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Feds Arrest Six In Kickback Scheme At Sacred Heart Hospital

Updated 04/16/13 - 4:18 p.m.

CHICAGO (CBS) -- Federal authorities have arrested the owner of Sacred Heart Hospital on the West Side, as well as another top executive and four doctors, for an alleged kickback scheme.

Federal prosecutors said the scheme involved the doctors receiving more than $225,000 in cash, along with other forms of payment, for referring patients on Medicare and Medicaid to the hospital. In exchange, the hospital ended up getting millions in reimbursement from Medicare and Medicaid for patients referred to the hospital.

Tuesday morning, FBI agents raided the hospital, at 3240 W. Franklin Blvd., executing search warrants as part of the criminal probe.

Feds Arrest Six In Kickback Scheme At Sacred Heart Hospital

Those arrested Tuesday morning included Sacred Heart owner and CEO Edward Novak, 58, of Park Ridge; executive vice president and chief financial officer Roy Payawal, 64, of Burr Ridge; Dr. Venkateswara Kuchipudi, 66, of Oak Brook; Dr. Percy Conrad May Jr., 75, of Chicago; Dr. Subir Maitra, 73, of Chicago; and Dr. Shanin Moshiri, 57, of Chicago.

Novak and Payawal allegedly schemed to pay bribes to the doctors, in exchange for referring patients covered by Medicare and Medicaid to Sacred Heart. They allegedly tried to conceal the bribes by masking payments as fake rental payments, by paying the salaries of the doctors' employees, and by providing ghost contracts for the doctors.

According to prosecutors, May received 37 checks totaling $74,000; Moshiri received 38 checks totaling $86,000; and Maitra received 34 checks totaling $68,000.

Federal authorities have seized approximately $2 million in Medicare reimbursement payments the hospital allegedly received as a result of the kickback scheme.

Also, according to authorities, Novak and Payawal approved unnecessary medical procedures for patients – including emergency room evaluations, tracheotomy procedures, and penile implant surgeries – and fraudulently billed Medicare or Medicaid for those services.

Acting U.S. attorney Gary Shapiro said those procedures "would be much more extensive than if those same medical services and procedures were provided for in doctors' offices, or in the patients' nursing homes.

A hospital administrator cooperating with the feds allegedly recorded Maitra boasting about how much money he made for Novak by performing penile implant procedures on an almost daily basis.

In a statement Tuesday afternoon, Sacred Heart Chief Nursing Officer Jim Bailey said the hospital is cooperating with the investigation, and continuing to provide ongoing care. He declined further comment.

Meantime, the Illinois Department of Public Health said it was assessing patient care at Sacred Heart in the wake of the criminal probe.

"The safe care of Sacred Heart patients and the hospital's ability to provide nursing and physician staffing is our utmost priority," said IDPH Director Dr. LaMar Hasbrouck. "Per our normal duties, the Department will be conducting a full inspection of the facility to determine any violations of state or federal regulations."

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