Owner of former Pacific Hospital pleads guilty to workers’ compensation fraud charges

LONG BEACH >> The former owner of a Long Beach hospital, whom prosecutors allege paid bribes to state Sen. Ron Calderon, pleaded guilty Friday to charges connected to a massive workers’ compensation scheme that cheated taxpayers out of hundreds of millions of dollars.

Michael D. Drobot, 69, of Corona Del Mar, was charged by the U.S. Attorney’s Office with orchestrating a conspiracy from 1997 to 2013 in which tens of millions of dollars in illegal kickbacks were paid to doctors, chiropractors, marketers and others who referred patients to the former Pacific Hospital for spinal surgery.

“The co-conspirators lined their pockets by ripping off insurance companies to the tune of hundreds of millions of dollars,” state Insurance Commissioner Dave Jones said in a statement.

Prosecutors said that Drobot paid $28,000 in bribes to Calderon, D-Montebello, to support legislation delaying or limiting changes in workers’ compensation laws that would have directly affected Drobot’s scheme. The hospital submitted more than $500 million in fraudulent bills between 2008 and last year. Much of the total was paid by the California workers’ compensation system, according to the U.S. Attorney’s Office.

Eric Weirich, deputy commissioner of the enforcement branch of the California Department of Insurance, said in a joint press conference with the U.S. Attorney’s Office that the scheme involved more than 150 insurance companies and is the largest such case in state history.

“I assure you, this is the first in many cases to come,” Weirich said.

As part of his deal, Drobot agreed to plead guilty to two counts: conspiracy and payment of kickbacks in connection with a federal health care program. He could be sentenced to 10 years in federal prison.

 

Drobot’s attorneys, Janet I. Levine and Jeffrey H. Rutherford of the Los Angeles office of Crowell & Moring, issued a statement Friday saying Drobot “acknowledged and accepts responsibility for his actions. He is providing information to assist the government in its expanding investigations.”

According to a plea agreement, Drobot offered to pay a kickback of $15,000 per lumbar fusion surgery and $10,000 per cervical fusion surgery directed to his hospital. In some cases, patients lived dozens or hundreds of miles from Pacific Hospital, and closer to other qualified medical facilities.

To finance the kickbacks, Drobot inflated the price of implantable devices used during spinal surgeries, knowing that under California law, “medical hardware was considered a ‘pass-through’ cost that could be billed at no more than $250 over what Pacific Hospital paid for the hardware,” the plea agreement stated.

Prosecutors said Calderon arranged meetings between Drobot and other public officials and helped Drobot’s attempt to keep the pass-through law in effect.

SB 863, which closed the loophole, became law on Jan. 1 last year.

The U.S. Attorney’s Office has charged Calderon and his brother, former state Assemblyman Tom Calderon, with political corruption connected to Drobot’s case and an FBI sting operation where agents posed as filmmakers to bribe the senator to introduce favorable legislation.

Pacific Hospital was sold to Santa Fe Springs-based College Health Enterprises in early October. The facility is now named College Medical Center Long Beach and is managed by American Family Care Hospital Management Inc., which is part of Molina Healthcare.

 

Molina spokeswoman Sunny Yu said her company not been approached by investigators probing Drobot or others who may be involved in the case. The hospital’s senior management team does not include anyone who worked there when it was still called Pacific Hospital, nor does the hospital currently perform spinal surgeries, Yu said.

“There is nothing that carried over,” she said. “We’re not even the same business anymore.”

The State Compensation Insurance Fund, a provider of workers’ compensation insurance, also has a pending civil suit against Pacific Hospital, which it filed in June. The hospital, Drobot and his son, Michael Drobot Jr., are named among the defendants. Officials from the State Fund said Friday they do not know how the criminal proceedings will affect their case, which is expected to go to trial in February 2015.

 

“We’re reviewing everything in light of the plea agreement,” said Jennifer Vargen, spokeswoman with the State Fund.

An attorney representing Michael Drobot Jr. acknowledged that investigators looked at his client’s activities, but have not charged or indicted the younger Drobot.

“The only thing I want to emphasize is that Mr. Drobot Jr. had nothing to do with the indictments or pleas,” said attorney Drew Pomerance of the Woodland Hills-based law firm of Roxborough, Pomerance, Nye & Adreani.

Nobody answered the door during a visit to the elder Drobot’s Bayside Drive home in Corona Del Mar on Friday. His two-story, three-car garage residence is nestled among multi-million homes near Bahia Corinthian Yacht Club.