state’s portion of the Medicaid claims involved in the case.
The case also highlights the role of whistleblowers in uncovering fraud in the healthcare industry. The allegations were first brought to light by four former employees and managers of SCMC and UDL—Ferzad Abdi, Julia Butler, Jameese Smit, and Karla Solis—who filed a qui tam or whistleblower lawsuit under the False Claims Act. The qui tam provision allows private individuals to sue on behalf of the government and receive a portion of any recovery.
In addition to the $10 million settlement, the whistleblowers reached a separate agreement with the defendants, receiving a $5 million settlement for additional allegations not covered in the government’s case. The relators’ share of the total recovery has not been finalized.
Principal Deputy Assistant Attorney General Brian M. Boynton of the Justice Department’s Civil Division commented on the case, stating, “Kickback and self-referral schemes risk impairing the judgment of healthcare providers and diminish the reliability of the care they render. This resolution upholds the department’s commitment to ensuring that Medicare and Medicaid beneficiaries receive care that is untainted by the providers’ financial interests.”
U.S. Attorney Martin Estrada for the Central District of California also emphasized the importance of upholding the integrity of federal health care programs, stating, “This significant resolution evidences our steadfast commitment to ensuring the integrity of federally funded health care programs.”
Acting Special Agent in Charge Eric Larson of the Department of Health and Human Services’ Office of Inspector General (HHS-OIG) added, “There is an expectation that providers who receive Medicare and Medicaid program funds obey the law and operate with integrity. This settlement is a reminder that HHS-OIG is committed to holding accountable those who exploit taxpayer-funded healthcare programs for their own personal gain.”
The settlement serves as a stark reminder of the importance of compliance with federal laws such as the Anti-Kickback Statute and the Stark Act, which were designed to prevent fraud and ensure that patient care is driven by medical necessity rather than financial incentives.
“This case underscores the federal government’s resolve to prevent abuse in healthcare programs that rely on taxpayer dollars,” said Bryan D. Denny, Special Agent in Charge of the Department of Defense Office of Inspector General, Defense Criminal Investigative Service (DCIS) Western Field Office. “It also highlights our commitment to protecting patient care from the influence of financial misconduct.”
This settlement is a significant step in addressing fraud in the healthcare industry, reinforcing the government’s commitment to ensuring that health services paid for by federal programs are provided with integrity and in the best interests of patients.
