More Chips Fall in Pacific Hospital Fraud Case

Sad disabled girl complaining looking at camera sitting on a couch in the living room at home

Uncovering fraud against government programs is sometimes like peeling an onion, exposing layer after layer of impropriety from people trying to get rich off others’ misfortune.

Such is the case with the on-going adjudication of a medical and workers’ compensation fraud ring tied to Pacific Hospital, in Long Beach, Calif. Daniel Capen, a 70-year-old spinal surgeon from Manhattan Beach, was among the latest to be sentenced in the case. He is among 24 people to be charged in the scheme, with at least 15 convicted. (Proving that it doesn’t pay to commit fraud!)

Pacific Hospital is a teaching facility known for its orthopedic and spinal surgeries. But federal prosecutors say two of its owners, doctors, and other professionals ran a workers’ compensation fraud scheme over several years, until at least 2013, that involved more than $900 million in fraudulent workers’ compensation billing. (He set a terrible example for medical students.)

Capen pleaded guilty in August 2018 to conspiracy to commit fraud and soliciting and receiving kickbacks for patient referrals and medical services, such as urine and drug tests, to the hospital. Between 1998 and 2013, prosecutors say, Capen accounted for about $142 million of the hospital’s claims to insurers, on which the hospital was paid about $56 million. Capen admitted to receiving $5 million in kickbacks. The overall scheme resulted in more than $580 million in fraudulent bills being submitted, mostly to California’s worker compensation system. (Who picked up the bill? Taxpayers.)

A federal judge sentenced Capen to 30 months in prison. She also ordered him to forfeit $5 million and pay a $500,000 fine.

A former owner of the hospital, Michael D. Drobot, is serving a five-year sentence in federal prison after being convicted of paying more than $50 million in bribes to doctors. Another former owner, Dr. Faustino Bernadett, an anesthesiologist, was convicted in January on charges of workers’ compensation fraud and paying kickbacks for spinal surgeries. (Looks like he should expect prison time, too.)

Today’s Fraud of the Day comes from a California Department of Justice press release, “Orthopedic Surgeon Sentenced to 2½ Years in Federal Prison for Receiving Kickbacks in Massive Health Care Fraud,” released Nov. 22, 2019.

SANTA ANA, California – A spinal surgeon was sentenced today to 30 months in federal prison for participating in a long-running health care fraud scheme in which he received at least $5 million in kickbacks for performing hundreds of spinal surgeries. The overall scheme resulted in more than $580 million in fraudulent bills being submitted, mostly to California’s worker compensation system.

Dr. Daniel Capen, 70, of Manhattan Beach, was sentenced by United States District Judge Josephine L. Staton, who also ordered Capen to forfeit $5 million to the United States and pay a $500,000 fine.

For more information, see Former owner of Pacific Hospital gets 15 months in prison for kickback scheme,” published Jan. 17, 2020 in the Long Beach Post.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.