California Dreamin'

As the late James Brown once sang,  Huuuuuuuuuuuuuuh!!!!!!!!

Super highways, Coast Coast to Coast
Doctors, Lawyers and Scam Artist are the Toast
Living in America, eye to eye station to station
Living in America hand to hand across the nation
Living in America got to have a celebration

Well TSB doesn't know why it took so long, but our friends at the WSJ, the bastion of capitalism, finally broke the story today entitled, " In Small California Hospitals, the Marketing of Back Surgery."  Yes Spine Nation, Mssrs. Carreyou, McGinty, and Millman had finally provided the public with an expose that was well, as Stephen Stills would say, "it's been a long time coming."  It seems that the Tri-City Regional Medical Center and Pacific Hospital have been singled out by the authorities as incubators rife with alleged corruption, involving doctors, lawyers, hospital administrators and former convicts.  Before we elaborate on this breaking story, has anyone ever wondered why people eventually get caught?  Well let's put it this way Tri-City billed workers' compensation insurers $65 million up from less than $3 million three years earlier.

The man behind the curtain helping incubate this business was one Paul Richard Randall a consultant to whom Tri-City had paid millions of dollars in marketing fees.  Here was his role;

• Bring cases to the hospital by recruiting surgeons to operate there
• Supply medical implants for the surgeries through distributorships he owned

By last August, the U.S. Attorney in Los Angeles had prepared a charge that if filed in court would accuse Mr. Randall of conspiring to inflate the cost of spinal hardware and use a portion of the proceeds to pay "kickbacks" to surgeons referring patients to Tri-City.  Mr. Randall's defense has been that he is just one of a dozen distributors who mark up the price of surgical hardware and "there's nothing illegal about what I'm doing, my lawyer tells me."  As for the alleged kickbacks, Randall was quoted as saying, "that's not true."  Just a word of advice to Mssr. Randall, "Quelle Horreur, you actually believe what your attorney tells you?"

The status of this investigation is unclear and no charges have been levied as of yet, by the U.S. Attorney in Los Angeles.

As for Tri-City, a hospital official stated that they ended their relationship with Mssr. Randall last year after it had outsted the executive who had hired him.  Based on public knowledge, an internal investigation is under way at Tri-City and that numerous "improprieties" have been found.  A lawyer conducting the internal inquiry said that the hospital did not know that Randall was inflating the cost of spinal-surgery hardware until late 2010, and it was never aware of any possible kickback to doctors.  Duh!!!!  As this expose unfolds one has to wonder whether those involved at Tri-City were living in the Twilight Zone.  TSB can hear Rod Serling, "The smoking gun leads to the shadowy tip of reality, you're on the through route to the land of the different, the bizarre, the unexplainable....go as far as you want on this word, this scam can go as far as you would like on this road, it's limits are only those of the mind itself."

Let's look at some facts.  California employers paid $7.1 billion in insurance premiums to cover workers' comp liability in '10.  Spinal surgery paid for 40% of these claims up from 30% in 2001. 

Mr. Randall, a 52 year old entrepreneur began his career as a hospital marketeer in the mid '90's after serving a brief stint in the Terminal Island Federal Correctional Facility in Long Beach Harbor, California.  Upon serving his time, he went into business with Michael D. Drobot, the owner of another small hospital near Tri-City called Pacific Hospital of Long Beach.  TSB is sure that a few of our readers have their own stories regarding Pacific.

For a decade, Mssrs. Randall and Drobot operated a business that arranged for MRI services. Randall introduced Drobot to doctors to increase spine surgery business at Pacific according to a person with knowledge of the arrangement.  As Mr. Drobot acknowledge through a spokesman, Randall introduced a "few" doctors.  Gotta love that "a few."

What is fascinating about this story is that finally someone has sunk their teeth into an industry that has been another of our industry's dirty little secrets and has become so lucrative that there are private equity investors, chiropractors, surgeons, lawyers, and middlemen scamming and conniving to take advantage of some poor and uneducated migrant worker all for the love of the Almighty Dollar.  The PEI's provide the necessary capital, the lawyers research the law to interpret potential legal violations, the surgeons do the dirty work, and the middleman, well let's just put it this way, they end up taking the fall when things start to unravel. But back to the story.

Mssr. Drobot created several businesses focused on workers' comp patients; 

• A Van Service to shuttle patients back and forth
• A provider of Spanish Interpretation
• A distributorship of metal implants

Between 2001 and 2010 Pacific performed 5,138 spinal fusions, an average of 571 surgeries per year, and billed $533 million, which was three times as much as any other hospital in the state, including much larger facilities.  As usual a business dispute between the two men resulted in Mssr. Randall moving to Tri-City. As a business consultant at Tri-City, Mssr. Randall was paid $3.2 million between 2008 and 2011 as a business development consultant.  Randall obviously understood how to play the game, acting as a distributor, his distributorship would purchase hardware and resell it to Tri-City.  So here is the legal catch, California's WC Division permits hospitals to bill separately for spinal implants, rather than include their cost in the overall charge for surgery, as in the case of Medicare and Medicaid.  Since the California WC Division doesn't put a limit on how much a distributor may mark up the cost of implants when it sells them to a hospital, it does restrict how much a hospital may mark up its own implant cost when it bills an insurance company.

Mssr. Randall's distributorship imposed some steep markups, invoices revealed.  Invoices for 16 spine surgeries at Tri-City between July 2010 and March 2011 for which suppliers charged Mssr. Randall's distributors $326,000, while his distributors in turn charged the hospital $1.1 million, nearly a 400% markup.  Here's where people start to get greedy and rockets red glare while bomb's burst in thin air, in 2010 Randall submitted an invoice for $42, 467 for hardware used in surgery that was purchased at a price of $3,600.  Could it be that Mr. Randall was inflating the cost of his implants to pay chiropractors and physicians kickbacks of approximately $15-$20,000 per case?  By August of 2011 , the federal prosecutors had prepared a proposed pleas agreement for Mssr. Randall, as of this expose, he has not signed it.

Today, Tri-City has initiated policies that include requiring vendors to attest that they comply with all applicable laws and regulations.  In addition, a legal spokesperson for the hospital is examining some "highly questionable transactions" that a former chief executive "caused the hospital to enter into with third party vendors."  The former CEO Arthur Gerrick was removed from this position for misconduct, according to the hospital's general counsel, Beryl Weiner.  Weiner ended Tri-City's relationship with Mr. Randall last summer after receiving an anonymous letter that described his criminal past.

As this story continues to unfold many questions need to be answered. The first question is how does a hospital sign a business development consultant and not run a mandatory background check?  What type of surgeon operates at a facility that mandates use of products that the owner of the hospital distributes?  How does an assisting surgeon make a statement that the outcome had nothing to do with the surgery?  Dipshit, if the patient didn't have the surgery, the patient probably wouldn't have died. What, did the product kill the patient?  Or, did poor surgical judgement?  The reason you go to medical school is to use your education as a guide to make prudent operative decisions.  

TSB could hear the outcry, you socialist, you are anti-business, you don't understand free markets, but here's the reality, let alone the scrutiny that Carreyou, McGinty, and Millman will receive.  Each and everyone of you that works in this industry in sales and wakes up in the morning to provide a better life for you and your family, must be angry.  You should out these people given every opportunity that you get.  This is why delivering healthcare in this country has become nothing more than a free for all.  Lawyers, Chiropractors, Surgeons, Hospital Administrators, and Middlemen attempting to stay one-step ahead of the law, while they abuse the system for nothing more than financial gain, and take advantage of poor uneducated people.  As for the migrant workers' family, they should sue the ass off these surgeons, the hospital, the hospital CEO, the hospital attorney for incompetence because it is easier to look the other way than confront the problem head on.  TSB wants to know what my comrades in the Long Beach area think? Let us know your experience with Tri-City and Long Beach, because we are sure that if there are a dozen distributors like Mssr. Randall, there are quite a few hospitals along the Coast that are involved in these types of deals. As the O'Jays use to sing;

Money, money, money, some people got to have it

Hey, hey, hey, some people really need it

Hey listen to me, y'all do thangs, do thangs bad thangs with it.

For the love of money people will steal from their mother, their brother