Patients ‘Treated Like Livestock’ in Kickback Scheme

By Pat Anson, Editor

Federal prosecutors have charged five people, including a former hospital executive and two orthopedic surgeons, with fraud in a $580 million kickback scheme involving thousands of spinal surgeries at two southern California hospitals.

The alleged scheme included tens of millions of dollars in illegal kickbacks paid to chiropractors, doctors and other health care providers over an eight year period.  As a result of the payments, thousands of patients were referred to Pacific Hospital in Long Beach for spinal surgeries that were paid for by Medicare or California worker’s compensation system.

“Medical referrals should be based on what’s best for the patient – not what’s best for the doctor’s bank account,” said IRS Special AgentErick Martinez. “In paying the kickbacks and submitting the resulting claims for spinal surgeries and medical services, the defendants acted with the intent to defraud workers’ compensation insurance carriers and to deprive the patients of their right to honest services.”

Two of the defendants have already pleaded guilty, and three others have agreed to plead guilty in the coming weeks. Prosecutors say all five have agreed to cooperate in the government’s ongoing investigation.

A second kickback scheme encouraged doctors to refer patients to the Tri-City Regional Medical Center in Hawaiian Gardens.

“Injured workers were treated like livestock by doctors and hospitals who paid or accepted kickbacks and bribes in exchange for referrals,” said California Insurance Commissioner Dave Jones. “Injured workers are put at risk when their medical treatment is based on kickbacks and bribes instead of their medical needs.”

The defendants include James Canedo, the former chief financial officer of Pacific Hospital. Canedo pleaded guilty in September to mail fraud, money laundering, paying or receiving kickbacks and other charges.

Orthopedic surgeons Philip Sobol and Mitchell Cohen, chiropractor Alan Ivar, and Paul Randall, a former health care marketer at the two hospitals, also agreed to plead guilty to charges stemming from the kickback scheme. Ivar admitted he was paid a monthly retainer by Pacific Hospital for over a decade to refer patients.  

Prosecutors say the conspirators typically paid a kickback of $15,000 for each lumbar fusion surgery and $10,000 for each cervical fusion surgery. Over 4,400 patients were referred to the hospitals, including some who lived hundreds of miles away.

Under the terms of their plea agreements, 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. All will be required to pay restitution to the victims of the scheme, which in Canedo’s case will be at least $20 million.