Judge Curtis A. Kin, Case Number: 23STCP03033, Date: 2024-04-23 Tentative Ruling

Petitioner Jeffrey David Gross, M.D. seeks a writ of mandate directing respondent Medical Board of California, Department of Consumer Affairs, State of California (“Board”) to reverse the revocation of his license to practice medicine.

On May 2, 2022, the Board filed an Accusation against petitioner after petitioner’s conviction for felony conspiracy to commit honest-services mail and wire fraud. Petitioner was charged with the following four causes for disciplinary action: (1) conviction of a crime substantially related to the qualifications, functions and duties of a person licensed to practice medicine, pursuant to Business and Professions Code section 2234, subdivision (a),[1] and section 2236, and under California Code of Regulations section 1360; (2) dishonest or corrupt acts, pursuant to section 2234(e) and Welfare and Institutions Code section 14107; and (3) unprofessional conduct, pursuant to section 2234(a).[2] (AR 11-19.)

A hearing on the Accusation was held before an administrative law judge (“ALJ”) on May 8, 2023. (AR 760.) Following the hearing, the ALJ issued a Proposed Decision revoking petitioner’s Physician and Surgeon Certificate and ordering him to pay the Board’s costs of investigation and prosecution of the matter in the amount of $15,832.50. The Board adopted the Proposed Decision, and its Decision became effective on September 8, 2023. (AR 759-783.)

The evidence demonstrated that Petitioner was issued Physician’s and Surgeon’s Certificate No. G 79394 on July 6, 1994. At the time of hearing, the Certificate was set to expire on November 30, 2023. (AR 33, 763.) An automatic suspension order preventing petitioner from practicing medicine was issued based on petitioner’s incarceration, an order to which petitioner objected. On July 13, 2022, the suspension order was terminated. (AR 33-95, 765-66.)

Petitioner is a neurosurgeon. He became board certified in neurological surgery in 2005, but his certification was withdrawn in approximately 2022. He formerly operated Oasis Medical Providers, Inc. (“Oasis”), a medical practice in Laguna Niguel, California. From 2005 through 2013, petitioner performed surgeries and other medical procedures on some of his patients at Pacific Hospital of Long Beach, California (“Pacific Hospital”). (AR 149, 610, 616, 627, 722, 763.)

Pacific Hospital closed in the fall of 2013 following a raid by federal authorities in a criminal investigation of alleged healthcare fraud. (AR 622-23, 663-66, 763.) On January 23, 2018, a 14-count Indictment was filed against petitioner in the United States District Court, Central District of California, Case No. SA CR 18-00014-CJC. Count One of the Indictment charged petitioner with conspiring with Pacific Hospital's owner, Michael D. Drobot, and others to defraud patients of their right to honest services by accepting bribes and kickbacks paid to induce petitioner to refer patients to Pacific Hospital for spinal surgeries and other medical services. (AR 97-125, 763.)

On July 16, 2020, petitioner entered into a plea agreement in which he agreed to plead guilty to Count One of the Indictment. (AR 137-62, 764.) Petitioner admitted he conspired to commit honest-services mail and wire fraud in violation of Title 18, United States Code, section 371, a felony, by receiving bribes and kickbacks disguised as legitimate payments under three agreements with Pacific Hospital and Pacific Specialty Physician Management, Inc. (“PSPM”), an affiliated company controlled by Drobot. In addition, petitioner admitted that, if he used hardware during surgeries from a particular distribution company formed by Drobot, petitioner was paid $5,000 for doing so. Petitioner admitted that he knew one purpose of the agreements was to induce him to bring spinal surgery patients to Pacific Hospital. During this time, petitioner “referred dozens of patients to Pacific Hospital for spinal surgeries based in part on payments made to him under those agreements.” Petitioner admitted that he understood the amounts paid to him by Drobot “constituted bribes and kickbacks to induce him to refer patients to Pacific Hospital” and that, in furtherance of the scheme, he and his co-conspirators “transmitted items by mail and interstate wire communications.” Petitioner further admitted that he did not disclose this information to his patients. He admitted that had the patients known of the payments, they may have explored other options related to their medical care. Petitioner admitted that Drobot paid him a total of $622,936 under the agreements between April 2008 and May 2013. (AR 148-51, 708-15, 764-65.)

A sentencing hearing in the criminal case was held on May 21, 2021. (AR 174-245.) At that hearing, the court noted mitigating factors in sentencing petitioner, including his assistance in the investigation and prosecution of other individuals; however, the court also noted at the outset that probation was not a suitable sentencing outcome for the case. (AR 180-86.) In his statement at the sentencing hearing, petitioner said he learned from and understood the nature of his lack of disclosure in his practice. He expressed regret but took solace in the quality of medical care he believed he provided. He said that in working through his understanding of honest services fraud, he found humility that prompted him to work hard on bettering himself. He did not think that participating in the scheme would compromise his service to his patients. (AR 198-204, 766-67.)

Two of petitioner’s former patients appeared at the sentencing hearing, both of whom discussed what they believed to be substandard care and their need for restitution. The court indicated a restitution hearing would be conducted at a later time. (AR 205-22.) Patient R.C. told the court his spinal surgery had been delayed, and he had been made to drive 96 miles to Pacific Hospital for his surgery. (AR 210.) Patient A.G. told the court that he had undergone spinal surgeries with the implants. He had learned about the fraud allegations against petitioner and was shocked. He had been directed by petitioner to Pacific Hospital. When he asked Petitioner why he had to go to Long Beach, petitioner said, “that’s where his people were.” (AR 221.)

In sentencing petitioner, the court considered the nature and circumstances of the offense and that, during a five-year period, petitioner, a licensed neurosurgeon, participated in a scheme that paid doctors and chiropractors kickbacks in return for referring patients to Pacific Hospital for surgeries and other services. The court noted that petitioner was paid about $15,000 per referred patient and $5,000 for implanting into his patients hardware from Drobot’s medical device company. Petitioner accomplished receipt of the funds through sophisticated methods, including a sham sublease agreement, an option agreement, and an outsource collections agreement under which petitioner assisted in collections, gaining approximately $623,000. (AR 228-30, 708-09.) The court stated: “[I]n a scheme such as this, as I have said before on many occasions now, kickbacks to doctors interfere with the doctor-patient relationship and taint the independent medical decision-making process. Quite simply, this scheme introduced greed into the physician-patient relationship.” (AR 228-30, 766-67.) The court noted the importance of allowing patients the peace of mind in knowing their doctor is considering only their best interest, but here petitioner picked the facility and hardware that earned him upfront payments, robbing his patients of that peace of mind. (AR 230-31.) The court noted that this is not a case where the lack of medical necessity was proven as set forth in the plea agreement, “[b]ut it is a case where the unknown is exactly part of the problem.” (AR 232.)

Petitioner was sentenced to 15 months in federal prison, followed by three years of supervised release. He was ordered to forfeit $622,936 to the government. After a restitution hearing, he was ordered to pay a total of $45,000 in victim restitution to three patients who underwent spinal surgery at Pacific Hospital and who received implant hardware for which petitioner received kickbacks from Drobot. (AR 165-73, 229, 235-44, 246-58, 765.) Petitioner surrendered to federal correctional authorities in August 2021 to begin his prison sentence. (AR 259, 765.)

In support of its prayer for recovery of the costs of investigation and enforcement of the administrative case, pursuant to section 125.3, Complainant submitted a cost certification stating that the Department of Justice billed the Board for $23,327.50 in case-related costs through April 18, 2023 and expected to bill the Board another $1,730 in costs up to the start of the hearing, for a total of $25,057.50. (AR 19, 260-262, 767.)

Petitioner testified at the hearing that, when he first read the Indictment, he did not believe he had done anything wrong. He utilized the services of the hospital’s own attorney, Michael Tichon, in drafting and negotiating the agreements between him and Pacific Hospital and PSPM. He trusted Tichon, who died before petitioner was indicted, to provide good advice and had no reason to believe the agreements were unlawful. (AR 642-48, 666-67, 712, 767.) Petitioner said the agreements did not affect his medical decision making for his patients, and he maintained his usual conservative treatment approach. Petitioner noted that the plea agreement includes a statement that it is not meant to indicate that petitioner provided any patients with substandard care or that any treatment he recommended, prescribed, and/or delivered was not medically necessary. As to patient notification, petitioner testified that he posted a sign in his office disclosing that Oasis provided services for a number of professionals and entities, including health care facilities where patients may have had or are recommended to have treatment. This, he said, included Oasis’ agreements with PSPM and Pacific Hospital. (AR 641-60, 675-77, 767-68.)

Petitioner fought the criminal charges for about two years before agreeing to plead guilty. He testified that, during the plea negotiations, he became aware of challenges in the case of a jury instruction for honest-services fraud that led him to believe he faced an uphill battle for an acquittal. Therefore, he admitted to having conspired with Drobot and others to commit honest-services mail and wire fraud. (AR 665-70, 768.)

Petitioner testified that the surgeries he performed at Pacific Hospital were on personal injury lien patients. He would operate on the patients in return for a lien on any recovery in the patient’s personal injury case. Pacific Hospital also received a lien for its costs. If the patient lost the personal injury case, petitioner had the right to pursue payment from the patient. Petitioner testified that he never did so. Petitioner testified that he treated these patients at Pacific Hospital because other hospitals would not admit the patients, who were often uninsured and unable to pay out of pocket for their care. He said his privileges at Pacific Hospital allowed him to provide surgical care to patients who otherwise may not have received it. Additionally, he testified that he was generally not paid the entire bill for a surgery on a personal injury lien patient and that he discounted an estimated two million dollars from his usual and customary charges for surgeries on these patients. (AR 605-10, 637-39, 768-69.)

Petitioner testified that he is current on the restitution and forfeiture payments, although he still owes some amount. He was released from prison in January 2022 to a halfway house, followed by home confinement. On July 5, 2022, petitioner was released from home confinement and placed on supervised release. (AR 687-88, 720, 765.)

Petitioner is licensed to practice medicine in both Nevada and Utah. The Nevada State Board of Medical Examiners placed petitioner’s license on probation for four years. In November 2022, the Division of Licensing of the Department of Commerce of the State of Utah placed petitioner’s license on probation for three years. The disciplinary charges are based on the same criminal conviction and underlying conduct as here. Petitioner was in compliance with the terms of the probationary orders. In satisfying his probationary conditions, he had competed a two-day course in medical ethics and professionalism and additional education requirements. He passed an Ethics and Boundary Assessment and was working on completing required community service. (AR 472-478, 510-11, 514-536, 689-93, 769-70.)

At the time of the hearing, petitioner was practicing medicine in Nevada in a solo practice, primarily treating patients with private insurance with some personal injury lien patients. He treats Medicare and Medicaid patients without charge as a way of giving back to the community. He acknowledged that, as a result of the criminal conviction, he has been excluded from billing federal entities for ten years. (AR 717-19, 721, 769.)

No character witnesses testified at the administrative hearing; however, letters of support for petitioner were admitted into evidence as administrative hearsay. These letters were from 2021 and directed to the sentencing court in the criminal case. They described petitioner as a highly skilled and professional surgeon who went above and beyond what was expected in providing medical care. Petitioner’s psychotherapist wrote that petitioner had realized he had a history of over-compliance with requests and demands of others and now knows that escaping discomfort and trying to meet the demands of financial pressure caused a major lapse in judgment. (AR 184-85, 479-503, 537-39, 677-87, 770.)

Petitioner agreed that a physician has a duty to look after a patient’s interest, and that the patient-physician relationship should be free from improper influence. He testified that some patients came from long distances to Pacific Hospital, even coming from Nevada because it was the only place where he could treat uninsured injured patients. (AR 695-700.) Petitioner acknowledged having referred to personal injury lien billing as an “orgy of profit” but stated his comments were taken out of context. (AR 705.)

In analyzing the evidence in its Decision, the Board disagreed with petitioner’s contention that his criminal conduct did not arise from or occur during patient care, treatment, management, or billing, making it less serious for disciplinary purposes than a crime that did. The Board found, as did the court in the criminal proceedings, that petitioner conspired to defraud patients of their right to honest services in their medical care and treatment by accepting bribes and kickbacks intended to influence their care, thereby introducing greed into the physician-patient relationship and depriving patients of the peace of mind needed when going through a surgical procedure. (AR 771.)

The Board also found that petitioner downplayed the gravity of his crime and did not acknowledge any wrongdoing. Petitioner also appeared to blame the deceased attorney for Pacific Hospital for his unwilling participation in a crime, in contradiction to admissions in his plea that the amounts paid to him by Drobot constituted bribes and kickbacks to induce him to refer his patients to Pacific Hospital. The Board noted that, in spite of a sign placed at Oasis indicating that Oasis provided services for a number of professionals and entities, petitioner admitted he did not disclose that the unstated purpose of the agreements with those entities was to induce him to refer patients to Pacific Hospital. (AR 771-72.)

Although petitioner claimed there was no harm to patients because the agreements with Pacific Hospital and PSPM never affected his medical decision-making, the award of $45,000 in victim restitution to three patients who received implant hardware for which petitioner received kickbacks was inconsistent with that claim. Petitioner’s belief that his crime was technical and victimless was not much different from his original belief when he first learned of the Indictment that he had done nothing wrong and weighed against a finding of a substantial change in attitude from that which existed at the time of the conspiracy. (AR 772.)

The Board found that Complainant proved each of the three causes for discipline by clear and convincing evidence. (AR 775-78.) In considering the appropriate level of discipline, the Board noted its primary purpose of public protection and secondarily that discipline should aid in the rehabilitation of the licensee. It considered the Manual of Model Disciplinary Orders and Disciplinary Guidelines (12th Edition 2016 (“Guidelines”). It noted the following differences in the Guidelines: (1) if a physician’s criminal conviction or dishonest act is substantially related to the qualifications, functions, or duties of a physician and surgeon and arises from or occurs during patient care, treatment, management, or billing, the Guidelines recommend a minimum disciplinary action of a one-year suspension and seven years of probation; (2) for a felony criminal conviction not arising from patient care, treatment, management or billing, the Guidelines recommend a minimum of seven years of probation without the suspension; (3) for dishonest acts not arising from or occur during patient care, treatment, management, or billing, the Guidelines recommend a minimum disciplinary action five years of probation; and (4) the maximum disciplinary action for all of these forms of unprofessional conduct is license revocation. (AR 296-97, 778-79.)

In its Decision, the Board determined that revocation of petitioner’s Certificate was appropriate and within the Board’s discretion. (AR 773-82.) The Board considered the rehabilitation criteria of California Code of Regulations, title 16, section 1360.1 (CCR Section 1360.1, subdivision (b)). Applying the criteria, the Board found:

crime(s). [Petitioner]’s crime was a serious felony involving dishonest and corrupt acts in [petitioner]’s medical practice. It resulted in a 15 - month federal prison sentence and three years of supervised release.

[Petitioner] has no other criminal record or prior record of professional misconduct.

(3) The time that has elapsed since commission of the act(s), professional misconduct, or crime(s). [Petitioner] committed the crime between April 2008 and May 2013. Over 10 years have elapsed since then.

probation, restitution, or any other sanctions lawfully imposed against such person. [Petitioner] is on supervised release. Complainant did not contend or prove [he] has violated any terms of that release. He is current on payments on the forfeiture and restitution orders against him, but an unspecified amount is still owing.

(5) The criteria in subdivisions (a)(1)-(5), as applicable. Subdivision(a)(1) of the regulation concerns the nature and gravity of the crime, which is addressed above. Subdivisions (a)(2)-(5) concern parole or probation and any modification of terms and parole or probation. There was no showing of any modification of the terms of [petitioner’s] supervised release.

(7) Evidence, if any, of rehabilitation submitted by the licensee. [Petitioner] agreed to plead guilty and completed his prison sentence on the conviction. He has not committed any similar misconduct since his criminal conviction, and he is gainfully employed in private medical practice in Nevada. [Petitioner] has also completed ethics and continuing education training in relation to the probation orders for his medical licenses in Nevada and Utah.

After considering all the criteria, the Board determined that petitioner had not made a showing of rehabilitation. Citing In re Gossage (2000) 23 Cal.4th 1080, 1096, 1099, the Board noted that petitioner’s conviction and misconduct are serious and evidence bad character requiring a stronger showing of rehabilitation. The Board acknowledged that, while the conduct ended in 2013, the criminal conviction is more recent, and petitioner was only released from prison the previous year, leaving little time in which to assess rehabilitation. Petitioner’s good behavior while under supervision was accorded little weight. (AR 781.) Acknowledging the drastic penalty of revocation, the Board concluded that “with serious misconduct and limited evidence of rehabilitation, allowing [petitioner] to continue practicing would not be protective of the public, which is the highest priority for the Board in exercising its licensing, regulatory, and disciplinary functions.” (AR 781-82.)

Finally, in evaluating the request for cost recovery in the amount of $25,057.50, petitioner argued that two Deputy Attorneys General had worked on the case, resulting in unnecessary and duplicative work. (AR 770.) The Board determined that evidence did not support a finding that the full amount of the original Deputy Attorney General’s costs were reasonable, and the hours and costs seemed disproportionate to what occurred during the relevant time frame, which included filing the Accusation, filing the request to set the matter for hearing, and preparing the notice of hearing. Thus, $5,000 of costs for the original Deputy Attorney General was allowed, and the remaining $9,225 was disallowed. The total costs of $15,832.50 were reasonable. (AR 772, 782-83.)

On August 22, 2023, petitioner filed a Verified Petition for Writ of Administrative Mandamus and/or Prohibition. On October 4, 2023, respondent filed a Return by Way of Answer.

On September 8, 2023, the Court denied petitioner’s ex parte application for stay of the Board’s decision to revoke petitioner’s license.

On February 23, 2024, petitioner filed an opening brief. On March 25, 2024, respondent filed an unsigned opposition. On March 26, 2024, respondent filed a signed opposition. On April 10, 2024, petitioner filed a reply. On April 10, 2024, petitioner re-filed the opening brief with citations to the administrative record. The Court has received an electronic copy of the administrative record and hard copy of the joint appendix.

CCP § 1094.5 is the administrative mandamus provision providing the procedure for judicial review of adjudicatory decisions rendered by administrative agencies. Under CCP § 1094.5(b), the pertinent issues are whether the respondent has proceeded without jurisdiction, whether there was a fair trial, and whether there was a prejudicial abuse of discretion. An abuse of discretion is established if the agency has not proceeded in the manner required by law, the decision is not supported by the findings, or the findings are not supported by the evidence. (CCP § 1094.5(b).)

“Where the decision of a statewide administrative tribunal lacking constitutional authority to exercise judicial functions substantially affects fundamental rights, particularly the right to practice one’s profession or trade, courts must exercise their independent judgment in determining whether the administrative findings are supported by the weight of the evidence. [Citations.]” (Cadilla v. Board of Medical Examiners (1972) 26 Cal.App.3d 961, 966; see also Li v. Superior Court (2021) 69 Cal.App.5th 836, 846 [“The independent judgment standard of review applies to agency decisions revoking or suspending a medical license”].) “To the extent an administrative decision involves a question of law, including the interpretation of statutes and application of judicial precedent, the reviewing court exercises independent judgment.” (Neptune Management Corp. v. Cemetery and Funeral Bureau (2024) 100 Cal.App.5th 1007, 2024 WL 1207360 at * 2.)

“However, the propriety of a penalty imposed by an administrative agency is a matter vested in the discretion of the agency and its decision may not be disturbed unless there has been a manifest abuse of discretion. [Citations.]” (Cadilla, 26 Cal.App.3d at 966; see also Williamson v. Board of Medical Quality Assurance (1990) 217 Cal.App.3d 1343, 1347.) If reasonable minds can differ about the propriety of the disciplinary action, there is no abuse of discretion. (County of Los Angeles v. Civil Service Commission (1995) 39 Cal.App.4th 620, 634.)

Petitioner contends that the issue of whether Count One of the federal Indictment to which he pleaded guilty subjects him to discipline under Business and Professions Code section 2236(a) is reviewed de novo. (Corr. Opening Br. at 8:12-19; Reply at 2:12-22.) The Court agrees. Because the issue requires the interpretation of section 2236(a), the Court exercises independent judgment.

However, if the Court determines that petitioner is subject to discipline under section 2236(a), the propriety of the discipline imposed by the Board is reviewed for manifest abuse of discretion. Accordingly, with respect to whether revocation of petitioner’s license, as opposed to suspension and/or probation, was proper, the Court agrees with respondent that a “manifest abuse of discretion” standard of review applies. (Opp. at 15:19-23.)

As a preliminary matter, the deadline to file and serve the opening brief was February 23, 2024, and the deadline to file and serve the opposition was March 25, 2024. (9/21/23 Minute Order; CCP § 12a(a) [with respect to opposition, deadlines falling on Sunday extended to next court day].) Nevertheless, the Court considers the corrected opening brief and the opposition filed on March 26, 2024, even though both were filed and/or served after their deadlines. The corrected opening brief cites the administrative record, which petitioner did not have at the time the opening brief was filed. (2/23/24 Opening Br. at 1, fn. 1.) No additional argument was added to the opening brief. (Reply at 4:4-5.) With respect to the opposition, the opposition filed on March 26, 2024 differs only based on the signature of counsel at the end of the points and authorities. Petitioner did not object to the re-filing of the opposition in the reply. Accordingly, the Court considers the corrected opening brief and the opposition filed on March 26, 2024.

Petitioner contends that the threshold issue is whether his actions for which he pled guilty in federal court arose from patient care, treatment, management, or billing. (Corr. Opening Br. at 2:14-16.)

Business and Professions Code § 2236(a) provides: “The conviction of any offense substantially related to the qualifications, functions, or duties of a physician and surgeon constitutes unprofessional conduct within the meaning of this chapter. The record of conviction shall be conclusive evidence only of the fact that the conviction occurred.”

Whether the misconduct at issue is substantially related to the qualifications, functions, or duties of a physician is clarified by section 1360 of title 16 of the California Code of Regulations:

(a) For the purposes of denial, suspension or revocation of a license pursuant to Section 141 or Division 1.5 (commencing with Section 475) of the code, a crime, professional misconduct, or act shall be considered to be substantially related to the qualifications, functions or duties of a person holding a license if to a substantial degree it evidences present or potential unfitness of a person holding a license to perform the functions authorized by the license in a manner consistent with the public health, safety or welfare. Such crimes, professional misconduct, or acts shall include but not be limited to the following: Violating or attempting to violate, directly or indirectly, or assisting in or abetting the violation of, or conspiring to violate any provision of state or federal law governing the applicant's or licensee's professional practice.

(b) In making the substantial relationship determination required under subdivision (a) for a crime, the board shall consider the following criteria:

The Manual of Model Disciplinary Orders and Disciplinary Guidelines (12^th Edition 2016) (“Guidelines”) provides for penalties for the conviction of a crime “[s]ubstantially related to the qualifications, functions or duties of a physician and surgeon and arising from or occurring during patient care, treatment, management or billing.” (AR 297, emphasis in original.) The minimum penalty is stayed revocation of a medical license, one year suspension, and at least 7 years probation. (AR 297.) The maximum penalty is revocation of a medical license. (AR 297.)

Petitioner does not dispute having pled guilty to one count of honest-services mail and wire fraud in violation of 18 U.S.C. § 371. (AR 137-162.) Petitioner disputes the guilty plea an resulting conviction having served as the basis for revocation of his physician license.

Petitioner maintains that his plea agreement provided that the quality of care that he provided was not negligent or that his services were not medically necessary. (AR 151-52 [“These stipulated facts are not meant to indicate that [petitioner] provided any patients with substandard medical or surgical care or that any treatment he recommended, prescribed, and/or delivered was not medically necessary”].) However, as admitted by petitioner in the plea agreement on July 12, 2020: “As a physician and neurosurgeon, [petitioner] owed a fiduciary duty to his patients to provide conflict-free medical advice and advice concerning the location of a patient’s surgery.” (AR 149.) Petitioner admitted that his patients have a right to honest services. (AR 146.) Having accepted $622,936.00 in kickbacks in exchange for referring dozens of patients to Pacific Hospital for spinal surgeries and other medical services, petitioner knowingly deprived his patients of the right to honest services. (AR 146, 149, 151.) Petitioner did not disclose that he entered into sublease, option, and collection agreements with Pacific Hospital’s owner, which compensated petitioner for referring spinal surgery patients to Pacific Hospital and using hardware from a company formed by the owner. (AR 149-51.) Petitioner also admitted that the kickbacks he received “were material to defendant's patients because they were capable of influencing patients' medical decisions, including the location of any surgery that was recommended.” (AR 151.) “Had [petitioner’s] patients known of these payments, they may have explored other options related to their medical care.” (AR 151.)

Based on the foregoing, petitioner’s actions were substantially related to the qualifications, functions or duties of a physician and surgeon and arose from or occurred during patient care, treatment, management or billing, as set forth in the disciplinary Guidelines. (AR 297.) Petitioner had a duty to avoid conflicts concerning the treatment of patients, including the location and facility where they would receive surgeries and the hardware used during those surgeries. Petitioner violated that duty by accepting kickbacks, which could have influenced his decision to refer patients to Pacific Hospital to receive spinal surgeries and use hardware from a company formed by Pacific Hospital’s owner.

Petitioner may not avoid discipline by arguing that the surgical services that petitioner provided were adequate or medically necessary. Deficient quality of care is not necessary to impose discipline under section 2236(a), 16 C.C.R. § 1360, or the Guidelines. The plea agreement addresses petitioner’s fiduciary duty to his patients to select a location for surgery without conflict of interest, which undoubtably occurred during patient care and treatment.

With respect to the criteria for making the making the “substantial relationship determination” set forth in 16 C.C.R. § 1360(b), even though the kickbacks ended more than 10 years ago in 2013, the nature and gravity of the crime and the nature and duties of a physician and surgeon weigh in favor of the imposition of discipline with respect to petitioner’s physician license. As stated by the Judge Staton during the federal sentencing proceedings, petitioner’s financial arrangement with Pacific Hospital’s owner introduced an element of greed into the physician-patient relationship and tainted the independent medical decision-making process. (AR 230.) Petitioner had a duty to consider only the best interest of his patients in selecting a facility for surgery and the hardware to be used during the surgery. (AR 231.) Petitioner selected the facility and hardware that provided him upfront payments. (AR 231.) Even if the surgeries were medically necessary, the Court agrees with Judge Staton that the “unknown [with respect to unsuccessful surgeries] is exactly part of the problem,” as those patients treated at Pacific Hospital with hardware which provided an upfront financial gain to petitioner will not know whether the lack of success in their surgeries may have resulted in whole or in part from the financial arrangements that petitioner had with Pacific Hospital’s owner. (AR 231-32.)

Petitioner also argues that the definition of honest services is not clear, based on a U.S. Supreme Court case decided after the administrative hearing. Petitioner’s citation to Percoco v. United States (2023) 598 U.S. 319 is unavailing. Percoco dealt with “whether a private citizen with influence over government decision-making can be convicted for wire fraud on the theory that he or she deprived the public of its ‘intangible right of honest services.’” (Percoco, 598 U.S. at 322.) This case concerns whether a physician’s acceptance of payments in exchange for referring patients to a specific hospital for surgery and using specified hardware during surgery is substantially related to the qualifications, functions, or duties of a physician and surgeon. Further, petitioner’s conviction for conspiracy to commit honest services mail and wire fraud remains valid, even if the scope of the honest services fraud has been limited. Accordingly, petitioner’s conviction remains a valid basis to impose discipline with respect to his physician license.

For the foregoing reasons, exercising its independent judgment, the Court finds that petitioner’s physician license is subject to discipline under section 2236(a), 16 C.C.R. § 1360, and the Board’s disciplinary Guidelines.

Petitioner argues that revocation of his physician license was excessive. (Corr. Opening Br. at 9:13-10:26.) Petitioner contends that he does not pose a risk to the public, that he has decades of experience, and that section 2229(b) required the Board to calibrate the discipline to aid in petitioner’s rehabilitation.

In assessing the propriety of a penalty, the “overriding consideration … is the extent to which the employee's conduct resulted in, or if repeated is likely to result in, ‘[h]arm to the public service.’ [Citations.] Other relevant factors include the circumstances surrounding the misconduct and the likelihood of its recurrence.” (Skelly v. State Personnel Bd. (1975) 15 Cal.3d 194, 218.) “The revocation or suspension of a license is not penal, but rather, the Legislature has provided for such to protect the life, health and welfare of the people at large ….” (Furnish v. Board of Medical Examiners (1957) 149 Cal.App.2d 326, 331.)

Revocation of petitioner’s license was not a manifest abuse of discretion. Petitioner violated the fiduciary duty owed to his patients by accepting kickbacks over a five-year period in exchange for referring the patients to Pacific Hospital and using hardware from a company formed by Pacific Hospital’s owner. (AR 148-51, 708-15, 764-65, 780.) Even if petitioner’s quality of care was adequate, petitioner violated the trust his patients placed in him to consider solely their best interest in making decisions with respect to serious medical treatment. Petitioner was aware of anti-kickback laws before being indicted. (AR 696.) Despite this knowledge, petitioner entered into contracts which ensured payments in exchange for referrals and usage of hardware.

The Guidelines provide for the Board to exercise its discretion to impose the maximum penalty of revocation for conviction of a crime “[s]ubstantially related to the qualifications, functions or duties of a physician and surgeon and arising from or occurring during patient care, treatment, management or billing.” (AR 297.) The Board was entitled to revoke petitioner’s physician license.

“Protection of the public shall be the highest priority for the Medical Board of California in exercising its licensing, regulatory, and disciplinary functions. Whenever the protection of the public is inconsistent with other interests sought to be promoted, the protection of the public shall be paramount.” (§ 2001.1.) A reasonable person could find that to protect the public, the Board was entitled to revoke petitioner’s license. (See Yazdi v. Dental Board of California (2020) 57 Cal.App.5th 25, 34 [“The fact that reasonable minds might differ as to the propriety of the penalty imposed fortifies the conclusion that the administrative body acted within its discretion”].)

Further, during the administrative hearing, petitioner appeared to dismiss or downplay the gravity of his criminal conduct. Petitioner emphasized that he selected surgery for five percent of his patients and that such decisions were based on the best interest of the patient, not the contracts with Pacific Hospital’s owner which provided for upfront financial payments. (AR 658-60, 670-71.) Petitioner also emphasized that the plea agreement did not speak to the quality of care he provided. (AR 671-72.) Petitioner did not acknowledge why having agreements for financial payments in exchange for referrals and usage of hardware may cause concern for his payments. Petitioner only begrudgingly admitted that had patients known about the payments, they may have explored other options for medical care. (AR 715.) It is also notable that petitioner’s decision to plead guilty to the federal charge was not borne of any particular sense of wrongdoing, acceptance of responsibility, or remorse for his conduct; rather, it came on the heels of his realization that he could not win at trial. (AR 668-69.)

“[T]he more serious the misconduct and the bad character evidence, the stronger the applicant’s showing of rehabilitation must be.” (In re Gossage (2000) 23 Cal.4th 1080, 1096.) Petitioner’s acceptance of kickbacks was serious and evidence of bad character. Petitioner’s lack of remorse is not sufficiently strong to justify any leniency.

Even if petitioner expressed remorse, “[r]emorse does not demonstrate rehabilitation.” (In re Conflenti (1981) 29 Cal.3d 120, 124.) “[A] truer indication of rehabilitation will be presented if petitioner can demonstrate by his sustained conduct over an extended period of time….” (Ibid.) Although petitioner has not committed misconduct similar to that for which he was convicted, little weight is placed on good behavior while under petitioner is under supervised release. (AR 688, 781; In re Gossage (2000) 23 Cal.4th 1080, 1099.)

The Court finds that the Board did not abuse its discretion in revoking petitioner’s physician license.

“[I]n any order issued in resolution of a disciplinary proceeding before any board within the department…upon request of the entity bringing the proceeding, the administrative law judge may direct a licensee found to have committed a violation or violations of the licensing act to pay a sum not to exceed the reasonable costs of the investigation and enforcement of the case.” (§ 12.53(a).)

Petitioner argues that the award of costs to the Board should not include any fees incurred by the originally-assigned Deputy Attorney General who worked on the case. (Corr. Opening Br. at 7:11-16; AR 783.) Petitioner does not provide any argument as to why such work was unreasonable or why the work should not be compensable. The Court declines to modify the cost award.

The petition is DENIED. Pursuant to Local Rule 3.231(n), respondent shall prepare, serve, and ultimately file a proposed judgment.

[1] All further statutory references are to the Business and Professions Code, unless otherwise indicated.

[2] The Accusation initially contained a Fourth Cause for Discipline for fraudulent or false claims and statements, which was stricken by the Board at hearing on the Accusation. (AR 729.)