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Dr. David Payne Healthcare Fraud Conviction - What Happened?

Doctor behind bars

Dr. David Payne Healthcare Fraud Conviction - What Happened?

Dr. David Payne faced numerous criminal fraud charges.  This blog explains what he was charged with, what he was convicted of and the effect on DWC reimbursement and his medical license.

The Medical Fraud Charges & Conviction

On July 14, 2023 Dr. David Payne was sentenced to 33 months in federal prison for accepting more than $315,000 in bribes and kickbacks. Dr. Payne is a surgeon. He went to trial over six days and was convicted of two counts of honest services wire fraud, and one count of use of an interstate facility in aid of bribery. The factual claim by the government was that Dr. Payne performed spinal surgeries at a Long Beach hospital which was used by its owner, Michael Drobot to use kickbacks and bribes to draw business to his hospital. Most of the patients were workers compensation injury patients. The government claimed that Dr. Payne received bribes from Drobot of up to $15,000 for each spinal surgery. The payments were made as payment for marketing services and other fees per a contract. The government claimed that this contract was a sham and a cover for the illegal payments.

The case started in 2013 and so far, 24 defendants including doctors have been convicted for being part of this scheme. Drobot was sentenced to 63 months in federal prison.  Specifically,  Drobot's plea agreement gave him 5 years in federal prison.  He was ordered by the court to forfeit $10 million to the United States government and to partially satisfy the forfeiture by selling his 1965 Aston Martin, 1958 Porsche, and 1971 Mercedes-Benz automobiles. 

Once convicted the government opposed Dr. Payne's release on bail.  He was eventually released only long enough to self surrender for jail in January 2024.  (See Self Surrender Order)

What has the Medical Board Done?

So how has the Medical Board of California handled Dr. Payne’s situation?

On February 16, 2024 an automatic suspension was issued. It starts with this:

YOU ARE HEREBY NOTIFIED that the Medical Board of California, Department of Consumer Affairs (Board), has automatically suspended Physician's and Surgeon's Certificate No. G 62826 by operation of law after having received and reviewed a certified copy of the record of conviction described below:

1. On or about March 3, 2023, in a criminal proceeding entitled, United States of America v. David Hobart Payne, in United States District Court, Central District, Case No. SA CR No. 17-53(A)-JLS, Respondent was found guilty by way of jury verdict ...

It ends with:

WHEREFORE, THE MEDICAL BOARD OF CALIFORNIA, DEPARTMENT OF CONSUMER AFFAIRS,. HEREBY NOTIFIES YOU THAT, by virtue of said conviction and incarceration, Physician's and Surgeon's Certificate No. G 62826 issued to David Hobart Payne, M.D., was automatically suspended by operation of law pursuant to Business and Professions Code section 2236.1, subdivision (a).

Said suspension shall remain in effect while you are incarcerated, and shall continue thereafter until a hearing may be held pursuant to Business and Professions Code section 2236.1, subdivision (d), or until fmther order of the Board.

YOU ARE FURTHER NOTIFIED THAT you have a right to a hearing on the issue of penalty, as provided by Business and Professions Code section 2236.1, subdivision (d). A request for penalty hearing may be made by delivering or mailing such a request to: Nicole Noonan-Miller, Deputy Attorney General, Depa1tment of Justice, Office of the Attorney General, 600 W Broadway, 18th Floor, San Diego, California 92102.

On February 23, 2024 a formal Accusation was filed on the same grounds.  Read the Accusation against Dr David Payne Here.

In many ways this is like a summary suspension on peer review pending the hearing.

California Workers Compensation Penalty

Meanwhile in April of 2023 the DWC suspended Dr. Payne from participation in the California Workers Compensation system. The letter giving notice started like this:

Dear David H. Payne, M.D., Inc.:

The Administrative Director of the Division of Workers’ Compensation (DWC) is required by
Labor Code section 139.21(a)(1)(D) to suspend you from participation in the California
workers’ compensation system because you are controlled by an individual [David H.
Payne] who has been convicted of a felony or misdemeanor described in subparagraph (A)
of Labor Code section 139.21. Per Labor Code section 139.21(a)(3), an entity is controlled
by an individual if: (1) the individual is or was an officer or director of the entity; (2) is or was
a shareholder with a 10 percent or greater interest in the entity; or (3) held de facto
ownership of the entity or de facto control consistent with the rights and duties of an officer
or directory of the entity (see Villanueva v. Teva Foods (2019) WCAB Case No.
ADJ9332041, 84 Cal. Comp. Cases 198 [significant panel decision]). Enclosed are copies
of the documents relied upon by the Administrative Director as the basis for taking this

Now Dr. Payne may win on appeal but the conviction and even the accusation is (to most) financially devastating. The take away is that before conviction you can lose your right to participate in reimbursement programs. In California upon accusation your license can be suspended or restricted. After conviction the suspension is summary and swift.

Daniel Horowitz is a criminal defense specialist (State Bar of California, Board of Legal Specialization). He focuses on complex cases involving physicians and healthcare issues. If you are facing criminal charges, Daniel Horowitz can assist you in obtaining the best possible defense and protecting your business and your license.

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