3 doctors held in insurance scheme

Likened to “body snatchers” by Orange County’s top prosecutor, three doctors were arrested Wednesday for their alleged roles in an elaborate insurance fraud scheme in which hundreds of patients across the U.S. were recruited to undergo unnecessary procedures in exchange for money or low-cost cosmetic surgeries.

The arrests bring to 17 the number of people named in the “rent-a-patient” scam allegedly operated out of Unity Outpatient Surgery Center in Buena Park.

Michael C. Chan, a Cerritos obstetrician, William W. Hampton, a Seal Beach surgeon, and Mario Z. Rosenberg, a Beverly Hills gastroenterologist on staff at Cedars-Sinai Medical Center, are accused of performing more than 1,000 unneeded procedures on 940 patients, then billing insurance companies an estimated $30 million for the work.

Each of the doctors is facing 47 felony counts, including conspiracy and insurance fraud, and could receive nearly 50 years in prison if convicted. They were ordered held on bail after their arrests and could be arraigned as early as this morning.

“We’re talking about doctors who were real-life body snatchers,” Dist. Atty. Tony Rackauckas said at a news conference Wednesday.

“It’s unfathomable that a doctor would treat patients as if they were bodies on a medical conveyor belt” for profit.

The California Medical Board is pursuing suspension of their licenses.

The doctors were in custody and could not be reached for comment Wednesday.

Los Angeles attorney Peter Morris, who represents Rosenberg, ardently denied the charges, calling them “false” and defending his client as “one of the most highly respected gastroenterologists in the country.”

“To the extent that there was fraud at Unity, Dr. Rosenberg didn’t know about it and had nothing to do with it,” Morris said. “He provided legitimate services to patients who needed the services.

According to the district attorney’s office, five Unity administrators and nine alleged recruiters, also known as “cappers,” had already been arrested since the case began unfolding about four years ago. One of the cappers has been convicted and sentenced to 12 years in prison. Two other cappers and one administrator have pleaded guilty.

In the scheme, authorities said, cappers would be paid commissions to recruit patients from around the country to have unneeded colonoscopies or other procedures, including what is usually a last-resort surgery for sweaty-palms disease. This operation involves collapsing a lung and clipping a nerve. In exchange, prosecutors said, the patients were rewarded with cash, vacations and cosmetic surgery, including tummy tucks and face-lifts.

Between July 2002 and April 2003, prosecutors said, more than 2,000 patients from more than 30 states were solicited to participate in the Unity scheme, resulting in $90 million in fraudulent claims billed to more than a dozen insurance companies. Those companies ultimately paid Unity $17 million of those claims, prosecutors said.

Chan, 61, was the owner and medical director at Unity, which is now closed.

He is accused of performing 211 unnecessary procedures on 208 patients, billing $9.5 million in claims, of which $1.8 million was paid to the clinic.

Rosenberg, 60, worked at the clinic Saturdays and Sundays, performing 646 procedures -- about half of those colonoscopies -- on 554 patients, Rackauckas said. Insurers were billed $9 million in claims, of which $2.3 million were paid. On one day alone, he performed 30 surgeries, Rackauckas said. And during one weekend, he performed 44 surgeries.

Hampton, 51, is accused of performing 180 procedures on 178 patients, billing $12 million to insurers, of which $1 million was paid. His specialty was sweaty-palms surgery, treating 10 patients on a single day, prosecutors said. On many occasions, he met with patients for the first time on the same day he performed the highly unusual, and dangerous, surgery, prosecutors said.

Deputy Dist. Atty. Rick Welsh, who is leading the prosecution, said he found the case “mind-boggling” on several levels: the volume of the procedures, the boldness of the doctors and the willingness of the patients to put themselves at great potential risk.

Rackauckas, meanwhile, said he hoped the arrests would serve as a strong message to anyone considering taking part in such a scam.

“Doctors have a respected position in our community and are entrusted with our health and well-being,” he said. “Doctors need to know if they commit insurance fraud, they may be trading in their scrubs for prison jumpsuits.”

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christine.hanley@latimes.com