Wired witnesses helped feds in Sacred Heart case

Federal authorities say they were compelled to work behind the scenes in February to prevent a patient from getting a tracheotomy he didn't need at a Chicago hospital under investigation for Medicare fraud.

The government then rushed to build a case against the executives and physicians allegedly orchestrating the scheme in order to protect other patients from harm, U.S. Attorney Gary Shapiro said at a news conference Tuesday afternoon.

Shapiro spoke hours after federal agents arrested the hospital's owner and executed sweeping search warrants at several locations looking for documentation of a pattern of doctors referring elderly and indigent patients to Sacred Heart for unneeded but profitable emergency room care and procedures such as tracheotomies, intubations and heavy sedation.

The hospital's owner and CEO, Edward J. Novak, 58, conspired with his chief financial officer, Roy Payawal, 64, and four doctors to exchange bribes ensuring that Medicare and Medicaid patients would come to the hospital for care, according to a 90-page complaint against the six men.

The six were charged Tuesday with conspiring to violate the anti-kickback statute. Their activities—as well as those of other doctors who were not charged—remain under active investigation, Shapiro said.

Since 2012, more than $225,000 in cash was paid to the doctors, along with indirect compensation such as the hospital agreeing to cover payroll at doctors' offices, paying doctors for rental space the hospital didn't need, and payments for “ghost” jobs with no real duties and teaching non-existent students, according to the complaint.

Sacred Heart Hospital is a 96-bed standalone for-profit hospital on Chicago's West Side. Calls seeking comment on the charges and search warrant were not returned Tuesday.

Federal authorities had three unnamed cooperating witnesses inside the hospital, who all agreed to wear wires after being recorded taking part in the conspiracy: the physician chairman of emergency room operations, the senior administrator who oversees Sacred Heart's medical clinics and ambulance services and a senior executive who reported directly to Novak.

According to the complaint, on March 1 Novak was secretly recorded by the senior administrator saying that tracheotomies are Sacred Heart's “biggest money maker,” netting $160,000 for each patient who stays 27 days or more in the hospital. A case manager was recorded telling the same administrator she sometimes has to “stretch” patient stays to 28 days “to make Novak happy.”

Both of those comments came just weeks after Shapiro said federal authorities got word through other secret recordings that an unnamed patient was scheduled to get an unneeded tracheotomy surgery—a procedure that involves cutting into a person's throat to insert a device that can be used for breathing.

Prosecutors instructed their cooperating witness to stop the procedure before it could happen, and the patient was weaned off a respirator and released from the hospital without a tracheotomy, Shapiro told reporters at the Dirksen Federal Building in Chicago.

One doctor, identified as Physician E, gave tracheotomies to 28 Medicare patients who collectively had a mortality rate more than three times the Medicare average. Five of the 28 people died within 14 days of their procedures, the complaint says.

A detailed affidavit used to get search warrants described several other alleged schemes, including efforts to have ambulances transport patients from nursing homes to Sacred Heart's ER and use of sedation that was higher than needed in order to prolong hospital stays.

However, Shapiro was quick to note that the executives and doctors were not charged on Tuesday with mistreating patients or any other crime besides violating the anti-kickback statute. He declined to speculate on future charges against the six defendants or anyone else that may come from information in the evidence that was recovered Tuesday using multiple search warrants.

The people charged Tuesday were Novak; Payawal; Dr. Venkateswara “V.R.” Kuchipudi, 66; Dr. Percy Conrad May, Jr., 75; Dr. Subir Maitra, 73; and Dr. Shanin Moshiri, 57.

Follow Joe Carlson on Twitter: @MHJCarlson