SANTA ANA (CBS) — A radiologist and three of his employees in a Buena Park medical office used billing fraud to fuel a $17 million workers’ compensation insurance fraud scheme, according to a grand jury indictment unsealed on Monday.

Dr. Sim Carlisle Hoffman, 59, of Newport Beach, Dr. Thomas Michael Heric, 74, of Malibu, Beverly Jane Mitchell, 60, of Westlake Village, and Louis Umberto Santillan, 44, of Chino Hills are accused of over-billing for unnecessary or never-performed procedures, said Orange County District Attorney Tony Rackauckas.

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Hoffman, a radiologist who owns Advanced Professional Imaging, Advanced Management Services and Better Sleeping Medical Center in Buena Park, faces 883 counts of insurance fraud and one count of aiding and abetting the unauthorized practice of medicine — all felonies.

Mitchell, the administrator in charge of insurance billing for Hoffman’s businesses, faces the same charges as Hoffman.

Heric, a neurologist, worked for Hoffman at the Better Sleeping Medical Center. He is charged with 296 counts of insurance fraud and one count of aiding and abetting the unauthorized practice of medicine.

Santillan, who did billing collections for Advanced Professional Imaging, is charged with 141 felony counts of insurance fraud.

“The mastermind of this medical mill is Dr. Sim Hoffman,” Rackauckas alleged.

“Hoffman is a radiologist who owns the sleep and nerve testing centers. He is charged for using patients as props in order to bilk the system by overbilling the insurance companies,” he said. “Dr. Hoffman was disciplined in 2001 by the Medical Board of California for similar unethical medical practices.”

Hoffman had Heric “study” patients and write reports on their status, Rackauckas said.

“Heric’s so-called `studying’ of patients involved using a made-up formula entirely of his own creation that is not recognized in any medical community,” Rackauckas said.

The reports were of a “cookie-cutter” variety, and none of the patients were given any treatment for their disabilities, the county’s top prosecutor said.

Heric’s license was suspended for 60 days in 2008 for a felony Medicare and Medi-Cal fraud conviction, Rackauckas said.

Hoffman hired Mitchell after he was disciplined in 2001, Rackauckas said.

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Santillan, who has no college degree or certification, is accused of collecting more than $800,000 in commissions from fraudulently received insurance payments over two years, Rackauckas said.

At the nerve-testing center, patients underwent painful testing that cost $330 instead of a much-less invasive exam that cost $35, Rackauckas alleged. Only two doctors in California are qualified to perform the more expensive and invasive test, he added.

“Hoffman is not one of those two doctors,” the prosecutor said, “and Hoffman didn’t just bill for one Single Fiber EMG per patient. According to his bills, the patients went through this painful procedure over 20 times each.”

A 56-year-old woman who hurt her wrist and ankle when she tripped over some boxes at work was referred to Hoffman, who had her undergo a sleep study, MRI and nerve testing, Rackauckas said.

The woman “was never told the results of her diagnostic tests,” Rackauckas said. “Months later, she was informed by her attorney that her claim had been denied by the insurance company.”

Hoffman has still pursued payment from the unidentified woman through liens amounting to more than $15,000, Rackauckas said.

“These patients were used as pawns in Hoffman’s piggy bank,” Rackauckas alleged.

The four “created a $17 million medical mill at the expense of over 1,200 patients and the workers’ compensation insurance system,” Rackauckas charged.

State Insurance Commissioner Dave Jones said such fraud drives up insurance premiums for legitimate businesses.

Zenith Insurance Co. brought the alleged fraud to light with a complaint to the insurance commissioner’s office in July 2008, Jones said.

“It’s outrageous, and the prosecution announced today will send a clear signal to medical providers,” Jones said. “We’re taking it seriously as we should because it’s a drag on our economy.”

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The four were indicted May 11, but the grand jury indictments were not unsealed until Monday.

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