By Jonathan Stempel

NEW YORK (Reuters) - Westchester Medical Center agreed to pay $18.8 million and admit to misconduct to settle a U.S. lawsuit accusing the suburban New York hospital operator of violating a federal anti-kickback law and defrauding Medicare, federal prosecutors said on Thursday.

U.S. Attorney Preet Bharara in New York said the settlement resolves allegations that Westchester Medical made improper payments to a local cardiology practice in exchange for hundreds of referrals, and obtained Medicare reimbursements for costs it did not incur.

"Westchester Medical Center's aggressive, intricate kickbacks and other fraud schemes in this case threatened the impartiality of medical referrals, the financial integrity of Medicare, and the public's trust in the health care system," Scott Lampert, a special agent for the U.S. Department of Health and Human Services, said in a statement.

The lawsuit alleged violations of the federal False Claims Act from 2000 to 2007.

It was first brought in December 2006 by former Westchester Medical compliance officer Dan Bisk, who died three years later and whose widow Chris Carrs pursued the case on his behalf. She will receive $3.71 million from the recovery, court papers show.

The False Claims Act lets whistleblowers pursue claims on behalf of the government and share in recoveries.

U.S. District Judge Lewis Kaplan in Manhattan approved the settlement on Thursday, when the government revealed its involvement and the case was unsealed.

"Although the Medical Center believes that its financial relationships with its clinical faculty are customary for academic medical centers of its size and complexity, we acknowledge that, with respect to a very small number of legacy relationships, we could not produce documentation sufficient to meet certain technical requirements of federal law," Westchester Medical said in a statement.

Westchester Medical operates a hospital in Valhalla, New York, and is a clinical affiliate of New York Medical College.

The cardiology practice, Cardiology Consultants of Westchester, was not charged.

"Dan took his responsibilities to the hospital and to the legal system seriously," Carrs said in a statement. "It was with reluctance but integrity that he moved the process forward."

The case is U.S. ex rel Bisk et al v. Westchester Medical Center et al, U.S. District Court, Southern District of New York, No. 06-15296.

(Reporting by Jonathan Stempel in New York; Editing by Christian Plumb)