An elderly man was admitted to Sacred Heart Hospital on Chicago's West Side in late February, intubated and sedated for more than a week and scheduled for an emergency tracheotomy even though it was medically unnecessary, federal prosecutors allege.
After a hospital administrator raised questions, the surgery was postponed. Later that day, the administrator asked the longtime owner of the hospital, Edward Novak, if he was upset about the cancellation. "Tell me about it! Tell me about it!" Novak allegedly replied.
What Novak didn't know was the administrator was secretly recording their conversation while working undercover as part of a federal investigation into an elaborate kickback scheme at Sacred Heart that allegedly involved everything from unnecessary sedation to penile implants, all fraudulently billed to Medicare and Medicaid.
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The three-year investigation came to light early Tuesday when federal agents arrested Novak, 58, of Park Ridge, as well as another hospital executive and four physicians in connection with a scheme that prosecutors said netted more than $225,000 in cash and at least $2 million in health care program reimbursements.
Authorities said the scheme at Sacred Heart subjected the poor and elderly to sometimes risky procedures they didn't need.
"Any time you come across a case where patients are being used as pawns for profit, it is troublesome," said Lamont Pugh III, who heads the inspector general's office for the Department of Health and Human Services in the Chicago area.
Also charged were the hospital's executive vice president and chief financial officer, Roy Payawal, 64, of Burr Ridge, as well as four of the hospital's affiliated doctors: Venkateswara Kuchipudi, 66, of Oak Brook; Percy Conrad May Jr., 75; Subir Maitra, 73; and Shanin Moshiri, 57, all of Chicago.
Novak, Payawal and Kuchipudi were ordered held pending detention hearings Friday, while the others posted bail.
Agents executed search warrants Tuesday at the small for-profit hospital in the 3200 block of West Franklin Boulevard, hauling out boxes of medical records, computer drives and other evidence. About 40 patients were at the 119-bed hospital when the raid took place.
At a news conference, interim U.S. Attorney Gary Shapiro hinted more arrests would be coming, pointing to a government affidavit that included wide-ranging allegations against additional doctors and hospital administrators.
In one example, the affidavit referred to an uncharged "Physician E," the doctor who was to perform the tracheotomy on the elderly man that was postponed . The affidavit alleged that in 28 such procedures performed at Sacred Heart by Physician E since 2010, five patients died within two weeks of the surgery, more than triple the statewide mortality rate.
Investigators are also looking into "Physician D," who allegedly ordered patients to be heavily sedated over a long period of time, making it more difficult to be weaned off a ventilator and leading in some cases to a tracheotomy that might otherwise be unnecessary.
The investigation also uncovered a system to admit nursing home patients to Sacred Heart "irrespective of any medical necessity" by using certain ambulance companies allegedly in on the scheme that were able to transport them as emergency room patients and directly bill Medicare, according to the affidavit. No one has been specifically charged in the transport scheme.
According to the complaint, Novak and Payawal concealed more than a combined $225,000 in kickbacks to the doctors as fictitious rental payments, ghost contracts or payments to teach nonexistent medical students.
The hospital administrator cooperating with the investigation allegedly recorded Maitra — a urologist who has an office in the Little Village neighborhood — bragging about the cash he made performing "almost daily penile implant procedures on patients," and that he no longer performed as many because Medicare had reduced its rates of reimbursement, prosecutors alleged.
Kuchipudi, who specializes in internal medicine, was known at the hospital as the "king of nursing homes," receiving kickbacks for Medicaid referrals that were hidden in part by paying a nurse and another doctor to work for Kuchipudi, drastically reducing his own costs, prosecutors said.
But it was concern about the unnecessary tracheotomies that caused federal investigators to move in when they did, Shapiro said.
"As you know, these are procedures which involved inserting a tube into the patient's windpipe or actually surgically cutting a hole in the patient's throat," Shapiro said.
Last month, the cooperating administrator recorded Novak saying that tracheotomies are the hospital's "biggest moneymaker" and that the hospital can make $160,000 for a tracheotomy if the patients stays for at least 27 days, prosecutors said.