Calif. Radiologist Charged in $17 Million Workers’ Comp Fraud Scheme

A Newport Beach, Calif.-based radiologist and neurologist stand accused of orchestrating a $17 million workers' compensation insurance fraud scheme, according to the California Department of Insurance and the Orange County District Attorney's Office.

Radiologist Dr. Sim Carlisle Hoffman owned and operated three separate medical facilities that provided MRI services. In order to generate extra billing, Hoffman allegedly ordered patients to undergo additional nerve testing called electromyography of EMG exams. EMGs are a non-invasive, out-patient test to examine muscle cells for neurological activity. Those tests typically cost $35, according to CDI.

But according to the indictment, Hoffman allegedly billed insurers for a different type of test known as a single-fiber EMG, which is an invasive, painful procedure that can often require hospitalization. Single-fiber EMG tests, which only two doctors in California are licensed to perform, typically cost $330. Hoffman allegedly billed insurers for as many as 20 single-fiber EMGs per patient -- causing cases that should have cost insurers less than $2,000 to exceed $10,000 per patient.

Among the insurers Hoffman is accused of fraudulently billing in the most recent case are Berkshire Hathaway Homestate Cos., California State Compensation Insurance Fund, Commercial Property and Casualty Insurance, Fireman's Fund Insurance Co., Liberty Mutual, Travelers Insurance, and Zenith Insurance Co.

The indictment charges Hoffman with 592 felony counts of insurance fraud from his time as the owner of Better Sleeping Medical Center, and 291 additional counts of insurance fraud for his time as the owner of a separate facility, Advanced Professional Imaging. He is also charged with one felony count of aiding and abetting the unauthorized practice of medicine. In 2001, Hoffman was disciplined by the Medical Board of California for excessive billing and subjecting a patient to radiology procedures that weren't medically necessary.

The indictment also names as defendants Dr. Thomas Heric, a neurologist who is charged with 296 counts of felony insurance fraud and one count of aiding and abetting the unauthorized practice of medicine; Beverly Mitchell, the administrator of all of Hoffman's billing who faces the same charges as Hoffman; and Louis Santillan, who worked in billing collections for Hoffman and faces 141 felony counts of insurance fraud.

If convicted, Hoffman and Mitchell face a maximum sentence of 892 years in state prison; Heric faces up to 315 years; and Santillan faces up to 150 years.

According to the indictment, authorities uncovered the alleged scheme in 2008 after two Better Sleeping Medical Center employees filed a complaint with the California Department of Health Services, accusing Hoffman of operating facilities that were unsanitary and lacked proper patient care.

The complaint was forwarded to Don Marshall, vice president of the national anti-fraud program for Zenith.

Based on the complaint, Zenith began a fraud investigation into BSMC and API and contacted CDI in July 2008. Zenith forwarded evidence that BSMC was not conducting an appropriate medical business and was overbilling for procedures that had no medical value or necessity.

CDI began investigating this case in July 2008 and turned over the case to the OCDA in June 2010. Following an extensive, lengthy joint investigation, the OCDA presented the case to the Orange County Grand Jury in May 2011.

(By Jeff Jeffrey, Washington Correspondent: [email protected])