California Health Care Fraud Scheme Uncovered – ‘Operation Spinal Cap’ Generated Nearly $600 Million

A health care fraud scheme in California, involving surgeons, a former chief financial officer, as well as an ex-Senator, was uncovered and the people involved, charged. The kickback scheme generated nearly $600 million before it was shuttered.

In one of the largest workers compensation insurance fraud cases, two orthopedic surgeons and the former chief financial officer of a California hospital were among five people charged with multiple counts of money laundering, committing mail fraud, violating the Travel Act, and other crimes in connection to illegal kickback schemes that brought in almost $600 million.

According to the U.S. Department of Justice, the majority of these money-making incidents revolved around fraudulent billings in spinal injuries. Dubbing the fraud scheme Operation Spinal Cap, authorities suspect thousands of cases of spinal surgery referred to the Pacific Hospital in Los Angeles were plain fraudulent, meant to usurp claim money. The scheme has so far netted nearly $600 million and resulted in the charging of five men, two of whom, have already pleaded guilty to federal charges, with the rest expected to do so in the near future. However, all five have agreed to fully cooperate with federal officials, reported Reuters. Each of the defendants is expected to enter a plea agreement and will face prison terms. They will also be ordered to pay restitution.

California Health Care Fraud Scheme Uncovered – ‘Operation Spinal Cap’ Involving Ex-Senator Generated Nearly $600 Million
(Photo by Nancy R. Cohen / Getty Images)

The five arrested are: 63-year-old James Canedo, who is the former chief financial officer of Pacific Hospital, 61-year old Philip Sobol, who is an orthopedic surgeon, Alan Ivar, who is a chiropractor, 56-year-old Paul Richard Randall, who is a health care marketer, and 55-year-old Mitchell Cohen, who too, is an orthopedic surgeon, reported the Examiner.

Among those who pleaded guilty: 56-year-old Paul Richard Randall, a health care marketer previously affiliated with Pacific Hospital and Tri-City Regional Medical Center. He pleaded guilty to conspiracy to commit mail fraud, reported Yahoo. The other person is 55-year-old Mitchell Cohen. An orthopedic surgeon, Cohen pleaded guilty to failing to report income received from kickback payments, stated U.S. Attorney’s spokesman Thom Mrozek, who added:

“Injured workers were treated like livestock by doctors and hospitals who paid or accepted kickbacks and bribes in exchange for referrals.”

The California health care fraud scheme had been going on for eight years. It involved “thousands” of operations, which were exorbitantly billed by Pacific Hospital of Long Beach and Tri-City Regional Medical Center. The bills were presented and cleared through California’s worker’s compensation system and the federal government. Needless to say, the majority of the cases for spinal surgery referred to the hospital were submitted as fraudulent claims. All such fraud cases also involved some serious kickbacks.

California Health Care Fraud Scheme Uncovered – ‘Operation Spinal Cap’ Involving Ex-Senator Generated Nearly $600 Million
(Photo Tim Schammberger / Getty Images)

One of the scheme’s primary culprits, the hospital’s former owner, Michael Drobot, had pleaded guilty to willingly participating in the health care fraud scheme last year. He is currently cooperating with the investigation, added Mrozek.

However, the scheme also involved Former California state Senator Ron Calderon. The ex-Senator was indicted last year on charges that he accepted $100,000 in bribes from Drobot. Apparently, Calderon claimed he could maintain a few critical loopholes needed for the fraud scheme to work with impunity. The loopholes allowed companies he controlled to charge a lot more for medical equipment used in spinal surgeries.

Incidentally, Calderon has also been accused of taking bribes from undercover FBI agents. The agents, disguised as Hollywood movie executives, expressed desire to steer legislation in their favor. Calderon allegedly agreed, in exchange for a handsome fee. The ex-Senator has vehemently denied any such wrongdoing. A trial is set to commence next year.

The charges levied against the five accused of the California health care fraud scheme include money laundering, referring patients in exchange for a monthly retainer, committing mail fraud and violating the Travel Act, reported HNGN. Mrozek admitted that the case was “one of the largest workers compensation insurance fraud cases we have ever seen.”

[Photo by Aslan Alphan / Getty Images, Tim Schammberger / Getty Images, Nancy R. Cohen / Getty Images]