March 6, 2023 - LOS ANGELES – An orthopedic surgeon has been found guilty by a federal jury of accepting more than $315,000 in bribes and kickbacks for performing spinal surgeries at a now-defunct Long Beach hospital whose owner was imprisoned for committing a massive workers’ compensation insurance fraud, the Justice Department announced today.

Dr. David Hobart Payne, 65, of Irvine, was found guilty late Friday afternoon at the conclusion of a six-day trial. The jury 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. 

According to court documents and evidence presented at trial, Michael Drobot –the owner of 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 doctors and surgeons, have been convicted for participating in the kickback scheme.

United States District Judge Josephine L. Staton scheduled a June 2 sentencing hearing, at which time Payne will face a statutory maximum sentence of 50 years in federal prison.

The FBI, IRS Criminal 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 and Assistant United States Attorneys Billy Joe McLain and Hava Mirell of the Violent and Organized Crime Section are prosecuting this case.
Source: DOJ Release