Five Charged in $600 Million California Hospital Fraud Cases

The former chief financial officer, two doctors, and two others have been charged in a series of related cases for their involvement in a long-running health care fraud scheme in Southern California.

The scheme yielded nearly $600 million in fraudulent billings over an eight-year period by illegally referring thousands of patients for spinal surgeries. Many of the fraudulent claims were billed to the federal government or the California worker’s compensation system.

All five defendants have agreed to cooperate with authorities in the ongoing investigation, “Operation Spinal Cap,” into kickbacks for patient referrals and fraudulent bills for spinal surgeries. Two of the five have already pleaded guilty, and the other three have agreed to do so soon.

The fraud scheme also involved tens of millions of dollars in illegal kickbacks to dozens of doctors, chiropractors, and others.

The charges against James Canedo, the former CFO of the Pacific Hospital of Long Beach, orthopedic surgeon Philip Sobol, chiropractor Alan Ivar, health care marketer Paul Richard Randall, and orthopedic surgeon Mitchell Cohen varied in scope and severity, and their prosecution built on the previous takedown of former Pacific Hospital CEO and owner Michael Drobot.

The ongoing investigation is being conducted by the FBI, USPS OIG, IRS-CI, and the California Department of Insurance.

“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.”