LOS ANGELES — The former owner of a tiny orthopedic hospital with an unusually heavy roster of spinal surgery patients was charged Friday with health care fraud in a $500 million scheme to defraud workers' compensation insurance providers with the help of a California state senator.
The state insurance commissioner called the 16-year scheme one of the largest workers' comp fraud cases in the history of California's Department of Insurance.
Michael D. Drobot, 69, a central figure in the scandal that ensnared state Sen. Ronald S. Calderon and his brother, agreed to plead guilty and testify in return for a reduced sentence. Calderon is charged with accepting bribes and luxury perks from Drobot to influence legislation that would allow him to continue the scam.
U.S. Attorney Andre Birotte Jr. released a plea agreement with Drobot in which the former hospital owner outlines his payments to Calderon as well as doctors, chiropractors and other medical professionals who referred patients to his Long Beach hospital.
There were no allegations of medical problems with the surgeries. The charges focused on illegal kickbacks given to those who referred patients.
"In some cases the patients lived dozens or hundreds of miles from Pacific Hospital, and closer to other qualified medical facilities," the court documents said. The patients were not told that their medical professionals were getting kickbacks for sending them to Drobot's facility.
Drobot had a bribery payment scale for specific surgeries, the documents said. He would pay a kickback of $15,000 per lumbar fusion surgery and $10,000 per cervical fusion surgery.
Prosecutors, who dubbed their investigation "Operation Spinal Cap," used an undercover FBI agent in their probe.
Drobot's attorneys, Janet I. Levine and Jeffrey Rutherford, said he accepts responsibility for his actions and "is providing information to assist the government in its expanding investigations."
Drobot has agreed to testify about his links to Calderon which began when he sought help in keeping a "spinal pass-through law" on the books. The now-repealed law permitted hospitals to pass on spinal medical device costs, plus up to an additional $250, to workers' comp insurers.
In his disclosures to the government, Drobot said he set up shell companies to sell surgeons hardware used in the surgeries at highly inflated prices. If the surgeon did not use the devices specified by Drobot, the kickbacks were smaller, the documents said.
With Calderon's help, Drobot said he was able to meet with other senators to discuss his legislative agenda and advocate for bills that would financially benefit him and his hospital. No other senators were named in the indictment.
Many of Drobot's revelations centered on his extraordinary largesse when dealing with Calderon. In addition to money, there were jobs given to Calderon's children, expensive dinners, trips to golf resorts and free flights on a private plane, the indictment said.
"All of these financial benefits were intended to ensure that Senator Calderon would take legislative positions favorable to defendant and Pacific Hospital, which would allow defendant to continue to commit and expand his health care fraud scheme," the plea agreement said.
At one point, they met with a director at the Division of Workers' compensation to discuss proposed regulations that Drobot opposed.
Doctors were referred to by initials in the documents and it was unclear whether further charges would be forthcoming.
Drobot's plea documents were filed in Orange County where he resides. He is due to be arraigned in federal court in Santa Ana on March 31. He could enter a plea, but his sentence will be delayed until after the Calderon case is completed.