Federal, Los Angeles Officials Crack Health Care Fraud Ring

On Wednesday, agents for the Federal Bureau of Investigation raided three hospitals in Los Angeles and Orange counties as part of a larger investigation of Medicare and Medi-Cal fraud involving homeless patients, the Los Angeles Daily News reports. Medi-Cal is California's Medicaid program (Morino, Los Angeles Daily News, 8/6).

Agents raided City of Angels Hospital, Los Angeles Metropolitan Medical Center, and Tustin Hospital and Medical Center. The FBI arrested City of Angels CEO and owner Rudra Sabaratnam and Estill Mitts -- the operator of the Assessment Center, a storefront facility on Skid Row in downtown Los Angeles.

The 21-count federal indictment accuses Sabaratnam and Mitts of health care fraud and illegal kickbacks (DiMassa et al., Los Angeles Times, 8/7).

U.S. Attorney Thomas O'Brien said that he expects additional charges to be filed in the case (Tayefe Mohajer, AP/Contra Costa Times, 8/7).

HHS and the Internal Revenue Service also are investigating the hospitals, according to authorities (Perkes/James, Orange County Register, 8/6).

Court filings allege that the Assessment Center hired people to recruit homeless patients on Skid Row who were eligible for Medicare or Medi-Cal (Los Angeles Times, 8/7). Patients then were issued a false diagnosis without a medical exam and transported to one of the participating hospitals.

The facilities allegedly admitted the patients based only on the diagnosis (Orange County Register, 8/6). According to the complaint, the patients would undergo treatment for minor conditions that did not require hospitalization but would remain at the facility for as long as three days (AP/Contra Costa Times, 8/7).

Medicare and Medi-Cal were then billed for the services (Kaufman, Wall Street Journal, 8/7).

Government officials have not finalized the total cost of the alleged fraud to Medicare and Medi-Cal, but prosecutors allege that Mitts' patient referral operation could have resulted in $11 million in improper payments.

In addition to the federal criminal charges, Los Angeles City Attorney Rocky Delgadillo filed a civil suit against the three hospitals, their parent companies and others allegedly involved in the operation. The suit alleges that the hospitals used unfair business practices to boost occupancy and increase revenue.

According to the complaint, Tustin Hospital was guaranteed 40 to 50 patients per month from the scheme, City of Angeles got 25 to 30 patients monthly and Metropolitan Medical Center received patients whenever beds were available (Los Angeles Times, 8/7).

The action seeks civil penalties, an injunction barring the hospitals from recruiting patients and an order requiring the facilities to fully comply with state and federal law (Orange County Register, 8/6).

The case arises from earlier investigations of hospitals improperly discharging patients and transporting them to Skid Row (AP/Contra Costa Times, 8/7).

Several broadcast programs included discussions of the charges. Links are provided below.

• "Medicare Fraud Case: FBI and LA City Go After Three Area Hospitals" (Morrison, "Patt Morrison," KPCC, 8/6).
• "Prosecutors Make Arrests in Scheme To Use Homeless To Defraud Medicare, Medi-Cal" (Watt, "KPCC News," KPCC, 8/6).
• "Local Hospitals Raided in Medicare Fraud Investigation" (Olney, "Which Way, L.A.?" KCRW, 8/6).