Ex-hospital CFO, physicians guilty in $580M kickback scheme

The ex-CFO of the now-defunct Pacific Hospital in Long Beach, Calif., was among those who recently reached a plea agreement with prosecutors for his involvement in a fraud scheme that generated $580 million in false billings, according to the Department of Justice.

Others involved in the scheme, including two orthopedic surgeons, have agreed to plead guilty in coming weeks.

The 15-year-long fraud scheme involved Pacific Hospital's former-CEO and others submitting bills to workers' compensation insurers and the U.S. Department of Labor for spinal surgeries. The surgeries were performed on patients who had been referred by dozens of physicians, chiropractors and others who were paid illegal kickbacks. More than $580 million in bills were fraudulently submitted by Pacific Hospital during the last eight years of the scheme alone.

The hospital's ex-CEO pleaded guilty to participating in the scheme in April 2014, according to the DOJ.

James Canedo, who served as the hospital's CFO from 1999 through October 2013, was responsible for tracking direct payments made to physicians by the hospital. He was also in charge of tracking the number of patients each physician referred and the amounts the hospital collected from the patients. His role in the scheme sometimes included mediating disputes between physicians who claimed credit for the same referrals.

Mr. Canedo pleaded guilty to participating in a conspiracy that engaged in paying or receiving kickbacks in connection with a federal healthcare program, among other charges. The case against Mr. Canedo was unsealed Tuesday, and his sentencing is scheduled for June 17, 2016.

Philip Sobol, MD, and Mitchell Cohen, MD, both orthopedic surgeons, and Alan Ivar, a chiropractor, have agreed to plead guilty for their involvement in the coming weeks, according to the DOJ.

In a second, similar fraud scheme that also involved spinal surgeries, physicians received illegal kickbacks for referrals to Tri-City Regional Medical Center in Hawaiian Gardens, Calif.

Paul Richard Randall, a healthcare marketer previously affiliated with both Pacific Hospital and Tri-City, admitted recruiting chiropractors and physicians to refer patients to Tri-City in exchange for kickbacks. He is scheduled to be sentenced April, 8, 2016.

"The defendants carried out this elaborate scheme by callously gathering patients, remaining indifferent to patient needs, and greedily lining their pockets with a cut of the cash from taxpayer-funded healthcare systems," said Assistant Director in Charge David Bowdich of the FBI's Los Angeles Field Office.

All five defendants have agreed to cooperate with the government's ongoing investigation, which has been dubbed "Operation Spinal Tap," according to the DOJ.

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