California Surgery Center Owners Charged in Fraud Case; More than $14 Million Stolen

July 22, 2004

A two-year investigation by the Orange County District Attorney’s Office with the assistance of the California Department of Insurance (CDI) and the Franchise Tax Board led to the filing of charges against Unity Outpatient Surgery Center in Buena Park this week.

Unity Outpatient Surgery Center owners Tam Vu Pham, 39, and his wife Hoang Ngo, 38, of Fullerton, along with Lan Nguyen, 48, of Huntington Beach, have been charged with 46 felony counts of conspiracy, grand theft, insurance fraud, capping and tax evasion.

They are accused of recruiting thousands of healthy patients from all over the country to have unnecessary surgeries at Unity Outpatient Surgery Center in Buena Park and bilking more than $14 million from insurance companies and employers.

If convicted Pham faces a maximum sentence of 26 years, Ngo faces a maximum sentence of 38 years 8 months and Nguyen faces a maximum sentence of 26 years 8 months in state prison.

Unity’s owners would reportedly pay “cappers” to recruit people from 45 states and the District of Columbia. These “cappers” targeted employees at businesses with PPO insurance because pre-approval from the insurance company is not a requirement. The “cappers” would arrange transportation for the “patients,” schedule the procedures, and instruct the “patients” on what to say. These healthy people would undergo multiple surgeries during a short period of time.

For their role in the insurance scam, the “patients” would reportedly receive either a cash payment, between $300 and $1,000, or earn credits toward inexpensive cosmetic surgery. The “cappers” were paid a commission for each surgical procedure performed at Unity.

The most common procedures performed were colonoscopies, EGDs (upper gastro-intestinal procedure), sweaty palms surgery, hemorrhoid surgery and pain management procedures.

“Even as health care fraud goes, it is hard to imagine anything more reprehensible than deliberately operating on healthy people solely to gain illegal profits.” said Orange County District Attorney Tony Rackauckas. “These surgery center owners, driven by greed, are bilking insurers and employers out of millions of dollars. Health care fraud victimizes each of us because it raises everyone’s health insurance rates. The higher our health insurance rates are, the less our employers have to pay us.”

“This national medical fraud conspiracy is like a sequel to Invasion of the Body Snatchers,” added California Insurance Commissioner John Garamendi. “Hundreds of employers and insurers were defrauded out of hundreds of millions of dollars, directly picking the pockets of other law abiding policyholders. Throughout this illegal scheme surgeries for various ailments had one thing in common, insurance companies were billed an arm and a leg.”

During an eight month period from August 2002 to April 2003, Unity owners were reported to have billed insurance companies close to $97 million and collected more than $14 million in fees. Unity is accused of defrauding hundreds of insurance companies and not paying taxes by creating a series of shell corporations with different addresses, tax ID’s and phone numbers, which they used to disguise their identities for billing.

At least 1,600 employers had employees that were involved in the fraud and more than 5,000 patients are known to have had unnecessary surgeries at Unity Outpatient Surgery Center.

A hotline has been set up for people who may have information on Unity or other surgery centers that are committing insurance fraud. They can reach the Orange County District Attorney’s office at (714)347-8760.

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