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Guilty Pleas in Spinal Surgery Kickback Scheme

Five people, including the CFO of a Long Beach, CA, hospital, have been charged in connection to a long-running kickback scheme that involved thousands of illegal referrals and millions of dollars in fraudulent billings.

“Operation Spinal Cap” was a scheme to pay doctors kickbacks for referrals of orthopedic spinal procedures. Surgeons received $15,000 for each lumbar fusion surgery and $10,000 for each cervical fusion surgery. The hospital then billed worker compensation insurers. The alleged perpetrators racked up nearly $600 million dollars in fraudulent claims.

Federal prosecutors filed charges against Joseph Canedo, the CFO of Pacific Hospital in Long Beach, and two surgeons. Canedo was allegedly responsible for tracking the payments to the clinicians as well as calculating the number of patients and the amount of money received from the referrals.

One surgeon, Dr. Mitchell Cohen, agreed to plead guilty to filing a false tax return since he did not include the kickbacks as income. Dr. Phillip Sobol, an orthopedic surgeon, and chiropractor Alan Ivar have agreed to plead guilty after receiving monthly retainers for a decade to refer patients to Pacific Hospital. Sobol faces a federal prison term of up to 10 years while Cohen, Canedo, and Ivar face up to 5 years under their plea agreements.

The Justice Department has recovered billions of dollars in healthcare fraud cases and shows no signs of slowing down. The Pacific Hospital case illustrates the importance of employing an effective compliance department and compliance officer, as well as the fact that individuals accused of participating in illegal schemes may be held criminally responsible and sent to prison for violation of the false claims provision.

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