Healthcare News & Insights

Alleged Medicare kickback scheme ensnares hospital CEO, CFO and MDs

If you’re looking for a new job, Sacred Heart Hospital in Chicago may have a few openings. Its CEO, CFO and four doctors were arrested for an alleged Medicare referral kickback scheme. 

161745789The executives and physicians were arrested on April 16 for allegedly conspiring to pay and receive illegal kickbacks. According to U.S. Attorney for the Northern District of Illinois Gary Shapiro, the kickbacks included more than $255,000 in cash, as well as other forms of payment in exchange for Medicare and Medicaid patient referrals to the 119-bed facility.

Arrested were:

  • Edward Novak, Sacred Heart’s owner and CEO since the late 1990s
  • Roy Payawal, executive VP and CFO since the early 2000s
  • Dr. Venkateswara Kuchipudi
  • Dr. Percy Conrad May, Jr.
  • Dr. Subir Maitra, and
  • Dr. Shanin Moshiri.

In addition, agents from the FBI and the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) executed search and seizure warrants in connection to an ongoing investigation of alleged Medicare and Medicaid fraud schemes at the hospital involving:

  • emergency room evaluation, testing and observation services that were not medically necessary, and
  • medically unnecessary sedation, intubation, and tracheotomy procedures performed on patients.

They also seized $2 million in Medicare reimbursement payments from various bank accounts.

Kickback scheme

The criminal complaint alleges that Novak directed and Payawal approved kickbacks to be paid to physician in return for Medicare and Medicaid patient referrals. The complaint further states that the CEO and CFO tried to cover up the scheme by:

  • disguising payments as rental payments
  • paying the salaries of the referral physicians’ employees
  • providing physicians contracts for duties that didn’t include any real responsibilities
  • creating alternative billing arrangements, and
  • allegedly paying physicians to supervise and teach non-existent medical students.

The 90-page affidavit states that a former physician at the facility and two administrators assisted the FBI  in its investigation by recording meetings and phone conversations with other executives, administrators, physicians and employees.

Depending on what the feds find in hospital records, it is possible that more doctors could be charged. It is also likely that this case will spawn civil lawsuits.

Conspiracy to violate the federal anti-kickback statute carries a maximum penalty of five years in prison and a $250,000 fine and restitution is mandatory.

Past problems

In a related story, Sacred Heart recently settled a civil monetary penalty case with the HHS OIG for more than $50,000, which was signed by Novak, reported AIS Health. The alleged violation was over the Emergency Medical Treatment and Labor Act. Supposedly, the hospital’s emergency department wouldn’t screen a 63-year-old woman, who was not breathing, and called the fire department to take her and her husband to another hospital where she was pronounced dead.

Sacred Heart admitted no liability in the settlement.


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