Medicare Kickback Bust in Chicago Hinged on Wired Colleagues

April 18, 2013

Two executives of a hospital in Chicago, Illinois, along with 3 physicians and a podiatrist were arrested by federal agents April 16 for allegedly conspiring to give and receive illegal kickbacks for referring Medicare and Medicaid patients in a case built with "wired" colleagues who had flipped for law enforcement.

The 6 individuals could face more charges as the FBI and the US Department of Health & Human Services (HHS) sift through records seized from the hospital in their investigation of other alleged fraud schemes. In one of them, outlined in a criminal complaint, a pulmonologist supposedly performed a high number of intubations and prolonged them through heavy sedation so that the patients could not breathe on their own, which set them up for tracheotomies.

Edward Novak, the president and chief executive officer of Sacred Heart Hospital, and one of the individuals arrested, was covertly recorded as saying that tracheotomies were the "biggest money maker" for the 119-bed institution, and that it could make $160,000 for the procedure if the patient stayed 27 days.

The other individuals arrested are Roy Payawal, the hospital's executive vice president; Venkateswara Kuchipudi, MD; Percy Conrad May, Jr, MD; Subir Maitra, MD; and Shanin Moshiri, DPM. Dr. May, Dr. Maitra, and Dr. Moshiri were released on bond while Novak, Payawal, and Dr. Kuchipudi remained in custody.

Three unnamed individuals, 2 hospital administrators, and a physician who had once directed emergency-department (ED) operations, agreed to record meetings and phone calls with the 6 others after they themselves were recorded discussing kickbacks for referrals, according to the complaint. They also provided investigators with insider details about Sacred Heart Hospital operations. They have not been charged with any crime, at least not yet.

The criminal complaint, filed in a Chicago federal court, states that Novak and Payawal disguised the kickbacks to physicians in a number of ways. Dr. May received $2000 a month in the form of rent payments for space in his office that the hospital never used. Dr. Maitra's monthly kickback of $2000 was framed as payments for teaching medical students at the hospital, which never happened, according to one of the flipped administrators.

Likewise, the hospital paid Dr. Moshiri $4000 — later cut down to $2000 — every month for fictitiously supervising podiatry students, according to the government.

The various ruses required paperwork, and the participating physicians sometimes had to be hounded to fill in the blanks, the complaint states.

"We've got to go through every (contract) to make sure that they are doing what they are supposed to be doing, and that we got a paper trail on this [expletive]," Novak was recorded as saying. "They're signing off on this and this and this. We don't want problems."

Dr. Kuchipudi was rewarded for prolific patient referrals in 2 ways, the complaint states. The hospital paid most of the salaries of a physician assistant and a registered nurse who worked almost exclusively for Dr. Kuchipudi. In addition, the hospital paid the salary of a physician who treated Dr. Kuchipudi's admitted patients even though the services were billed in Dr. Kuchipudi's name.

Mortality Rate for Tracheotomies Triple the State Average

The criminal complaint lays out other alleged frauds that federal authorities intend to explore further. Hospital administrators and physicians supposedly schemed to bill Medicare and Medicaid for unnecessary ED visits and hospital admissions. Many of the unnecessary hospitalizations involved nursing home patients who were classified as "direct admissions." Ambulances automatically whisked such patients to Sacred Heart Hospital from as far away as 30 miles, bypassing other hospitals along the way.

Novak was recorded as saying that his hospital had a significant "nursing home practice."

"They're coming back and forth," he said. "We have a deal with the ambulance company so they won't reroute the patient."

One of the heaviest admitters of nursing home patients was Dr. Kuchipudi, known in the hospital as "the king of nursing homes."

Dr. Maitra drew attention in the government complaint for telling a wired hospital administrator that he once made Novak "so much money" by performing penile implants almost on a daily basis. However, Dr. Maitra said that he was performing them less often because Medicare had reduced its Part A and Part B reimbursement for the procedure.

Perhaps the most egregious allegation is that administrators and physicians defrauded Medicare and Medicaid by having some patients undergo needless intubations and, later on, tracheotomies. According to the criminal complaint, one unnamed pulmonologist was notorious for unnecessarily prolonging the time that patients spent on ventilators by heavily sedating them so that they could not breathe on their own. This was contrary to the practice of reducing sedation and weaning patients off the machines. These patients eventually failed tests showing that they could breathe independently and were deemed ventilator dependent and therefore candidates for tracheotomies performed by a Sacred Heart surgeon.

The 14-day mortality rate for Medicare patients undergoing tracheotomies performed by the Sacred Heart surgeon was roughly triple the rate for all other Illinois surgeons over a 3-year period, according to the criminal complaint.

Dr. Maitra's attorney, Thomas Durkin, told Medscape Medical News that his client denies the charges and "looks forward to contesting them in court." Likewise, Roy Payawal's attorney, Robert Clarke, said Payawal will "plead not guilty and contest all the charges against him."

Attorneys for the remaining defendants did not respond to a request for comment as of press time.

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