O.C. surgeon sentenced accepting illicit payments to perform surgeries at corrupt hospital


Date: July 14, 2023

Contact: newsroom@ci.irs.gov

LOS ANGELES — An Orange County orthopedic surgeon was sentenced today to 33 months in federal prison for accepting more than $315,000 in bribes and kickbacks for performing spinal surgeries at a now-defunct Long Beach hospital whose owner later was imprisoned for committing a massive workers' compensation insurance fraud.

David Hobart Payne of Irvine, was sentenced by United States District Judge Josephine L. Staton, who also ordered him to a pay a fine of $20,000, and to forfeit $316,597 in ill-gotten gains.

At the conclusion of a six-day trial, a federal jury on March 3 found Payne guilty of one count of conspiracy, two counts of honest services wire fraud, and one count of use of an interstate facility in aid of bribery.

Michael Drobot – the owner of the Long Beach-based Pacific Hospital – conspired with doctors, chiropractors, and marketers to pay kickbacks and bribes in return for the referral of patients to Pacific Hospital for spinal surgeries and other medical services. These services and surgeries were paid for primarily through the California workers' compensation system. During its final five years, the scheme resulted in the submission of more than $500 million in medical bills for spinal surgeries involving kickbacks.

Payne received bribes from Drobot of up to $15,000 for each spinal surgery that he performed at Pacific Hospital. The top bribe payment was for lumbar spinal surgeries Payne performed on patients at Pacific Hospital with implants from one of Drobot's companies. Drobot and Payne covered up the bribes by disguising them as payments for marketing services and fees based on a sham contract.

In total, Payne received more than $315,000 in illegal payments.

In April 2013, law enforcement searched Pacific Hospital, which was sold later that year, bringing the kickback scheme to an end.

To date, 24 defendants, among them multiple physicians, have been convicted for participating in the kickback scheme. In 2018, Drobot was sentenced to 63 months in federal prison.

"Bribe schemes like [Payne's] cause an insidious harm that lingers for years, leaving victim-patients wondering whether their surgeries were necessary or whether the unethical doctors and hospital executives who treated them as commodities also agreed to implant substandard medical hardware in their bodies," prosecutors wrote in a sentencing memorandum.

The Internal Revenue Service Criminal Investigation, Federal Bureau of Investigation, United States Postal Service Office of Inspector General, and the California Department of Insurance investigated this matter.

First Assistant United States Attorney Joseph T. McNally, Assistant United States Attorneys Billy Joe McLain of the Public Corruption and Civil Rights Section, and Hava Mirell of the Violent and Organized Crime Section prosecuted this case.