3 Accused of $97-Million Rent-a-Patient Scheme

Three people who ran a Buena Park medical clinic have been charged with bilking insurance companies out of millions of dollars for unnecessary surgeries performed on thousands of patients recruited from around the country.

Authorities say that more than 5,000 people, from August 2002 to April 2003, were taken to the Unity Outpatient Surgery Center, where they underwent procedures they didn’t need, including colonoscopies and surgeries for hemorrhoids, pain management and sweaty palms.

Insurers were billed $97 million for the work, of which they paid $14.2 million, money not yet recovered.

Arrested Tuesday were Tam Vu Pham, 39, his wife, Huong Thien Ngo, 38, both of Fullerton, and Lan Thi Ngoc Nguyen, 48, of Huntington Beach. Collectively, they were charged with 46 felony counts -- many involving large numbers of patients -- including grand theft, conspiracy, insurance fraud and tax evasion. The husband and wife were being held Wednesday in Orange County Jail in lieu of $5-million bail each; the other suspect was held on $1-million bail.

The arrests came as part of a two-year investigation by the Orange County district attorney’s office in conjunction with state insurance and tax officials.

Dist. Atty. Tony Rackauckas said that additional arrests are likely, although he declined to say whether patients or the doctors who performed the surgeries would be among them.

“It’s just the tip of the iceberg,” Rackauckas said. “It is hard to imagine anything more reprehensible than deliberately operating on healthy people solely to gain illegal profits.”

Southern California has become a hub of “rent-a-patient” scams, in which healthy people undergo expensive medical procedures and surgeries in exchange for cash, vacations and cosmetic surgery. Authorities believe scores of clinics are bilking insurers in this manner in Los Angeles and Orange counties. Nationwide, the racket has cost insurers at least $500 million in recent years and has left some patients with serious health complications.

Indeed, many of the surgeries performed in the Orange County case are inherently dangerous and require general anesthesia.

The complaint alleges that the defendants paid nearly $1 million to at least seven middlemen, or “cappers,” to refer patients to Unity. The cappers canvassed for people in 45 states, often targeting friends or co-workers at companies whose insurance plans didn’t require pre-approval for the procedures performed, authorities say. They then allegedly provided transportation to Orange County, made the appointments and coached patients on what to say.

At least 1,600 employers and hundreds of insurance companies -- including California’s workers’ compensation program -- were affected nationwide, authorities said.

Patients were each allegedly paid $300 to $1,000 to undergo an unneeded procedure or earned credits toward cosmetic surgery.

One patient was compensated with eight “makeover plastic surgeries,” said state Insurance Commissioner John Garamendi.

He called the case “one of the most egregious and outrageous insurance frauds I’ve seen in a long, long time.”

Authorities say Unity’s owners set up shell companies through which they billed insurance companies.

One reason California is such a hotbed for the rent-a-patient scam, insurers say, is that state law requires insurers to pay claims in 30 to 45 days, allowing little time to investigate any single claim for fraud before payments are made.

Among the felonies the defendants are charged with is tax fraud, for allegedly not reporting the insurance payments they collected as income. If convicted on all counts, the three could face from 26 to nearly 39 years in prison.