When Michael D. Drobot admitted in federal court in February 2014 to orchestrating wide-ranging conspiracy and illegal-kickback schemes through Pacific Hospital in Long Beach that he then owned, the Corona del Mar resident vowed to help in the investigation of other defendants. As part of the ongoing investigation, the U.S. Attorney announced Tuesday that charges, guilty pleas or promises of the same have been tied to the hospital's former chief financial officer, three Orange County men–including a chiropractor and orthopedic surgeon–and another Southern California orthopedic surgeon.
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Michael D. Drobot Signs Plea Deal to Testify Against Slimed Legislator Ron Calderon
The new defendants charged in the 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 are:
$ James L. Canedo, 63, of San Pedro, the former Pacific Hospital CFO who pleaded guilty on Sept. 4 to 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. Canedo is scheduled to be sentenced on June 17, 2016.
$ Philip Sobol, 61, a Studio City 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. Sobol is expected to be arraigned next month.
$ Alan Ivar, 55, a Las Vegas chiropractor who used to reside in San Juan Capistrano and owned several businesses based in Costa Mesa. He was charged Tuesday with conspiracy to commit mail fraud, honest services fraud, money laundering and violations of the Travel Act. In a plea agreement also filed Tuesday, 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 agreed to plead guilty, is expected to be arraigned next month.
$ Paul Richard Randall, 56, of Orange, a health care marketer previously affiliated with Pacific Hospital and Tri-City Regional Medical Center in Hawaiian Gardens, pleaded guilty on April 16, 2012, to conspiracy to commit mail fraud. 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.
$ Mitchell Cohen, 55, an Irvine orthopedic surgeon, was charged last week with filing a false tax return. Cohen admits in a plea agreement filed on Nov. 16 that he failed to report income received from kickback payments and is expected to be arraigned next month.
All five defendants have agreed to cooperate in “Operation Spinal Cap,” the government's ongoing investigation into kickbacks for patient referrals and fraudulent bills for spinal surgeries, according to the U.S. Attorney's office of the Central District of California.
Under the terms of their plea agreements, Sobol faces a federal prison term of up to 10 years; Canedo, Ivar and Randall face up to five years in prison; and Cohen faces up to three years in prison on the tax charge. All will be required to pay restitution to the victims of the scheme, which in Canedo's case will be at least $20 million, the U.S. Attorney says.
The schemes involved tens of millions of dollars in illegal kickbacks to dozens of doctors, chiropractors and others. As a result of the illegal payments, thousands of patients were referred to Pacific Hospital, 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. Many of the fraudulent claims were paid by the California worker's compensation system and the federal government. A second, similar scheme also involved spinal surgeries and doctors receiving illegal kickbacks for referrals to a Hawaiian Gardens hospital.
Drobot, who was the owner and/or CEO of Pacific Hospital of Long Beach until late 2013, as well as the owner of two other companies involved in his schemes: California Pharmacy Management and its successor, Industrial Pharmacy Management.
He was hailed as a healthcare superstar in the national and Orange County business media. What those reporters did not know was he was making his fortune bilking workers' compensation insurers and the U.S. Department of Labor for 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.
So, in the long view, Drobot caused much more harm than good to the healthcare market.
“Health 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,” said U.S. Attorney Eileen M. Decker of the Central District of California. “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.”
Canedo, as Pacific Hospital's 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' procedures. 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.
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.
“The 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,” said Assistant Director in Charge David Bowdich of the FBI's Los Angeles Field Office. “The 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.”
According to the feds, Operation Spinal Cap continues.
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OC Weekly Editor-in-Chief Matt Coker has been engaging, enraging and entertaining readers of newspapers, magazines and websites for decades. He spent the first 13 years of his career in journalism at daily newspapers before “graduating” to OC Weekly in 1995 as the alternative newsweekly’s first calendar editor.