updated 4/8/2009 4:02:55 PM ET 2009-04-08T20:02:55

A $1.6 million settlement has been reached with two Southern California hospitals accused of improperly discharging and dumping psychiatric patients on Skid Row in Los Angeles, the city attorney’s office said Wednesday.

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The settlement also bars College Hospitals in the Orange County cities of Costa Mesa and Cerritos from transporting homeless psychiatric patients to downtown shelters, City Attorney Rocky Delgadillo’s office said.

City officials allege that over two years, as many as 150 patients from the two hospitals were dumped on Skid Row, an area on the east side of downtown where thousands of homeless people live.

“We will not stand idly by while society’s most vulnerable are dumped in the gutters of Skid Row,” Delgadillo said in a statement.

Calls seeking comment from College Hospital were not immediately returned

Under the settlement, the hospitals agreed to give $1.2 million to charities that care for the mentally ill and homeless and to pay $400,000 in civil penalties.

Slideshow: Perspectives on health care In one case, the city attorney’s office said Steven Davis, 32, a bipolar schizophrenic, was driven 40 miles to the Union Rescue Mission last year from the Costa Mesa hospital. The next day, the shelter contacted the hospital and asked them to pick up Davis, saying they were unequipped to treat him.

A van from the hospital came for Davis but simply dropped him at another Skid Row shelter, according to the city attorney’s office. From there, he wandered the streets before ending up at a clinic that contacted his family and found a place for him to board and receive treatment.

Last May, the hospital’s chief executive officer, Wayne Lingenfelter, denied dumping patients. He said Davis requested discharge to the Los Angeles shelter and had adequate health care in place.

Attorney David Daniels, who represents Davis, said College Hospital will be required to develop protocols for discharging psychiatric patients to “ensure homeless psychiatric patients will have the dignity and the continuum of care that everyone leaving a hospital deserves.”

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