More defendants plead guilty in $600 million 'Operation Spinal Cap' fraud
Scheme spawned millions in illegal kickbacks for referrals, nearly $600 million in fraudulent bills for spinal surgeries at Long Beach hospital.
Three additional defendants, including the son of a southern California hospital owner, have pleaded guilty in an elaborate healthcare fraud scheme that authorities say spawned tens of millions of dollars in illegal kickbacks for patient referrals, and nearly $600 million in fraudulent bills for spinal surgeries performed at Pacific Hospital in Long Beach, the Justice Department announced.
Michael R Drobot, 44, of Newport Beach has pleaded guilty to conspiracy and illegal kickback charges. He is the son of Michael Drobot Sr., the owner of Pacific Hospital in Long Beach who has already pleaded guilty to charges related to the scheme.
Chiropractor Michael E. Barri, 48, of San Clemente, who owned and operated Tri-Star Medical Group and Jojaso Management Company, pleaded guilty to one conspiracy charge and admitted he got kickbacks for referrals to Pacific Hospital from 2009 through October 2013. Those referrals resulted in Pacific Hospital billing insurers roughly $3.9 million for spinal surgeries, authorities said.
Linda Martin, 66, of Clovis, California was a marketer for Pacific Hospital and recruited medical professionals and others to refer patients to the hospital promising kickbacks.
The three defendants join six others, including Drobot Sr., who have already pleaded guilty and are cooperating in the ongoing investigation, referred to as "Operation Spinal Cap", that is sorting through a scheme that involved dozens of surgeons, orthopedic specialists, chiropractors, marketers and other professionals.
Citing court documents, the DOJ said Drobot Sr., the owner and CEO of Pacific Hospital of Long Beach until late 2013, operated a 15 year scheme in which he and his co-conspirators submitted hundreds of millions in bills to workers' compensation insurers and the Department of Labor for spinal surgeries and other procedures.Those patients had been referred by doctors and other professionals who received kickbacks for the referrals.
For example, as part of the scheme, participants in the scheme typically paid a kickback of $15,000 for each lumbar fusion surgery and $10,000 for each cervical fusion surgery. Some patients actually lived closer to other facilities and were, in fact, hundreds of miles away from Pacific Hospital. Patients had no knowledge of the kickbacks, the DOJ said.
From 2005 through 2013, which is only part of the overall scheme, authorities said Pacific Hospital billed insurers more than $580 million for spinal surgeries related to over 4,400 patients. Insurers actually paid the hospital more than $226 million for the surgeries performed as a direct result of the illegal kickbacks.
The DOJ said the kickback payments were concealed by a wall of bogus contracts that were supposed to shield the real goings-on with the scores of doctors and other medical professionals involved. A number of these bogus contracts involved another of Drobot Sr.'s companies, called Pacific Specialty Physician Management. For example, some doctors formed agreements with PSPM that paid as much as $100,000 a month in return for the right to purchase the doctors' medical practices, but that right was never actually exercised.
[Also: Dallas doctor convicted in landmark $375 million fraud case, largest ever in home health]
In accordance with his plea agreement, Drobot Jr. admitted to taking part in the kickback scheme, mostly by operating two of his father's other companies, California Pharmacy Management and its successor Industrial Pharmacy Management, who authorities said were "important players in the scheme". They said the companies set up and managed mini-pharmacies within doctors' offices, buying and doling out medications prescribed to patients by their doctors. The business got a cut of the money reimbursed by insurance companies, the DOJ said. As early as 2005, Drobot Jr. started recruiting doctors and chiropractors to sign contracts with CPM, and kickbacks were discussed. Those arrangements were finalized by his father, though Drobot Jr. did sometimes step in to settle disputes.
Last year, the U.S. Attorney's office announced charges against five other defendants, including two doctors involved in the Pacific Hospital scheme and a similar scheme involving Tri-City Regional Medical Center in Hawaiian Gardens, CA. The ongoing investigation into spinal surgery kickbacks is being conducted by the FBI, the U.S. Postal Service, Office of the Inspector General, IRS, and California Department of Insurance.
Twitter: @BethJSanborn
