Burr Ridge Man Charged in Medicare Kickback Scheme

A 64-year-old Burr Ridge resident was one of six people arrested Tuesday in connection with a Medicare referral kickback scheme, the FBI said.

Roy M. Payawal was charged with conspiring to pay and receive illegal kickbacks, along with other forms of payment, in exchange for the referral of patients insured by Medicare and Medicaid to Sacred Heart Hospital in Chicago, said Gary S. Shapiro, U.S. Attorney for the Northern District of Illinois.

Payawal is Sacred Heart's executive vice president and chief financial officer, a position he has held since the early 2000s. Also charged were Sacred Heart owner Edward J. Novak, 58, of Park Ridge and four physicians:

• Venkateswara R. “V.R.” Kuchipudi, 66, of Oak Brook
• Percy Conrad May, Jr., 75, of Chicago
• Subir Maitra, 73, of Chicago 
• Shanin Moshiri, 57, of Chicago.

The defendants were charged in a complaint that was filed Monday and unsealed Tuesday after the arrests. All six defendants were scheduled to appear Tuesday afternoon before U.S. Magistrate Judge Daniel Martin in Federal Court.

If convicted, Payawal, Novak and the physicians face a maximum five years in prison, a $250,000 fine and mandatory restitution.

The FBI and the U.S. Department of Health and Human Services Office of Inspector General on Tuesday began executing search and seizure warrants in connection with the ongoing investigation into the scheme. About $2 million in Medicare reimbursement payments was seized Tuesday from various bank accounts, according to a statement from the FBI.

About 40 in-patients on Tuesday morning were in the 119-bed hospital, located at 3240 West Franklin Blvd. in Chicago. State health officials will ensure the continuity of patient care.

"These charges and the affidavit’s other allegations outline a kickback conspiracy to bribe doctors to refer patients to Sacred Heart where they would be treated in an environment in which the quality of care and appropriate medical analysis were less important than maximizing the numbers of patients funneled into the hospital," Shapiro said.

The Scheme

With Payawal's assistance and Novak's direction, the hospital implemented a plan to pay kickbacks to physicians in return for referrals of Medicare and Medicaid patients. Novak and Payawal allegedly tried to conceal the scheme by:

• Masking payments as fictitious rental payments
• Paying the salaries of physicians’ employees 
• Providing physicians ghost contracts for duties without any real responsibilities
• Creating alternative billing arrangements 
• Purporting to pay physicians to supervise and teach non-existent medical students

An unnamed former Sacred Heart physician began cooperating in the investigation in October 2011, according to a 90-page affidavit in support of the criminal complaint. Two unnamed administrators began to assist as well in January 2013 and February 2012, respectively, with recordings of meetings and telephone conversations with other hospital executives and staff.

In a conversation that Administrator "A" recorded on Feb. 28, 2013, Novak and Payawal allegedly identified Drs. Moshiri, Maitra and May as physicians receiving regular kickback payments who Administrator A should pay.

Between January 2010 and February 2013, the doctors received a combined $228,000 distributed in amounts of $2,000 over several checks.

The investigation is also probing claims that a Sacred Heart pulmonologist performs a high number of unnecessary intubations and prolongs them by directing heavy sedation of his patients, often resulting in tracheotomies performed by Sacred Heart surgeons that might not have been medically necessary.

Administrator A told agents that during a lunch with Novak and Payawal in December 2012, they explained that tracheotomy cases provide substantial insurance reimbursement income for the hospital.

To report health care fraud, go to stopmedicarefraud.gov.

Please note that a complaint is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

There are plenty of ways to keep up on Burr Ridge news:

• Sign up for our daily email newsletter
• Like us on Facebook