5 charged in $580M Southern California kickback scheme

Staff Writer
Columbus CEO

LOS ANGELES (AP) — Five people, including a former hospital executive and two surgeons, are charged with a massive kickback scheme that resulted in billing $580 million to the government and insurance companies, authorities announced Tuesday.

Two already pleaded guilty and the others have agreed to plead guilty in connection to the scheme, which involved paying tens of millions of dollars to dozens of doctors, chiropractors and others to refer patients to two Southern California hospitals for spinal surgeries, according to a statement from the U.S. attorney's office.

Over an eight-year period, Pacific Hospital of Long Beach and Tri-City Regional Medical Center in Hawaiian Gardens billed thousands of operations to California's workers' compensation system, the U.S. Department of Labor and workers' compensation insurers.

"Some of the patients lived hundreds of miles away from Pacific Hospital, and closer to other qualified medical facilities. The patients were not informed that medical professionals had been offered kickbacks to induce them to refer the surgeries to Pacific Hospital," the U.S. attorney's statement said.

"Injured workers were treated like livestock by doctors and hospitals who paid or accepted kickbacks and bribes in exchange for referrals," California Insurance Commissioner Dave Jones said in a statement.

Pacific Hospital's former owner, Michael D. Drobot, pleaded guilty last year to taking part in the fraud. He also has acknowledged bribing state Sen. Ron Calderon, who has pleaded not guilty to bribery, fraud and money laundering charges that carry a maximum sentence of 396 years in federal prison.

Calderon, D-Montebello, allegedly accepted about $100,000 in exchange for promoting legislation to expand Hollywood tax credits and to protect the financial interests of Pacific Hospital, which benefited from a provision of the workers' compensation law.

In the other cases, charges were filed against two people on Tuesday, and three previous cases were unsealed Monday.

James L. Canedo, Pacific Hospital's former chief financial officer, pleaded guilty in September to conspiracy to engage in fraud, money laundering and other crimes. Paul Richard Randall, a health care marketer previously affiliated with Pacific Hospital and with Tri-City Regional Medical Center, pleaded guilty in April 2012 to conspiracy for recruiting chiropractors and doctors to refer patients to Tri-City.

Orthopedic surgeons Philip Sobol of Studio City and Mitchell Cohen of Irvine and Alan Ivar, a Las Vegas chiropractor who used to live in Southern California, have agreed to plead guilty to conspiracy or other charges.

Under terms of their plea agreements, Sobol could be sentenced to up to 10 years in federal prison while Canedo, Ivar and Randall could get up to five years. Cohen faces up to three years for filing a false tax return.

"Health care fraud and kickback schemes burden our health care system, drive up insurance costs for everyone, and corrupt both the doctor-patient relationship and the medical profession itself," U.S. Attorney Eileen M. Decker said in a statement. "The 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."

The five defendants will have to pay restitution, which in Canedo's case will be at least $20 million, authorities said.