Hospital CEO, Doctors Arrested In Alleged Kickback Scheme

Executives accused of bribing doctors to refer patients, and providing unnecessary care

Wednesday, Apr 17, 2013  |  Updated 10:03 AM CDT
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The owner and CEO of a West Side acute care hospital, his co-CEO and four doctors were arrested Tuesday in connection with an alleged Medicare kickback scheme.

Investigators say the illegal scam at Sacred Heart Hospital netted more than $225,000 in cash and other forms of payment in exchange for Medicare and Medicaid patient referrals. Authorities also seized more than $2 million in Medicare reimbursement payments from various bank accounts.

In addition, the FBI and the U.S. Department of Health and Human Services Office of Inspector General confiscated documents Tuesday that they believe will show fraud involving emergency room evaluation, conducting tests and services that were not medically necessary such as sedation.

Charges are pending against Edward Novak, 58, of Park Ridge, who has been the CEO and owner since the late 1990s. Investigators alleged that Novak and executive vice president and co-CEO Roy Payawal, 64, were aware and assisted with the scheme.

Two administrators at the hospital cooperated with investigators and provided damning audiotapes of meetings and telephone conversations with other hospital officials, according to federal authorities.

Novak and Payawal are accused to trying to cover-up the scheme by creating fake rental payments and ghost contracts.

The arrested doctors include Venkateswara Kuchipudi, 66, Percy Conrad May, Jr., 75, Subir Maitra, 73 and 57-year-old Shanin Moshiri.

Forty patients were admitted at the hospital at the time of the raid.

The defendants are due in federal court Tuesday afternoon.

The hospital's chief nursing officer, Jim Bailey, released a statement saying the hospital is "cooperating with law enforcement" and "providing ongoing patient care."

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