Doctor and Ex-Hospital Owner Sentenced to 15 Months in Prison for Massive Health Care Fraud that Occurred on His Watch
SANTA ANA, California – A doctor and the former owner of a Long Beach hospital was sentenced this morning to 15 months in federal prison for taking part in a long-running health care fraud scheme where he authorized sham contracts that concealed over $30 million in illegal kickback payments to physicians who steered spinal surgeries to his hospital. The overall scheme resulted in more than $900 million in fraudulent bills being submitted, primarily to California’s worker compensation system.
Dr. Faustino Bernadett, 65, of Rolling Hills, was sentenced by United States District Judge Josephine L. Staton, who also ordered him to pay a $60,000 fine on top of $1 million he has already forfeited to the United States.
Bernadett, a board-certified anesthesiologist and pain management physician who retired his license last year, pleaded guilty in August to a one-count criminal information charging him with misprision of a felony.
The kickback scheme centered on Pacific Hospital in Long Beach, which specialized in surgeries, especially spinal and orthopedic procedures. Pacific Hospital’s owner, Michael D. Drobot, conspired with doctors, chiropractors and marketers to pay kickbacks in return for the referral of thousands of patients to Pacific Hospital for spinal surgeries and other medical services paid for primarily through the California workers’ compensation system.
In 2005, Bernadett purchased Pacific Hospital from Drobot. Under the terms of the sale, Drobot guaranteed to Bernadett that 75 spinal surgeries per month would be performed at Pacific Hospital or else Drobot’s payout would be reduced by $25,000 for each surgery below that requirement.
Bernadett, who became directly involved with the hospital’s day-to-day operations by late 2007, later learned that Drobot was making illegal kickback payments to physicians in order to cause those physicians to steer spinal surgeries to Pacific Hospital. By January 2008, Bernadett had learned that Drobot concealed the illegal kickback payments by entering into various types of sham contracts – such as management agreements, collection agreements and option agreements.
Instead of putting a halt to Drobot’s kickback scheme, Bernadett authorized the continued use of Drobot’s sham contracts to incentivize surgical referrals to his hospital. Between January 2008 and October 2010 (when Bernadett sold his interest in Pacific Hospital back to Drobot), Pacific Hospital and related entities made more than $30 million in illicit payments to kickback recipients and performed approximately 1,400 kickback-induced spinal fusion surgeries.
“Kickbacks corrupt the doctor-patient relationship and have a deleterious impact on the health care system because they incentivize doctors to put their financial interests before patients’ best interests,” prosecutors wrote in their sentencing memorandum. “More so than other Pacific Hospital executives, [Bernadett] understands the sacred nature of the doctor-patient relationship because he is a physician himself.”
Twenty-four defendants have been charged in connection with the scheme, and 15 of them have been convicted, including Drobot and his son.
Drobot is serving a five-year prison sentence for conspiracy and paying illegal kickbacks, and has admitted that he orchestrated a wide-ranging fraudulent kickback scheme where paid more than $50 million in bribes to doctors to steer hundreds of millions of dollars in spinal surgeries to his hospital. Drobot ultimately profited millions of dollars from the scheme. Drobot currently awaits sentencing after pleading guilty to breaking additional federal laws by violating a court forfeiture order by illegally selling his luxury cars.
The investigation into the spinal surgery kickback scheme was conducted by the FBI; IRS Criminal Investigation; the California Department of Insurance; and the United States Postal Service, Office of Inspector General.
This case was prosecuted by Assistant United States Attorneys Joseph T. McNally of the Violent and Organized Crime Section, Scott D. Tenley of the Santa Ana Branch Office, and Victor A. Rodgers of the Asset Forfeiture Section.