9 accused of submitting $950M in fraudulent health insurance claims

Federal prosecutors in California announced charges against nine individuals—including orthopedic surgeons, chiropractors and a C-suite executive—for allegedly running a 15-year scheme that submitted nearly $1 billion in fraudulent health insurance claims to the federal government, state of California and private insurers.

Dubbed “Operation Spinal Cap,” the scheme involved more than $40 million in illegal kickbacks paid to physicians and other healthcare professionals in exchange for spinal surgery referrals for thousands of patients and other services at Pacific Hospital in Long Beach, California.

The owner of Pacific Hospital and alleged leader of the scheme, Michael Drobot, was sentenced to five years in prison earlier this year for his involvement in the scheme.

Defendant Daniel Capen, MD, of Manhattan Beach, California, an orthopedic surgeon, agreed to plead guilty to both conspiracy and illegal kickback charges. According to the statement issued by the federal government, he was responsible for approximately $142 million of the hospital’s claims to insurers. Capen’s claims resulted in $56 million in payments to the hospital.

Additionally, Brian Carrico and two companies—Performance Medical & Rehab Center, Inc. and One Accord Management, Inc.—owned by Carrico, are accused of being responsible for $80 million in claims submitted to workers’ compensation programs and were paid $56 million from the scheme.

“Public health insurance programs—whether a workers’ compensation program or Medicare—are not a personal pocketbook for criminals seeking to exploit government programs designed to help those who need these plans the most,” said R. Damon Rowe, Special Agent in Charge of IRS Criminal Investigation’s Los Angeles Field Office in the statement. “Taxpayers rightly expect individuals working in the healthcare industry that receive payments from taxpayer-funded programs to scrupulously follow the rules. IRS Criminal Investigation will continue to protect the integrity of public health insurance programs and ensure that doctors, pharmacists and medical service providers who profit from these illicit schemes are held accountable.”

The Federal Bureau of Investigation, IRS Criminal Investigation, the California Department of Insurance, the United States Postal Service and the Office of Inspector General are conducting the investigation into the scheme.