Skid Row Patient Recruiting Scheme Uncovered
Stephen Barrett, M.D.
Several people have been charged with defrauding government health care programs by recruiting homeless individuals for unnecessary hospital treatment, and then fraudulently billing Medi-Cal and Medicare for millions of dollars in unwarranted compensation. The alleged scheme was detailed in a civil suit filed by the Los Angeles City Attorney against three Southern California Hospitals, their executive officers and several co-schemers [1]. The civil complaint named:
- Pacific Health Corporation
- Los Angeles Metropolitan Medical Center, its CEO John Fenton and admitting physician Frederick Rundall
- Tustin Hospital and Medical Center, its CEO Daniel Davis, CFO Vincent Rubio, and admitting physicians Kenneth Thaler and Al-Reza Tajik
- City of Angels Medical Center, and its owner/operators Robert Bourseau and Rudra Sabaratnam.
- Estill Mitts, the director of a hospital support company, Metropolitan Healthcare. According to the Compliant, Mitts received tens of thousands of dollars per month from the hospitals named in the Complaint for coordinating the scheme.
- APT Ambulance Company was also named for its role in transporting homeless recruits.
The complaint alleges:
- In an effort to fill unused beds at hospitals, runners employed by Mitts approached homeless individuals in Downtown Los Angeles’ Skid Row to determine their eligibility for Medicare or Medi-Cal benefits.
- Eligible individuals were promised up to $30, in exchange for visiting the Seventh Street Assessment Center in downtown Los Angeles.
- At the facility, an admitting form was generated for the homeless recruit that included a fabricated diagnosis by untrained staff. These forms were sent to one of the Defendant hospitals under the name of the admitting physician, who had not examined (or in most cases even seen their patient beforehand).
- Thee Seventh Street Assessment Center had agreed to provide Tustin Hospital up to 50 patients per month, City of Angels Hospital up to 30 patients per month, and LA Metro Hospital with whatever patient referrals were necessary to fill all of its beds.
- Recruits were often admitted to hospitals solely based on the faxed Admission Form for various ailments, both actual and fictional, but none that rose to the level required for hospitalization.
- The admitting physician frequently did not see their “patients” until shortly before their discharge.
- The hospitals, physicians and transporting ambulances would submit claims to Medicare or Medi-Cal for compensation after homeless recruits were sent back to Skid Row.
- Recruits were usually sent back within 1-2 days of being admitted.
- The defendants named in the civil law enforcement action received millions of dollars in payments from the Medi-Cal and Medicare programs through this scheme.
- Mitts and Metropolitan Healthcare were paid a flat fee of $20,000 per month by LA Metro Hospital for patient referrals; up to $4,000 per month from City of Angels Hospital; and varying amounts from Tustin Hospital depending on the number of patients received.
- Assessment center personnel were paid up to $3,500 per month by Mitts or the hospitals directly.
- The scheme was discovered in October 2006 by Los Angeles Police Department officers who originally believed they were witnessing an incident of homeless patient dumping. An investigation later discovered these homeless individuals were in fact recruits used in the scheme to defraud the Medi-Cal and Medicare program.
This civil law enforcement action seeks to enjoin the hospitals from engaging in the illegal activities described in the Complaint, a court order requiring the defendants to fully comply with all state and federal health care laws and disgorgement of all ill-gotten gains from the scheme. In addition, the suit seeks civil penalties of $2,500 for each violation of the Unfair Competition Law, and an additional $2,500 penalty for each violation that victimized any senior citizen or disabled person.
In a parallel criminal case, Sabaratnam and Mitts are jointly charged with conspiring to receive and pay kickbacks for patient referrals and to commit health care fraud. Sabaratnam is charged with eight counts of paying kickbacks for patient referrals. Mitts is charged with four counts of receiving kickbacks for patient referrals. Mitts is additionally charged with six counts of money laundering and two counts of tax evasion for allegedly failing to report more than $479,000 in income in 2005 and more than $620,000 in income in 2006 [2].
In 2006, in a civil case brought under the Federal False Claims Act, the Sabaratnam, Bourseau, and two companies they ran were ordered to pay the U.S. Government $23,776,332 for treble damages and $31,000 in civil penalties for defrauding Medicare by submitting inflated hospital cost reports for 1997 through 1999 [3]. The U.S. Court of Appeals upheld this verdict in 2008 [4].
References
- City attorney files civil law enforcement action against hospitals, doctors, for health care fraud: Investigators uncover scheme to fill hospital beds with homeless to bilk state, federal health care benefit systems. Press release, Office of the Los Angeles City Attorney, Aug 6, 2008.
- Indictment. U.S.A. v. Rudra Sabaratnam and Estill Mills. U.S. District Court for the Central District of California, Case No. 2:08-cr-00904, Unsealed Aug 6, 2008.
- Benitez RT. Findings of fact and conclusions of law. U.S.A. v. Robert I. Bourseau et al. U.S. District Court, Southern District of California, Case No. CV 03-0907-RTB, Sept 29, 2006.
- Beezer RR. Opinion. U.S.A. v. Robert I. Bourseau et al. U.S. Court of Appeals for the Ninth Circuit. Case No. 06-56741, filed July 14, 2008.