Tag: 2015 News

In a series of related cases the former chief financial officer of Pacific Hospital of Long Beach, two orthopedic surgeons and two others have been charged in long-running health care fraud schemes that allegedly referred thousands of patients for spinal surgeries and generated nearly $600 million in fraudulent billings over an eight-year period.

Two of the defendants have pleaded guilty and three others have agreed to plead guilty in the coming weeks. All five defendants have agreed to cooperate in the government’s ongoing investigation into kickbacks for patient referrals and fraudulent bills for spinal surgeries.

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 in Long Beach, 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.

In a second, similar scheme that also involved spinal surgeries, doctors received illegal kickbacks for referrals to a Hawaiian Gardens hospital.

Federal prosecutors filed two cases related to the scheme, and earlier three other cases were unsealed by a federal judge. Those named in the cases are:

1) James L. Canedo, 63, of San Pedro, California, the former CFO of Pacific Hospital in Long Beach, who pleaded guilty on Sept. 4 to a criminal information charging him with 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. The case against Canedo was unsealed a few days ago by U.S. District Judge Josephine L. Staton of the Central District of California, who is scheduled to sentence the defendant on June 17, 2016.
2) Philip Sobol, 61, of Studio City, California, an 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. The information against Sobol and a related plea agreement were filed in U.S. District Court, where the Sobol is expected to be arraigned next month.
3) Alan Ivar, 55, of Las Vegas, a chiropractor who formerly resided in San Juan Capistrano, California, and owned several businesses based in Costa Mesa, California, was charged in a criminal information that alleges one count of conspiracy to commit mail fraud, honest services fraud, money laundering and violations of the Travel Act. In a plea agreement also filed at the same time, 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.
4) Paul Richard Randall, 56, of Orange, California, a health care marketer previously affiliated with Pacific Hospital and Tri-City Regional Medical Center in Hawaiian Gardens, pleaded guilty on April 16, 2012, before Judge Staton 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.
5) Mitchell Cohen, 55, of Irvine, California, an 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 with the government’s ongoing investigation, dubbed “Operation Spinal Cap,” into the kickback schemes, which involved dozens of surgeons, orthopedic specialists, chiropractors, marketers and other medical professionals.

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 of the defendants will be required to pay restitution to the victims of the scheme, which in Canedo’s case will be at least $20 million.

As part of the scheme, the conspirators typically paid a kickback of $15,000 for each lumbar fusion surgery and $10,000 for each cervical fusion surgery. Some of the patients lived hundreds of miles away from Pacific Hospital and closer to other qualified medical facilities. The patients were not informed that medical professionals had been offered kickbacks to induce them to refer the surgeries to Pacific Hospital. From 2005 through 2013, only part of the overall scheme, Pacific Hospital billed insurers more than $580 million for spinal surgeries on more than 4,400 patients. Insurers paid the hospital more than $226 million for the surgeries performed as a result of illegal kickbacks.

The conspirators in the Pacific Hospital scheme concealed the kickback payments by entering into bogus contracts to provide a “cover story” for the doctors, chiropractors and others who received illegal payments. For example, a number of doctors entered into agreements with a Pacific Specialty Physician Management (PSPM), a company owned by Drobot, under which the doctors received as much as $100,000 per month from PSPM in return for the right to purchase their medical practices – an option that was never exercised. PSPM paid some doctors inflated prices for the right to operate their practices and collect on their insurance claims. In still other cases, Pacific Hospital entered into contracts with doctors under which the doctors were to help the hospital collect on its surgery bills to insurance companies, but the hospital’s own collection staff, rather than the doctors, actually performed the collections work. Several doctors entered into lease agreements under which PSPM or Pacific Hospital paid rent for the use of office space, but rarely used the space. And other doctors had agreements to provide consulting services to Drobot’s companies, but did not actually provide the services. Still others, including marketers who introduced doctors to Pacific Hospital, had additional agreements with Drobot’s companies.

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.

Two other Drobot companies, California Pharmacy Management (CPM) and its successor, Industrial Pharmacy Management (IPM), were also important players in the scheme. Both companies set up and managed what were essentially mini-pharmacies within doctors’ offices. CPM and IPM bought and dispensed medication that the doctors prescribed to their patients, and these businesses received a portion of the money reimbursed by insurance companies for the medications. Drobot, along with others at CPM and IPM, often agreed to increase the doctors’ shares of the insurance claims in return for those doctors’ referral of patients to Pacific Hospital. In many cases, for doctors who made such referrals, the conspirators “advanced” payments from CPM and IPM before the companies had collected any money for the medications or even prescribed them, and often simply “wrote off” payments as losses when collections fell short.

Randall, who also facilitated the Pacific Hospital scheme by introducing doctors to Drobot and coordinating kickback arrangements, pleaded guilty to participating in a separate, similar scheme involving Tri-City Regional Medical Center. According to his plea agreement, Randall acted as a “marketer” for Tri-City and conspired with hospital executives to pay kickbacks to doctors and chiropractors to refer workers’ compensation patients Tri-City for spinal surgeries. As in the Pacific Hospital scheme, the surgeries at Tri-City involved use of spinal surgery hardware that Randall distributed to Tri-City at inflated prices through his company Summit Medical Group, knowing that the cost would be passed on to insurers. Using proceeds from the sale of the hardware, Randall paid a 5 percent kickback to Tri-City and kickbacks of up to $20,000 per surgery to the doctors and chiropractors who referred the patients. In addition, Randall paid kickbacks to doctors in return for referrals of patients for toxicology tests though a separate company, Platinum Medical. The scheme resulted in several million dollars in losses to insurers.

San Diego became the destination for information about anti-health-care fraud efforts, courtesy of the National Healthcare Anti-Fraud Association’s annual training conference. According to the recap published in Bloomberg BNA attendees were treated to an inside look at how law enforcement is fighting the scourge of health-care fraud.

First up on the docket was a presentation from Timothy Delaney, deputy assistant director of the Federal Bureau of Investigation’s criminal investigative division. According to Delaney, health-care fraud prison sentences have gotten increasingly longer, which has served as an effective deterrent. In addition, Delaney said the number of qui tam settlements and judgments has grown dramatically, from 43 in 1985, totaling around $2 billion, to 753 in 2014, totaling around $3 trillion.

Delaney said the major health-care fraud areas include mental health, durable medical equipment, labs and pharmaceuticals, and said there’s no lack of creativity behind some of the fraud schemes. For instance, Delaney said one doctor billed for wave therapy, which turned out to involve the doctor walking through a room full of patients and waving to them.

A presentation from the OIG that laid out the scope of existing pharmaceutical drug fraud. Shimon Richmond, the OIG’s special agent in charge of Miami, said that while the agency continues to have trouble with opiate drug fraud, non-controlled drug fraud is rising rapidly. Richmond said Medicare Part D spending has increased from $51 billion in 2006 to $121 billion in 2014, and out of the $121 billion, $113 billion was spent on non-controlled drugs.

Richmond was joined by the OIG’s Michael Cohen, who said the agency is concerned by the rise of high-dollar specialty drugs being approved by the FDA. Cohen said the high-priced drugs are too much of a temptation for fraudsters. For example, Cohen said the agency is keeping a close eye on the new Hepatitis C drugs that have recently hit the market, such as Solvadi and Harvoni.

Dr. Robert Califf, President Obama’s recent nominee to head the Food and Drug Administration, has been the target of serious criticism in recent weeks over his close ties to the pharmaceutical industry. He has received hundreds of thousands of dollars from Big Pharma.

The New York Times reports that Dr. Califf, a cardiologist, is a renowned clinical researcher who has deep respect for the system in which he works, and no one who knows him thinks he wants to weaken the regulatory agency he has been chosen to lead. But he has deeper ties to the pharmaceutical industry than any F.D.A. commissioner in recent memory, and some public health advocates question whether his background could tilt him in the direction of an industry he would be in charge of supervising.

While the previous commissioner, Dr. Margaret A. Hamburg, a former top health official in New York City, came from the field of public health, Dr. Califf ran a multimillion-dollar clinical research center at Duke University that received more than 60 percent of its funding from industry.

His financial disclosure form last year listed seven drug companies and a device maker that paid him for consulting and six others that partly supported his university salary, including Merck, Novartis and Eli Lilly. A conflict-of-interest section at the end of an article he wrote in the European Heart Journal last year declared financial support from more than 20 companies.

“In a sense, he’s the ultimate industry insider,” said Daniel Carpenter, a Harvard political science professor who has written extensively about the F.D.A.

But , Dr. Califf’s supporters note that a résumé studded with industry funding is not unusual in academic medicine. Doctors are paid consulting fees all the time, and universities routinely conduct clinical trials on behalf of companies. Those contracts help support university researchers’ salaries, a standard practice. Many emphasize that it does not imply an inherent conflict. His supporters contend that Dr. Califf’s vast experience in the clinical science world could be a major asset in his new post.

Valentino H. Douglas, 45, of Rialto, was arrested and booked into the West Valley Detention Center on multiple counts of felony insurance fraud after receiving more than $112,000 in workers’ compensation benefits for an alleged work injury that actually occurred a month earlier while playing softball.

While employed as a security officer at Rialto High School, Douglas filed a workers’ compensation claim in July 2013, two months after an altercation with a student claiming that he injured his shoulder during the incident. An investigation by Department of Insurance detectives revealed Douglas sought treatment a month earlier for the same shoulder injury stating that it occurred while playing softball.

“Workers’ compensation fraud is a costly crime that we all pay for,” said Insurance Commissioner Dave Jones. “Insurers pass along the cost of their losses to businesses through higher insurance premiums and those costs are passed onto to consumers through higher prices for goods and services. Ultimately, there is a ripple effect on our economy.”

Videotape evidence also showed Douglas exercising with a boot camp group with no apparent physical limitations. When questioned about his statements to physicians and his exercise activity, Douglas continued to misrepresent the facts of his alleged injury. The case is being prosecuted by the San Bernardino District Attorney’s office.

The U.S. Food and Drug Administration approved the first-ever nasal spray emergency treatment for opioid overdose on Wednesday. The reformulated drug, sold as Narcan, comes as a nasal spray and should help first responders, police and others deliver the antidote in emergency situations. Known generically as naloxone, it reverses the effects of opioids – drugs that include legal painkillers such as oxycodone and illegal narcotics such as heroin.

Data from the Centers for Disease Control and Prevention indicates opioid overdose led to about 23,500 deaths in the United States in 2013, a four-fold jump from 1999. A majority of these deaths occur in non-medical settings, stressing the need for user-friendly treatments that can be administered without the help of a medical practitioner, Adapt Chief Executive Seamus Mulligan told Reuters.

The treatment, Narcan, which Adapt plans to launch by January, is expected to have wide coverage under health insurance with affordable co-pays, Mulligan added. Ireland-based Adapt bought the development and commercialization rights to Narcan from London-based Lightlake Therapeutics Inc in December 2014. The company says the nasal spray is cheaper and easier to use than injections.

Group purchasers, such as law enforcement, fire fighters, departments of health, local school districts, colleges and universities, and community-based organizations will be able to purchase the spray at a discounted price of $37.50 per 4 mg device. Some first responders already convert naloxone injections into a nasal spray using nozzles and other equipment..