Three Calif. Doctors Arrested in Outpatient Surgery Center Scam

May 17, 2007

The California Department of Insurance and the Orange County District Attorney's Office have arrested three doctors for medical fraud. The doctors are the latest charged defendants in what's being dubbed the Unity Outpatient Surgery Center scheme, and are accused of performing unnecessary surgical procedures and fraudulently billing more than $30 million to medical insurance companies.

Dr. Michael Cheeluen Chan, an obstetrician-gynecologist, Dr. William Wilson Hampton Jr., a general surgeon and Dr. Mario Z. Rosenberg, a gastroenterologist each have 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 is set at $1.8 million for Chan, $1 million for Hampton, and $2.3 million for Rosenberg.

Deputy District Attorney Rick Welsh of the Economic Crimes Unit is prosecuting this case. The arraignment is expected today.

According to the DOI, the doctors participated 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 more than 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 more than $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.

On paper, Chan was the owner and Medical Director of Unity Outpatient Surgery Center in Buena Park, Calif. 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 more than $9.5 million in insurance billing with more than $1.8 million collected for the unnecessary and fraudulent work. Of his patients, 83 percent were referred by cappers who have already been charged.

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 more than $9 million, for which Unity was paid more than $2.3 million. Of Rosenberg's patients, 84 percent were referred by cappers who have already been charged.

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 percent 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.

The Franchise Tax Board and the Medical Board of California provided substantial assistance in the investigation, DOI said.

Source: DOI