Doctors Busted in $30 Million Surgery Scam

Insurance scheme involved hundreds of patients nationwide

AP / Newsweek Magazine 17may2007

SANTA ANA, Calif. — Three doctors were charged with billing insurers for $30 million of unnecessary surgery performed on hundreds of patients recruited from around the country.

Authorities said the patients received money or low-cost cosmetic procedures for participating in the “rent-a-patient” scam at Unity Outpatient Surgery Center.

More than $5 million of the insurance claims were paid, authorities said.

Arrested Wednesday were Dr. Michael Chan, an obstetrician; Dr. William Hampton, a surgeon; and Dr. Mario Z. Rosenberg, a gastroenterologist.

Each was charged with 47 felony counts including conspiracy after billing 19 insurance companies for what authorities said were unnecessary colonoscopies and surgeries on 940 patients. Bail ranged from $1 million to $2.3 million.

Each doctor could face nearly 50 years in prison. The California Medical Board was also pursuing suspension of their licenses.

Fourteen other people — five administrators and nine recruiters — have been charged as part of a four-year investigation.

“Doctors need to know if they commit insurance fraud, they may be trading in their scrubs for prison jumpsuits,” District Attorney Tony Rackauckas said.

Chan, 61, was the owner and medical director at Unity. Authorities said he performed 211 unnecessary procedures on 208 patients, billing $9.5 million in claims, of which $1.8 million was paid to the clinic.

Rosenberg, 60, and Hampton, 51, also performed hundreds of procedures, billing insurers $21 million in claims, of which $3.3 million were paid, prosecutors said.

Their first court appearance was pending. It was not immediately known whether any had retained attorneys.

source: 20may2007

Doctor charged in alleged scam
mistakenly released from OC jail

AP / San Jose Mercury News 17may2007

SANTA ANA, Calif.— A doctor charged in a $30.5 million "rent-a-patient" scam was mistakenly released early Thursday from the Orange County jail, authorities said. A judge later ordered the re-arrest of Dr. Mario Z. Rosenberg, 60, of Beverly Hills—one of three physicians charged in the alleged scam that authorities say cost insurers millions of dollars.

Prosecutors allege the doctors were part of a scheme at Unity Outpatient Surgery Center that recruited patients from across the nation. The patients underwent unnecessary surgery in exchange for money or low-cost cosmetic procedures, prosecutor said.

The three doctors were taken into custody Wednesday.

Rosenberg, a gastroenterologist, had been held on $2.3 million bail but was released Thursday morning after posting bond. A hearing on whether the bail money was from a legitimate source was supposed to occur prior to release, said Deputy District Attorney Rick Welsh, who called it a "clerical mistake."

Along with ordering the re-arrest of Rosenberg, Orange County Superior Court Judge Luis A. Rodriguez delayed to May 29 the arraignments of Cerritos obstetrician Dr. Michael Chan and Seal Beach surgeon Dr. William Hampton.

The judge also denied defense requests to lower bail. Chan was being held on $1.8 million bail, while Hampton's bail was set at $1 million.

Defense attorney Donald Etra defended Hampton, saying he has been a doctor for 27 years and has no criminal record.

"It's not a scam, not a fraud," Etra said. "The district attorney in this case does not have a slam-dunk case."

Chan's lawyer, Benjamin Gluck, said his client met with Orange County prosecutors and gave them information about the Unity case several years ago.

"This is a doctor who has practiced for decades without any complaints," he told the judge.

Attorney Peter Morris, who represents Rosenberg, has also denied the charges, saying his client provided legitimate services to patients.

Each doctor was charged with 47 felony counts, including conspiracy for billing 19 insurance companies $30.5 million after performing unnecessary colonoscopies and surgeries on 940 patients, authorities said.

The doctors could face nearly 50 years in prison if convicted.

source: 20may2007

Doctor accused in scam to be rearrested:

O.C. authorities say release of insurance-scheme suspect
was a mistake stemming from confusion over bail qualification. 

H.G. REZA / Los Angeles Times 18may2007

A doctor arrested this week for his alleged role in a $30-million insurance scam was ordered back into custody Thursday after he was mistakenly released from the Orange County Jail on $2.3-million bail.

Mario Z. Rosenberg, a Beverly Hills gastroenterologist, must show that the money used to post bail was obtained lawfully, said Orange County Superior Court Judge Luis A. Rodriguez. He ordered the Sheriff's Department to rearrest Rosenberg. Jail officials attributed his release to confusion about whether he qualified for bail.

The arrest warrants for Rosenberg and co-defendants Dr. Michael C. Chan and Dr. William W. Hampton required a hearing to determine the source of funds used to secure bail before they could be released, Deputy Dist. Atty. Rick Welsh said. Rosenberg posted bail before a hearing could be scheduled.

Authorities want to ensure the bail money does not come from the alleged insurance fraud.

Attorney Peter Morris, who represents Rosenberg, was not available for comment, a secretary said.

The three doctors were arrested Wednesday in an alleged "rent-a-patient" scam that prosecutors said led to about $30 million in questionable billings to insurance companies. The insurers paid the doctors $5.1 million. The physicians are accused of performing more than 1,000 unneeded procedures on 940 patients. Each is facing 47 felony counts, including conspiracy and insurance fraud punishable by nearly 50 years in prison.

Rodriguez rescheduled the arraignments of Chan and Hampton for May 29 and denied defense requests to lower bail. Bail for Chan, an obstetrician from Cerritos, was set at $1.8 million. Bail for Hampton, a surgeon from Seal Beach, was set at $1 million.

Rosenberg's arraignment will be set after he is arrested.

Donald Etra, who represents Hampton, said the charges against his client stemmed from procedures he performed five years ago. Hampton knew he was the subject of an investigation and spoke to investigators, Etra said.

"The money he earned is not related to any alleged illegal activity," Etra said.

Attorney Benjamin N. Gluck, who represents Chan, said his client had never been accused of misconduct in his practice.

Welsh told the judge the doctors recruited patients from 32 states for the unnecessary procedures.

The alleged scheme used recruiters to persuade people to have colonoscopies and surgery for sweaty palms, which involves collapsing a lung and clipping a nerve. In return, the patients were rewarded with cash, vacations and cosmetic surgery, prosecutors said.

source: 20may2007

Related . . .

Three Doctors Arrested in Unity Outpatient Surgery Center Scam for Performing Unnecessary Surgeries and Fraudulent Insurance Billing Largest medical fraud case in the United States involving 17 defendants Orange County District Attorney's Office

State of California Department of Insurance
Press Release 16may2007

Media Contact: Susan Kang Schroeder, Public Affairs Counsel 714-347-8408 / 714-292-2718 (cell)

Media Contact: Farrah Emami, Spokesperson 714-347-8405 / 714-323-4486 (cell)

SANTA ANA - The California Department of Insurance and the Orange County District Attorney's Office have arrested three doctors in the largest medical fraud prosecution in the nation. The doctors are the latest charged defendants in the Unity Outpatient Surgery Center (Unity) scheme and are accused of performing unnecessary surgical procedures and fraudulently billing over $30 million to medical insurance companies. The Franchise Tax Board and the Medical Board of California have provided substantial assistance in this investigation.

The three defendants are Dr. Michael Cheeluen Chan, 61, Cerritos, an obstetrician-gynecologist, Dr. William Wilson Hampton, Jr., 51, Seal Beach, general surgeon, and Dr. Mario Z. Rosenberg, 60, Beverly Hills, a gastroenterologist. Each doctor has been charged with 47 felony counts, including one count of conspiracy to commit insurance fraud, eight counts of paying cappers, 19 counts of insurance fraud, and 19 counts for using cappers to recruit patients from the victim insurance companies. If convicted, they face a maximum sentence of 49 years and four months. Bail for Chan, Hampton, and Rosenberg is set at $1.8 million, $1 million, and $2.3 million respectively. Deputy District Attorney Rick Welsh of the Economic Crimes Unit is prosecuting this case. The arraignment is expected tomorrow, Thursday, May 17, 2007 at 9:00 a.m. in Department C-5 or C-57, Central Justice Center, Santa Ana. "Insurance fraud is a $15 billion epidemic in California," said Insurance Commissioner Steve Poizner.

"Insurance fraud is not a victimless crime; it has a price tag for every Californian that is equivalent to a $500 fraud tax on every man, woman and child. Fighting insurance fraud is one of my top priorities and together with law enforcement and District Attorneys we will fight fraud wherever it exists."

"The Medical Board of California is pleased to have worked so well with the Orange County District Attorney's Office in our mutual endeavor to protect the public," said Candis Cohen, Information Officer of the Medical Board of California.

"We are talking about doctors who were real life body snatchers, doctors putting people on a medical conveyer belt to make a quick buck," said Orange County District Attorney Tony Rackauckas. "Doctors have a respected position in our community, entrusted with our health and well being. We take this fiduciary relationship very seriously, and we hope that these prosecutions serve as a warning to any doctor who may feel tempted to engage in this behavior. If doctors commit these types of crimes, they may be trading in their scrubs for prison jump suits."

Overview

The defendants in the case of Unity in Buena Park are accused of participating in a $96 million billing scheme that recruited 2,000 healthy people from all over the country to receive unnecessary surgeries in exchange for money or low cost cosmetic surgery. The recruitment of patients, or "capping," is illegal in California. Insurance companies paid Unity more than $17 million during a 10-month period.

The Unity cappers, or recruiters, targeted employees from businesses in over 32 states and covered by PPO insurance plans, as pre-approval from the insurance company would not be a requirement for surgery. More than 1,600 employers were affected by employees who were involved in this scheme. The cappers arranged transportation for the patients, scheduled the surgeries, and coached the healthy patients on what to say. In exchange for undergoing surgery, the "patients" would receive a cash payment, usually between $300 and $1,000 per surgery, or credit toward a free or discounted cosmetic surgery.

The doctors charged in this case are accused of participating in medical insurance fraud for performing medical procedures on healthy people with the knowledge that the patients were being recruited. Chan, Hampton, and Rosenberg are accused of performing 1,037 procedures, resulting in insurance billings for the facilities fees alone that exceeded $30 million. Unity received over $5.1 million in payment as a result of the surgeries performed by the doctors.

Many of the surgeries were performed on Saturdays and Sundays by the doctors. Often they operated on members of the same household on the same day. The doctors are accused of ignoring basic medical protocols such as: 1) Patients receiving surgeries on consecutive days instead of while under one anesthesia; 2) Doctors not meeting the patients prior to operating; 3) Doctors not following up with patients after the procedure was completed; and 4) Doctors not obtaining necessary medical information.

Dr. Michael Chan In order to operate an outpatient surgery center in California, the owner must be a licensed medical doctor. On paper, Chan was the owner and Medical Director of Unity. In practice, he contracted almost complete control of Unity to non-licensed administrators in exchange for 2 percent of the center's fraudulent profits, and obtained the right to perform all gynecological procedures at Unity.

Chan is accused of performing procedures on 208 patients which resulted in over $9.5 million in insurance billing with over $1.8 million collected for the unnecessary and fraudulent work. Of his patients, 83% were referred by cappers who have already been charged.

Dr. Mario Rosenberg Rosenberg, on staff at Cedars-Sinai Medical Center and affiliated with Herbalife, primarily performed colonoscopies and esophagogastroduodenoscopy (EGDs). Rosenberg is accused of performing 646 procedures on 554 patients, which resulted in the fraudulent billing to insurance companies of over $9 million, for which Unity was paid over $2.3 million. Of Rosenberg's patients, 84% were referred by cappers who have already been charged.

Dr. William Hampton Hampton is accused of performing 180 procedures on 178 patients. He primarily performed thoracic sympathectomies, also known as sweaty palms surgeries, which is a highly unusual and dangerous medical procedure. This condition can also be treated with topical creams, medication, and botox. Of the patients that underwent surgery by Hampton, 97% were referred by cappers who have already been charged. Hampton has been indicted by the federal government for his involvement in a Los Angeles surgery center scheme similar to the Unity Outpatient Surgery Center case.s

Unity Defendants

Please visit the Department of Insurance Web site at www.insurance.ca.gov. Non media inquiries should be directed  to the Consumer Hotline at 800.927.HELP. Callers from out of state, please  dial 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833. If you are a member of the public wishing information, please visit our Consumer Services.

source: 20may2007

State of California Department of Insurance

Press Release 21jul2004

For Release: July 21, 2004 Media Calls Only: 916-492-3566 Orange County Surgery Center Owners Charged with Paying Thousands of Healthy Patients to Undergo Unnecessary Surgeries and Bilking Millions by Fraud

*Video of arrests available*

SANTA ANA – 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 today.

WHO ARE INVOLVED?

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.

METHOD OF OPERATION

Unity’s owners would 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 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.

MESSAGES

“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,” said 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.”

LOSS/DAMAGES

During an eight month period from August 2002 to April 2003, Unity owners 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 1600 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 REQUEST FOR PUBLIC’S HELP

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

###

Please visit the Department of Insurance Web site at www.insurance.ca.gov. Non media inquiries should be directed to the Consumer Hotline at 800.927.HELP. Callers from out of state, please dial 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.

source: 20may2007