The CEO of a Los Angeles hospital was arrested yesterday for allegedly recruiting mostly healthy homeless people off the streets of the city and providing them with beds and cash to pose as patients for which the hospital then billed the government.
Now some of those allegedly involved in what authorities say was a massive scheme have been charged with billing government programs for millions of dollars in unnecessary health services.
Federal agents raided three medical centers. City attorney Rocky Delgadillo's office has also sued the hospitals, saying they used homeless people as "human pawns."
Hospitals in Los Angeles and Orange counties submitted phony Medicare and Medi-Cal bills for hundreds, perhaps thousands, of homeless patients — including drug addicts and the mentally ill — recruited from downtown's Skid Row, state and federal authorities allege.
While treating minor problems that did not require hospitalization, such as dehydration, exhaustion or yeast infections, the hospitals allegedly kept homeless patients in beds for as long as three days and charged the government for the stays.
Search warrants were served Wednesday at City of Angels Medical Center, Los Angeles Metropolitan Medical Center and Tustin Hospital and Medical Center, the FBI said.
Agents arrested Rudra Sabaratnam, CEO of City of Angels hospital, and Estill Mitts, operator of a Skid Row health assessment center, FBI spokeswoman Laura Eimiller said. They were in federal custody and were scheduled to be arraigned Monday.
A 21-count indictment unsealed Wednesday charged both men with conspiring to receive and take kickbacks for patient referrals and to commit health care fraud. Sabaratnam also was charged with paying kickbacks and Mitts 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.
Bond for Mitts was set at $25,000. He was expected to be released Wednesday night to home detention, said Thom Mrozek, a spokesman for the U.S. attorney's office. Sabaratnam's bond hearing was set for Thursday.
Sabaratnam's lawyer Dominic Cantalupo, and Mitts' lawyer John Vandevelde did not immediately return calls seeking comment.
U.S. Attorney Thomas O'Brien said he expects additional charges in the case.
"This is one of several major medical fraud investigations that are ongoing," he said. "There's too much money being illegally stripped from public health care programs and the potential impact to those with a legitimate need is too great to let such fraud escape federal prosecution."
The city attorney's office said it filed a lawsuit against the corporate owners of the three hospitals — along with Sabaratnam, several doctors and others — in connection with the alleged scheme.
The investigation began in 2006 as Los Angeles police looked into reports that hospitals were dumping homeless patients on Skid Row streets.
Representatives of the hospitals did not immediately respond to calls seeking comment. Los Angeles Metropolitan and the Tustin hospital are owned by Pacific Health Corp., and Los Angeles-based Intercare Health Systems owns City of Angels.