FBI agents served search warrants this morning on three hospitals as part of an investigation into alleged Medicare fraud involving homeless patients who were recruited from skid row.
Dr. Rudra Sabaratnam, an owner and the chief executive of City of Angels Medical Center, and Estill Mitts, an alleged patient recruiter, were indicted by a federal grand jury last week on 21 counts of healthcare fraud, money laundering and income tax evasion.
The men were arrested this morning as part of the federal government's criminal investigation, according to FBI spokeswoman Laura Eimiller.
''It's a scheme that ranged from street operatives to the CEO of a hospital,' said U.S. Atty. Thomas P. O'Brien, adding that he expects several more arrests in coming weeks.
At the same time, Los Angeles City Atty. Rocky Delgadillo announced civil litigation against the three hospitals and their operators in what officials said was a 'scheme to defraud the Medi-Cal and Medicare programs out of millions of dollars.'
Beginning at 8 a.m., agents working with the federal Department of Health and Human Services, the Internal Revenue Service and the California Department of Justice raided City of Angels Medical Center, Los Angeles Metropolitan Medical Center and Tustin Hospital and Medical Center.
The raids cap what law enforcement sources told The Times was a nearly two-year investigation of alleged medical fraud on skid row.
The city attorney's office alleged that the hospitals tried to fill empty beds in a bid to boost their finances.
The hospitals allegedly were aided by a patient recruiting operation on skid row that plucked homeless people from the streets and delivered them with fake medical conditions to the hospitals.
Metropolitan Medical Center in 2006 was accused by the Los Angeles Police Department of using ambulances to 'dump' five patients in one day onto the streets of the downtown skid row area against their will after their discharge from the hospital. At the time, officials at the hospital strongly denied any wrongdoing.
But the city attorney now alleges that those patients had been recruited 'by runners' who directed them to an assessment center on 7th Street, where their Medicare and Medi-Cal benefits eligibility was checked and a 'fabricated description of conditions' was prepared by non-doctors so they could be eligible for treatment. All five of the patients were admitted to Metropolitan Medical Center.
Each of the patients received $20 to $30 when they returned to the assessment center after spending one to three days in the hospital, according to the suit.
'Within the past four years, hundreds, if not thousands of other homeless persons in skid row have been recruited, hospitalized, treated and discharged in a manner substantially similar . . . as part of a long-running scheme to bilk the Medicare and Medi-Cal programs out of millions of dollars by causing unnecessary hospitalization for paid recruits,' the lawsuit alleges.
The list of the accused is striking.
Among those named in the suit are Pacific Health Care Corp.; 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; and City of Angels Medical Center and its owner-operators Robert Borseau and Sabaratnam. Mitts, the owner and manager of Metropolitan Healthcare LLC and the president of the 7th Street Christian Day Center, which was until recently located on skid row, is also named in the suit.
City attorneys allege that the Tustin hospital was 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 Drs. 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.
The Associated Press (here, via the San Diego Union-Tribune) reported that two people, including one hospital CEO, were arrested during the raids.
FBI agents arrested Rudra Sabaratnam, 64, chief executive officer of City of Angels hospital, and Estill Mitts, 64, who operated the 7th Street Assessment Center, where people are screened for health needs, the U.S. attorney's office said in a statement.
A federal jury last week indicted both men. The 21-count indictment, which was unsealed Wednesday, charged them with conspiring to receive and take kickbacks for patient referrals and to commit health care fraud.
Sabaratnam also was charged with paying kickbacks while Mitts also was charged with money laundering and tax evasion.
If convicted, Sabaratnam could face 50 years in federal prison, and Mitts could face 140 years, authorities said.
We have often discussed how health care has come to be dominated more and more by ever larger organizations. Thus, the leadership of these organizations has increasing influence over health care, and hence on people's health and safety. Yet on this blog we have documented more and ever sleazier examples of ill-informed, incompetent, self-interested, and even corrupt leadership of health care organizations.
The story above is of allegations, indictments, and lawsuits. But if half of the allegations in it are true, it would represent a new low for hospital leadership.
Thus, I raise again a proposal for licensure of leaders of all organizations that affect health care, starting with hospitals, academic medical centers, and hospital systems; but also including managed care organizations and health care insurers; drug, biotechnology, and device companies; health information technology companies; etc, etc, etc. Such licensure could assure that leaders have some minimum level of knowledge about and exposure to health care; and that they must conform to some ethical standards. Licensure could be subject to removal under due process. Clearly, licensing health care organizational leaders would not solve all or most of health care's problems. But it would at least assure some minimum standard of leadership.