{"id":17700,"date":"2015-11-24T13:33:51","date_gmt":"2015-11-24T21:33:51","guid":{"rendered":"https:\/\/cjnotebook.com\/?p=17700"},"modified":"2015-11-24T13:35:01","modified_gmt":"2015-11-24T21:35:01","slug":"17700-2","status":"publish","type":"post","link":"https:\/\/cjnotebook.com\/?p=17700","title":{"rendered":"Five, Including Two Doctors and Hospital Exc., Charged with Fraud Involving $600 Million Kickback Scheme"},"content":{"rendered":"

\"Veterans<\/a> Santa Ana, Calif.<\/span><\/strong><\/p>\n

\n

Federal officials said today that five people, including two orthopedic surgeons and former Long Beach, hospital executive, were charged in kickback schemes involving $600 million in fraudulent claims by Southern California Hospitals, according to authorities<\/span>.<\/p>\n

The scheme involved long-running health care fraud schemes that illegally referred thousands of patients for spinal surgeries and generated nearly $600 million in fraudulent billings over an eight-year period, officials said.<\/span><\/p>\n

The doctors, the former hospital exec and two others admitted their roles and involvement and have agreed to cooperate, according to officials.<\/span><\/p>\n

The schemes involved tens of millions of dollars in illegal kickbacks to dozens of doctors, chiropractors and others.<\/span><\/p>\n

From 2005 through 2013, officials said Pacific Hospital billed insurers more than $580 million for spinal surgeries on over 4,400 patients. Insurers paid the hospital more than $226 million for the surgeries performed as a result of illegal kickbacks.<\/span><\/p>\n

\u201cHealth care fraud and kickback schemes burden our healthcare system, drive up insurance costs for everyone, and corrupt both the doctor-patient relationship and the medical profession itself,\u201d said United States Attorney Eileen M. Decker.<\/strong> \u201cThe members of this scheme treated injured workers and their spines as commodities, to be traded away to the highest bidder. This investigation should send a message to the entire industry: patients are not for sale.<\/span><\/p>\n

Two of the defendants have previously pleaded guilty, and three others have agreed to plead guilty in the coming weeks. All five have agreed to cooperate in the government\u2019s ongoing investigation into kickbacks for patient referrals and fraudulent bills for spinal surgeries.<\/span><\/p>\n

As a result of the illegal payments, officials said thousands of patients were referred to Pacific Hospital in Long Beach, where they underwent spinal surgeries that led to more than $580 million in bills being fraudulently submitted during the last eight years of the scheme alone. <\/span><\/p>\n

\"Medical<\/a>Many of the fraudulent claims were paid by the California worker\u2019s compensation system<\/strong> and the federal government.<\/span><\/p>\n

In a second, similar scheme \u2013 also involving spinal surgeries \u2013 doctors received illegal kickbacks for referrals to a Hawaiian Gardens hospital.<\/strong><\/span><\/p>\n

Today, federal prosecutors filed two cases related to the scheme, and \u00a0Monday, three other cases were unsealed by a federal judge. <\/span><\/p>\n

Those named in the cases are:<\/span><\/strong><\/p>\n

James L. Canedo<\/strong>, 63, of San Pedro, the former chief financial officer of Pacific Hospital of Long Beach, who pleaded guilty on Sept. 4 to a criminal information charging him with participating in a conspiracy that engaged in mail fraud, honest services fraud, money laundering, paying or receiving kickbacks in connection with a federal health care program, and violating the Travel Act, specifically, interstate travel in aid of a racketeering enterprise.<\/span><\/p>\n

Canedo is scheduled to be sentenced in June.<\/span><\/p>\n

Philip Sobol,<\/strong> 61, of Studio City, an orthopedic surgeon, who has agreed to plead guilty to conspiracy to commit mail fraud, honest services fraud, and violations of the Travel Act, as well as a separate, substantive Travel Act violation.<\/span><\/p>\n

Sobol is expected to be arraigned next month.<\/span><\/p>\n

Alan Ivar<\/strong>, 55, of Las Vegas, a chiropractor who formerly resided in San Juan Capistrano and owned several businesses based in Costa Mesa, was charged today in a criminal information that alleges one count of conspiracy to commit mail fraud, honest services fraud, money laundering, and violations of the Travel Act. <\/span><\/p>\n

In a plea agreement also filed today, Ivar admitted that for well over a decade, he had an agreement with the owner of Pacific Hospital to refer patients in exchange for a monthly retainer. Ivar, who also has agreed to plead guilty, is expected to be arraigned next month.<\/span><\/p>\n

Paul Richard Randall<\/strong>, 56, of Orange, a health care marketer previously affiliated with Pacific Hospital and Tri-City Regional Medical Center in Hawaiian Gardens, who pleaded guilty on April 16, 2012 before Judge Staton to conspiracy to commit mail fraud. <\/span><\/p>\n

Randall, who admitted recruiting chiropractors and doctors to refer patients to Tri-City in exchange for kickbacks, is scheduled to be sentenced on April 8, 2016.<\/span><\/p>\n

Mitchell Cohen<\/strong>, 55, of Irvine, an orthopedic surgeon, was charged last week with filing a false tax return. Cohen, who in a plea agreement also filed on November 16 admits the he failed to report income received from kickback payments, is expected to be arraigned next month.<\/span><\/p>\n

\"courtroom_02\"<\/a>All five defendants have agreed to cooperate with the government\u2019s ongoing investigation \u2013 dubbed \u201cOperation Spinal Cap\u201d \u2013 into the kickback schemes, which involved dozens of surgeons, orthopedic specialists, chiropractors, marketers and other medical professionals, according to officials.<\/span><\/p>\n

Under the terms of their plea agreements, \u00a0officials said Sobol faces a federal prison term of up to 10 years; Canedo, Ivar and Randall could be sentenced to as much as five years; and Cohen faces up to three years in prison on the tax charge. <\/span><\/p>\n

All defendants will be required to pay restitution to the victims of the scheme, which in Canedo\u2019s case will be at least $20 million.<\/span><\/p>\n

The former CEO and owner of Pacific Hospital of Long Beach, Michael D. Drobot, pleaded guilty in April 2014 to participating in the scheme. Drobot is also cooperating with the investigation.<\/span><\/p>\n

As described in court documents, Drobot, who was the owner and\/or CEO of Pacific Hospital of Long Beach until late 2013, ran a 15-year-long scheme in which he and others billed workers\u2019 compensation insurers and the U.S. Department of Labor hundreds of millions of dollars for spinal surgeries and other procedures performed on patients who had been referred by dozens of doctors, chiropractors and others who were paid illegal kickbacks.<\/span><\/p>\n

As part of the scheme, the conspirators typically paid a kickback of $15,000 for each lumbar fusion surgery and $10,000 for each cervical fusion surgery.<\/span><\/p>\n

Some of the patients lived hundreds of miles away from Pacific Hospital, and closer to other qualified medical facilities, officials said.<\/span><\/p>\n

The patients were not informed that medical professionals had been offered kickbacks to induce them to refer the surgeries to Pacific Hospital, according to authorities.<\/span><\/p>\n

The conspirators in the Pacific Hospital scheme concealed the kickback payments by entering into bogus contracts to provide a \u201ccover story\u201d for the doctors, chiropractors and others who received illegal payments. <\/span><\/p>\n

For example, a number of doctors entered into agreements with a Drobot-owned company, Pacific Specialty Physician Management, under which the doctors received as much as $100,000 per month from PSPM in return for the right to purchase their medical practices \u2013 an option that was never exercised. <\/span><\/p>\n

Physician Management paid some doctors inflated prices for the right to operate their practices and collect on their insurance claims.<\/span><\/p>\n

In still other cases, Pacific Hospital entered into contracts with doctors under which the doctors were to help the hospital collect on its surgery bills to insurance companies, but the hospital\u2019s own collection staff, rather than the doctors, actually performed the collections work. <\/span><\/p>\n

Several doctors entered into lease agreements under which Pacific Management or Pacific Hospital paid rent for the use of office space, but rarely used the space. <\/span><\/p>\n

And other doctors had agreements to provide consulting services to Drobot\u2019s companies, but did not actually provide the services. Still others, including marketers who introduced doctors to Pacific Hospital, had additional agreements with Drobot\u2019s companies.<\/span><\/p>\n

Canedo, as Pacific Hospital\u2019s CFO from 1999 through October 2013, was responsible for tracking payments made directly to doctors by the hospital, as well as the number of patients each doctor referred to the hospital and the amounts the hospital collected for those patients\u2019 procedures. <\/span><\/p>\n

Canedo also communicated directly with a number of the doctors regarding the payments and surgeries, and sometimes mediated disputes between different doctors who claimed credit for the same referrals.<\/span><\/p>\n

Sobol, Ivar and Cohen each received, respectively, $5.2 million, $1.24 million, and $1.64 million in kickbacks. Together they referred more than 200 patients to Pacific Hospital.<\/span><\/p>\n

\u201cThe defendants carried out this elaborate scheme by callously gathering patients, remaining indifferent to patient needs, and greedily lining their pockets with a cut of the cash from taxpayer-funded health care systems,\u201d said David Bowdich, the Assistant Director in Charge of the FBI’s Los Angeles Field Office.<\/strong> \u201cThe effort by investigators and prosecutors in this case cannot be overstated and, as it continues, will play a part in restoring confidence in the medical marketplace.\u201d<\/span><\/p>\n

Two other Drobot companies, California Pharmacy Management (CPM) and its successor, Industrial Pharmacy Management (IPM), were also important players in the scheme. Both companies set up and managed what were essentially mini-pharmacies within doctors\u2019 offices. <\/span><\/p>\n

CPM and IPM bought and dispensed medication that the doctors prescribed to their patients, and these businesses received a portion of the money reimbursed by insurance companies for the medications. <\/span><\/p>\n

Drobot, along with others at Pharmacy Management and Industrial Pharmacy Management, often agreed to increase the doctors\u2019 shares of the insurance claims in return for those doctors\u2019 referral of patients to Pacific Hospital. <\/span><\/p>\n

In many cases, for doctors who made such referrals, the conspirators \u201cadvanced\u201d payments from Pharmacy Management and \u00a0Industrial Pacific Management before the companies had collected any money for the medications or even prescribed them, and often simply \u201cwrote off\u201d payments as losses when collections fell short.<\/span><\/p>\n

\"workers-compensation-form-300x284\"<\/a>\u201cInjured workers were treated like livestock by doctors and hospitals who paid or accepted kickbacks and bribes in exchange for referrals,\u201d said California Insurance Commissioner Dave Jones.<\/strong> \u201cInjured workers are put at risk when their medical treatment is based on kickbacks and bribes instead of their medical needs. Detectives from the Department of Insurance worked closely with federal law enforcement agencies to investigate and expose this illegal conspiracy, which is one of the largest workers compensation insurance fraud cases we have ever seen.\u201d<\/span><\/p>\n

Randall, who also facilitated the Pacific Hospital scheme by introducing doctors to Drobot and coordinating kickback arrangements, pleaded guilty to participating in a separate, similar scheme involving Tri-City Regional Medical Center. <\/strong><\/span><\/p>\n

According to his plea agreement, Randall acted as a \u201cmarketer\u201d for Tri-City and conspired with hospital executives to pay kickbacks to doctors and chiropractors to refer workers\u2019 compensation patients Tri-City for spinal surgeries. <\/span><\/p>\n

As in the Pacific Hospital scheme, the surgeries at Tri-City involved use of spinal surgery hardware that Randall distributed to Tri-City at inflated prices through his company Summit Medical Group, knowing that the cost would be passed on to insurers, officials said.<\/span><\/p>\n

Using proceeds from the sale of the hardware, Randall paid a 5 percent kickback to Tri-City and kickbacks of up to $20,000 per surgery to the doctors and chiropractors who referred the patients.<\/span><\/p>\n

In addition, though a separate company, Platinum Medical, Randall paid kickbacks to doctors in return for referrals of patients for toxicology tests.<\/span><\/p>\n

The scheme resulted in several million dollars in losses to insurers.<\/span><\/p>\n

\u201cMedical referrals should be based on what\u2019s best for the patient \u2013 not what\u2019s best for the doctor\u2019s bank account,\u201d said IRS-Criminal Investigation Special Agent in Charge Erick Martinez.<\/strong> \u201cIn paying the kickbacks and submitting the resulting claims for spinal surgeries and medical services, the defendants acted with the intent to defraud workers\u2019 compensation insurance carriers and to deprive the patients of their right to honest services.\u201d<\/span><\/p>\n

Tom Frost, Special Agent in Charge with the Postal Service Office of Inspector General,<\/strong> stated: \u201cWe are committed to preserving Postal Service resources by vigorously investigating allegations of fraud and corruption. We are grateful for the efforts of the U.S. Attorney\u2019s Office and our State and Federal partners in this investigation.\u201d<\/span><\/p>\n

The ongoing investigation into abuses involving the spinal pass-through law and kickbacks paid for spinal surgery patients is being conducted by the FBI; the U.S. Postal Service, Office of Inspector General; IRS Criminal Investigation; and the California Department of Insurance.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Federal officials said today that five people, including two orthopedic surgeons and former Long Beach, hospital executive, were charged in kickback schemes involving $600 million in fraudulent claims by Southern California Hospitals.<\/p>\n","protected":false},"author":1,"featured_media":17705,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16,3],"tags":[1952,680,1954,943,1953],"class_list":["post-17700","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-home-main-slider","category-u-s-department-of-justice","tag-california-workers-compensation-insurance","tag-doctors","tag-hawaiian-gardens-hospital","tag-health-care-fraud","tag-pacific-hospital"],"yoast_head":"\nFive, Including Two Doctors and Hospital Exc., Charged with Fraud Involving $600 Million Kickback Scheme<\/title>\n<meta name=\"description\" content=\"Federal officials said today that five people, 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