SEBASTOPOL – Palm Drive Hospital disclosed that it failed to enter into proper contracts with physicians, resulting in reimbursement mistakes totaling more than $2.5 million from 2007 through February of this year.

According to a letter provided by the hospital, Palm Drive volunteered the errors to the federal Department of Health and Human Services and the Office of the Inspector General to show the following:

From January to December of 2007, $93,753 was improperly paid to physicians.

From January 2009 to December 2009, $446,097 was improperly paid.

From January 2010 through February of this year, $2 million was improperly paid.

The improprieties stem from a $500 monthly stipend program that the hospital had in place for its top physicians.

But the hospital failed to provide adequate contracts, per federal Stark Law regulations that require them.

“In short, the elected chiefs of medical staff received a $500 monthly stipend from the hospital without entering into a formal written agreement signed by the parties,” according to legal papers.

In March, the hospital admitted to mistakenly billing Medicare for $2.3 million from 2007 to 2010. The hospital could be on the hook to repay both sums, which would total about $4.4 million. Alternatively, the federal government could choose to ask only for a portion of that money or none at all.

The federal government could take up to three years to determine what penalty, if any, the hospital will face.