Parkridge is the third Chattanooga hospital since 2005 to reach a federal settlement for violating various state and federal anti-kickback laws.
Memorial Health Care System agreed to a $1.3 million settlement in August.
Erlanger Health System paid out a $40 million settlement in 2005.
Parkridge Medical Center and its parent company, HCA, reached a $16.5 million settlement with the Department of Justice over violations of federal laws that govern leasing agreements between hospitals and physicians.
Parkridge and HCA Physician Services in Nashville made several deals with Diagnostic Associates of Chattanooga in 2007, providing financial benefits to encourage doctors in the group to refer patients to HCA facilities, according to the agreement.
"Physicians should make decisions regarding referrals to health care facilities based on what is in the best interest of patients without being induced by payments from hospitals competing for their business," said Bill Killian, U.S. attorney for the Eastern District of Tennessee, in a news release.
Parkridge also has agreed to a five-year corporate integrity agreement to ensure its continued compliance as part of the settlement. Memorial Hospital's recent settlement did not include an integrity agreement, but Erlanger's 2005 settlement did.
In an emailed statement, Parkridge executives said they are pleased the matter is concluded and plan to fulfill the terms of the agreement. They admit no wrongdoing in the settlement.
A whistle-blower, who worked as real estate appraiser conducting fair market studies, reported the violations in 2008 by filing a complaint in federal court.
According to the complaint, HCA Physicians Services bought Diagnostic Associates of Chattanooga in 2007 and hired its doctors. At the same time, Parkridge agreed to lease office space from Diagnostic and paid it a rental rate well above fair market value, the complaint states.
Parkridge paid the higher rental rate because the Diagnostic partners needed the money to pay several bank loans that had gone into default, the complaint states.
Before the lease agreement, a market rent study done by the whistle-blower and signed by Parkridge CEO Darrel Moore had given the hospital a market value of the space. Instead of paying that lesser rate, HCA hired an "unlicensed and uncertified" appraiser to provide an erroneous study that determined a rate high enough to meet the loan payments needed by the Diagnostics group, the complaint states.
The $16.5 million settlement will be split, with $15.7 million paid to the federal government and $807,000 paid to Tennessee.
The whistle-blower -- who under law receives a negotiable percentage of the settlement -- will get 18.5 percent, or $3.1 million.
HCA also will pay $236,000 for the whistle-blower's attorney's fee and other costs.
The federal government intervenes only in about 20 percent of whistle-blower cases. In the HCA case, it chose to intervene in two out of seven claims.
The filed complaint also brought allegations against HCA-owned facilities in Nashville and Florida and also made claims on behalf of Georgia, which paid Medicaid claims to Parkridge. All those claims were dismissed as part of the settlement, but the filing notes that the claims on behalf of Georgia and Florida will require those states to agree to the dismissal.
HCA, which is one of the largest for-profit hospitals chains in the country, has settled previous fraud cases, including two of the top 10 false claims cases by civil award amount, according to the Taxpayers Against Fraud Education Fund website. In 2000, it paid $731 million and in 2003 it paid $631 million, the website shows.