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Article updated: 4/16/2013 9:20 PM

Doctors, hospital executives accused of kickback scheme

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By Associated Press

At least two doctors at a Chicago hospital endangered patients by intentionally over-sedating them and performing unnecessary tracheotomies in a bid to boost profits, a graphic and wide-ranging complaint released by federal prosecutors Tuesday alleges.

The document doesn't directly say patients at Sacred Heart Hospital died as a result of the procedures that involve cutting a hole into someone's windpipe, but it notes mortality rates from one of the doctor's tracheotomies were far higher than average.

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The investigation of the hospital dating back to 2011 led to arrests on Tuesday of the hospital's owner, Edward Novak, 58, of Park Ridge, as well as another executive and four doctors in an alleged conspiracy to exchange kickbacks for referral of patients insured by Medicare and Medicaid. The arrested doctors received kickbacks from the hospital totaling more than $225,000, the 90-page complaint said.

The complaint didn't indicate how much the hospital may have profited from unnecessary procedures.

"We will not allow patients to be pawns for profit," a Chicago-based U.S. health and human services inspector, Lamont Pugh III, told reporters Tuesday.

None of the six arrested Tuesday is charged in connection with the alleged unneeded procedures, which are part of an ongoing criminal investigation of the 119-bed hospital. They are charged with conspiracy to violate the federal anti-kickback statute.

One of the doctors arrested Tuesday, urologist Subir Maitra of Chicago, was heard in another secret recording as lamenting that he once made "so much money" from doing penile-implant procedures -- but that he no longer performed as many because Medicare had decreased its rates of reimbursement, the complaint says.

The 73-year-old's attorney, Thomas Durkin, said his client denied any wrongdoing.

In a secret recording of Novak by an administrator cooperating with investigators, Novak states tracheotomies are Sacred Heart's "biggest moneymaker" as he appeared to acquiesce to unneeded tracheotomies. He adds the hospital can make $160,000 for a single tracheotomy if the patient stays 27 days, according to prosecutors.

Hospital staff members told investigators another doctor working with the doctor performing the tracheotomies would intentionally over-sedate elderly and disabled patients so they would eventually be unable to breathe on their own -- extending their stays and leading to tracheotomies, both of which boosted revenues, the complaint says.

The complaint said the doctors suspected of involvement in performing unnecessary tracheotomies worked inside the hospital, unlike the doctors arrested Tuesday. Federal authorities left open the possibility those two doctors and others could face charges.

Looking tired and disheveled -- several of the arrested doctors wearing T-shirts -- Novak and the five others appeared together in federal court Tuesday afternoon. Prosecutors explained the charges to them, but they will enter pleas later. A conviction on a charge of violating the federal anti-kickback statute carries a maximum five-year prison sentence.

Judge Daniel Martin ordered that Novak, the executive and one of the doctors be held at least until a detention hearing set for Friday. The others, including Maitra, were released Tuesday afternoon and did not speak to reporters. Messages left at Novak's office were not returned Tuesday, and there was no answer at a residential number for him.

Hospital Chief Nursing Officer Jim Bailey said in a statement that the Sacred Heart Hospital is cooperating with law enforcement and continuing to provide patient care.

The FBI raided the West Side hospital on Tuesday morning, serving warrants and carting away evidence. About $2 million in Medicare reimbursement payments also were seized on Tuesday from various bank accounts, prosecutors said.

The death rate among those who received tracheotomies by the doctor from 2010 to 2013 was nearly 18 percent within 14 days of surgery; that's well above the around 6 percent rate performed by other surgeons, according to the complaint.

Authorities decided to move ahead with arrests, in part, after discovering the possibility recently that unnecessary procedures were being done and when one patient may have been singled out for an unneeded tracheotomy, authorities said Tuesday.

"When we learned about these procedures, we did everything we could to stop them from happening," said Gary Shapiro, the interim U.S. attorney in Chicago.

The hospital has some 40 patients currently and public health officials are closely monitoring their care, he said.

Illinois Department of Public Health said in a Tuesday statement it is assessing Sacred Heart's ability to care for patients and will conduct a full inspection.

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