By Mike Dougherty

CAMDEN, N.J. (CBS) - Cooper Health System has agreed to pay a hefty fine for involvement in what the government calls improper consulting and compensation agreements with physicians.

Private Doctors on Cooper’s Heart Institute Advisory Board were allegedly paid to refer patients to Cooper’s heart center. That’s a big no-no according to New Jersey acting attorney general John Hoffman.

“The law is there to avoid a situation in which a doctor is making a referral decision based on being compensated. You want a doctor to be making a referral decision based on the best health care interest of the patient.”

Hoffman says board members were paid, in some cases, $18,000 a year.

“The patients that were referred to the hospital, the costs were ultimately paid by the government. And that tie between compensation and referrals is what the law tries to be very careful about and tries to separate.”

After a three-year battle with lawyers from both the state and federal level, Cooper agreed to pay a $12.6-million settlement — about $10.2 million to the federal government and $2.3 million to New Jersey.

In a statement, hospital officials refused to admit any wrongdoing, saying they paid the fine to “avoid the burdens and uncertainties of a protracted litigation.”

According to Hoffman, the laws can often be complicated and difficult to follow. He said the hospital has taken several measures to ensure they are always in compliance.