Five physicians, including a podiatrist and two hospital executives from Chicago-based Sacred Heart Hospital have been arrested for allegedly conspiring to pay and receive illegal kickbacks in exchange for the referral of patients insured by Medicare and Medicaid.
Gary Shapiro, the U.S. Attorney for the Northern District of Illinois made the announcement on April 16, 2013.
“Scheme to Pay Kickbacks”
The fraud allegedly occurred at the 119-bed acute care facility and involved emergency room evaluation, testing, and observation services that were not medically necessary. Also alleged were unnecessary sedation, intubation, and tracheotomy procedures. Agents from the FBI and OIG (Office of the Inspector General) seized approximately $2 million in Medicare reimbursement payments from various bank accounts.
Arrested were Edward J. Novak, 58, Sacred Heart’s owner and chief executive officer since the late 1990s; Roy M. Payawal, 64, executive vice president and chief financial officer since the early 2000s; and Drs. Venkateswara R. “V.R.” Kuchipudi, 66, Percy Conrad May, Jr., 75, Subir Maitra, 73, Kenneth Nave, 50, and Shanin Moshiri, 57. Moshiri is the podiatrist.
Masked Payments
According to the complaint, Novak and Payawal implemented a scheme to pay kickbacks to the physicians in return for the referrals. Novak and Payawal allegedly tried to conceal the scheme by masking payments as fictitious rental payments; paying the salaries of physicians’ employees; providing physicians ghost contracts for duties without any real responsibilities; creating alternative billing arrangements; and purporting to pay physicians to supervise and teach non-existent medical students.
Insiders Flipped
The statement from U.S. Attorney said a physician that used to work at Sacred Heart began cooperating in the investigation in October 2011. Two unidentified administrators joined in the following February 2012 and then January 2013. In February 2013, one of those administrators recorded Novak and Payawal allegedly identifying Drs. Moshiri, Maitra and May as physicians receiving regular kickback payments who the administrator should pay.
Between January 2010 and February 2013, May allegedly received $74, 000 in the form of 37 checks, for $2, 000 each, disguised as “rental payments”; Moshiri allegedly received $86, 000 in 38 checks for a purported contract to teach podiatry students; and Maitra allegedly received $68, 000 in 34 checks for a purported teaching contract.
Penile Implants, Improper Salaries and Payments
In a recorded conversation last month, Maitra allegedly explained to the administrator that he used to make Novak “so much money” performing almost daily penile implant procedures on patients, but that he no longer performed as many of those procedures because Medicare had decreased its rates of reimbursement. The hospital’s motto is “Healthcare with a personal touch.” Ouch.
According to one of the cooperating administrators, Sacred Heart paid Kuchipudi for Medicare patient referrals in two ways: first, by paying most of the salaries of a physician’s assistant and a registered nurse who were effectively employed by Kuchipudi, and second, by paying another physician for treating Kuchipudi’s patients at Sacred Heart, despite the fact that Kuchipudi, and not the hospital, billed insurers for the services provided to those patients.
Out on Bail
The Chicago Sun-Times reported on April 22 that Novak was released after he agreed to post bail of $10 million, to surrender his passport and to wear an electronic tracking bracelet until next week.
Novak’s wife dramatically ran into the courtroom clutching a $4 million check with just moments to spare, according to the paper.
Kuchipudi had $4 million in assets frozen as a condition of his release and Payawal had to post $2 million in assets to get out. The other doctors were released without posting bonds.
“These charges outline a kickback conspiracy to bribe doctors to refer patients to Sacred Heart where the quality of care and appropriate medical analysis were less important than maximizing the numbers of patients funneled into the hospital, ” said U.S. Attorney Shapiro.
The case falls under the umbrella of the Medicare Fraud Strike Force, which expanded operations to Chicago in February 2011. More than five dozen defendants have been charged in health care fraud cases since the strike force began operating in Chicago.
