Ex-California Hospital Owner Sentenced for $600M Workers’ Comp Fraud

January 16, 2018

The former owner of Pacific Hospital in Long Beach was sentenced to federal prison on Friday for running a $600 million workers’ compensation fraud scheme.

Michael Drobot, 73, was sentenced Friday to 63 months in prison and fined $500,000.

Earlier this week, he was ordered to forfeit $10 million to the government and to liquidate assets that include real estate along with a 1965 Aston Martin, a 1958 Porsche and a 1971 Mercedes Benz.

Prosecutors said that for at least 15 years, Drobot paid more than $40 million to dozens of doctors, chiropractors and other medical professionals in return for referring thousands of patients to his hospital for spinal surgeries. Some of the patients lived hundreds of miles from the hospital.

He, along with seven others were charged in relation to the government’s ongoing investigation into kickbacks for patient referrals and fraudulent bills for spinal surgeries performed at Pacific Hospital in Long Beach. The scheme involved tens of millions of dollars in illegal kickbacks to dozens of doctors, chiropractors and others. As part of the scheme, members of the conspiracy typically paid a kickback of $15,000 for each lumbar fusion surgery and $10,000 for each cervical fusion surgery. As a result of the illegal payments, thousands of patients were referred to Pacific Hospital, where they underwent spinal surgeries that led to more than $600 million in fraudulent bills being submitted during the last eight years of the scheme alone. Insurers paid the hospital more than $226 million for the surgeries performed as a result of illegal kickbacks. The bills included the cost of medical hardware implanted into patients that were sold by Drobot’s own company. He exploited a now-repealed California law that permitted hospitals to pass the full cost of medical devices implanted in spinal surgeries to workers compensation insurers, prosecutors said.

Many of the fraudulent claims were paid by the California worker’s compensation system and the federal government through the Federal Workers’ Compensation System.

A former state senator, Ronald Calderon, is serving a federal prison sentence for accepting bribes, including some from Drobot in exchange for making efforts to preserve the law.

Drobot pleaded guilty in 2014 to conspiracy and paying illegal kickbacks.

U.S. District Judge Josephine L. Staton, who sentenced Drobot, said he “introduced greed into the doctor-patient relationship.”

Seven other people, including Drobot’s son Michael, also have pleaded guilty in connection with the scheme and await sentencing.

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