L.A. hospitals raided in fraud probe
Lawsuit alleges homeless were recruited to fake illnesses; CEO subject of 21-count indictment
Published: Thursday, August 7, 2008 at 3:42 a.m.
Last Modified: Thursday, August 7, 2008 at 2:31 p.m.
LOS ANGELES -- On a Sunday afternoon two years ago, five homeless people being dropped off on Los Angeles' Skid Row by an ambulance caught the attention of police officers.
The officers videotaped what they thought was a case of hospitals dumping patients in a section of the city where few would notice or care.
But as investigators began to unravel the incident, they say they found something far different: A massive scheme to defraud taxpayer-funded health-care programs of millions of dollars by recruiting homeless patients for unnecessary medical services.
The elaborate enterprise churned thousands of indigents through hospitals over the past four years and billed Medicare and Medi-Cal for costly and unjustified medical procedures, federal, state and local investigators alleged Wednesday.
The alleged conspiracy "ranged from street-level operatives to the chief executive of a hospital," said U.S. Attorney Thomas O'Brien.
Following raids on three hospitals in Los Angeles and Orange counties, one hospital chief executive was charged criminally, and executives at two other facilities were accused of fraudulent business practices in a related civil lawsuit filed by Los Angeles City Attorney Rocky Delgadillo.
Some homeless patients were given tests or treatments that were potentially harmful, authorities said.
The "depravity" of the alleged scheme startled authorities, said Salvador Hernandez, assistant director in charge of the FBI's Los Angeles office.
"The defendants are accused of preying on the homeless and exploiting their desperate conditions for personal gain," he said.
Arrested on federal charges were Dr. Rudra Sabaratnam, an owner and the chief executive of City of Angels hospital, and Estill Mitts, an alleged patient recruiter who operated a storefront facility called the Assessment Center in the heart of Skid Row. A 21-count grand jury indictment accuses the pair of health care fraud and receiving illegal kickbacks.
Mitts, who was released Wednesday afternoon on $25,000 bail and confined to his home, is also charged with money laundering and income tax evasion. Sabaratnam was held in custody until another hearing today.
In addition to City of Angels hospital, agents earlier Wednesday swarmed Los Angeles Metropolitan Medical Center and Tustin Hospital and Medical Center. Pacific Health Corp., which operates both hospitals, said in a statement that it has cooperated with authorities and believes it will be cleared of any illegal conduct.
Officials said the investigation is continuing and additional defendants are expected to be charged. The total amount of the fraud was still being tallied, but prosecutors said that Mitts' operation could have cost the government $11 million in improper payments and that City of Angels collected $5 million in federal health care reimbursements.
Delgadillo sued the three hospitals, their operators and several others. The hospitals used unfair business practices to fill empty beds in a bid to boost their finances, the suit says.
The privately owned medical centers allegedly worked with patient recruiting operations on Skid Row that plucked homeless people from the streets and delivered them with fake medical diagnoses to the hospitals.
According to court filings, "runners" or "stringers" on Skid Row looked for homeless recruits. Prospects were offered small sums of money, typically $20 or $30, to be paid upon completion of a hospital stay of one to three days. The street recruiter typically received $40 for each homeless recruit with Medicare eligibility and $20 for each recruit with Medi-Cal benefits, according to the city attorney.
A person familiar with the workings of the alleged scheme told the Los Angeles Times last year that employees at the Assessment Center would recruit people on Skid Row to reach out to potential patients, who may or may not have needed medical treatment. The recruiters were paid between $25 and $200 a day; some patients were reimbursed for their time with money, food or a pack of cigarettes -- what was called an "incentive," according to the source, who spoke on the condition that he not be named.
The source said that it didn't matter whether the patient was using drugs, or whether they had underlying psychiatric issues.
Delgadillo said that patients received treatment for conditions such as dehydration, yeast infection and a cardiopulmonary disorder that "didn't exist."
(Begin optional trim) One patient, referred to in the city attorney's lawsuit as "Recruit X," suffered from a mental disorder and was sent by the Assessment Center to all three of the medical centers. At one of the hospitals, the lawsuit says, the patient was given a nitroglycerin patch for a nonexistent cardiopulmonary condition, which caused a precipitous drop in her blood pressure. The treatment, said Delgadillo "put her in peril."
(End optional trim) Wednesday's crackdown sends a message that "those who would seek to defraud our health care system, and those who would callously exploit mentally impaired and drug addicted homeless men and women to turn a profit will be prosecuted to the fullest extent of the law," Delgadillo said.
In addition to Mitts and Sabaratnam, the city attorney's civil lawsuit names Pacific Health Corp.; the corporation that operates Los Angeles Metropolitan Medical Center; its chief executive, John Fenton, and admitting physician Frederick Rundall; Tustin Hospital and Medical Center; its chief executive, Daniel Davis, Chief Financial Officer Vincent Rubio and admitting physicians Kenneth Thaler and Al-Reza Tajik. Also named are City of Angels Medical Center and Robert Borseau, an owner/officer with the company that operates the hospital.
Most of the defendants could not be reached for comment.
The Tustin hospital was allegedly guaranteed 40 to 50 patients a month while City of Angels got 25 to 30 patients month. Metropolitan Medical Center received patients whenever beds were available, according to the suit. City attorneys allege the admitting doctors -- Rundall, Thaler and Tajik -- did not see their patients until shortly before their discharge. City attorneys allege that for patient referrals, Mitts' group was paid $20,000 per month each from Metropolitan Medical Center and Tustin, while City of Angels paid between $400 to $1,000 a week to the recruiting group.
The suit also alleges that the Tustin hospital's chief financial officer personally received a $3,500-a-month kickback from Mitts' group to ensure that Tustin continued to take homeless patients from the Skid Row center.
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