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Sacred Heart CEO, executive and 4 doctors arrested in kickback conspiracy

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CHICAGO (Sun-Times Media Wire) -

The owner of Sacred Heart Hospital on the West Side encouraged his doctors to do unnecessary surgeries on elderly patients and oversaw a kickback scheme in a massive healthcare fraud, federal authorities allege.

Edward J. Novak, 58, of Park Ridge, was arrested along with four doctors Tuesday morning as FBI agents and U.S. Department of Health investigators raided the 119-bed hospital and seized evidence, the Sun-Times is reporting.

Novak and his chief financial officer Roy Payawal, 64, of Burr Ridge, allegedly directed doctors Venkateswara Kuchipudi, 66, Percy May Jr., 75, Subir Maitra, 74, and Shanin Moshiri, 57, to refer Medicare and Medicaid patients to Sacred Heart, nursing homes and ambulance services with which the hospital had a "relationship."

Between them, a physician who has been working undercover for investigators since 2011 and two administrators secretly recorded other doctors talking about how they did unnecessary procedures to patients to cash in on Medicare and Medicaid payments, a federal affadavit alleges.

In a recorded conversation last month, it's alleged, Maitra told one of the administrators that he used to make Novak "so much money" performing almost daily penile implant procedures. He allegedly added that he no longer did so many because Medicare had stopped paying so much for penile implants — declining to mention any medical reason why he'd stopped doing the procedure.

Prosecutors said they are also probing claims that an unnamed Sacred Heart pulmonologist performed a high number of unnecessary intubations, then dragged them out by directing heavy sedation of his patients, often resulting in tracheotomies being performed by Sacred Heart surgeons that "may not have been medically necessary."

During a December 2012 lunch, Novak and Payawal explained to an administrator who was working with the feds that tracheotomy cases provide substantial insurance reimbursement income for the hospital, it's alleged.

Novak later allegedly stated that tracheotomies are Sacred Heart's "biggest money maker" and the hospital can make $160,000 for a tracheotomy if the patient stays 27 days, while the hospital's Intensive Care Unit case manager allegedly told an administrator that she had to "stretch" a tracheotomy patient's stay to 28 days "to make Novak happy."

Once the hospital realized it was under investigation in March, Novak allegedly told the pulminologist to do "two more" tracheotomies before investigators returned.

Both he and all four arrested doctors are due to appear in court Tusday afternoon.

According to a news release, investigators have seized $2 million in medicare reimbursement payments. The scheme also allegedly involved cash kickbacks of more than $225,000.

This isn't the first time Novak and his staff have been accused of wrongdoing. In 2009, a self-described whistleblower filed a lawsuit against him, alleging he paid kickbacks to refer patients to Superior Home Care, a home health provider Novak owned that received Medicaid and Medicare funds.

Though that case was ultimately dropped, prosecutors took a keen interest in it, court records show.

Hospital staff declined to comment immediately Tuesday morning, but visitors were shocked by the raid at the hospital at 3240 West Franklin.

"They are all over that hospital, every floor," said Omar Midence, who was at the hospital with his sister to visit his 82-year-old mother amid the chaos.

Thomas Grasso, who was waiting for his wife to get out of an outpatient procedure, said he saw at least 50 FBI agents swarming the hospital.

They were "loading boxes and boxes of paper and looking at every computer in there," Grasso said.

Federal authorities said they were working with the Illinois Department of Healthcare and Family Services to care for 40 in-patients currently being treated at Sacred Heart.

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