LOS ANGELES A hospital CEO was arrested Wednesday in what authorities said was a scheme to recruit homeless people as phony patients and bill government programs for millions of dollars in unnecessary health services.
Federal agents raided three medical centers and the city of Los Angeles sued the hospitals, saying they used homeless people as "human pawns."
More charges are expected, a federal prosecutor said.
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.
Over four years, a mentally ill woman identified as "Recruit X" was admitted to all three hospitals for conditions she said she never had, such as shortness of breath and chest pains.
After her stays, she would be returned to Skid Row and use money she received for participating in the scheme to buy crack cocaine, authorities alleged. She was never treated for drug addiction.
The investigation was sparked in 2006 by a Los Angeles police investigation of reports that hospitals were dumping homeless patients on the streets.
Search warrants were served at City of Angels Medical Center, Los Angeles Metropolitan Medical Center and Tustin Hospital and Medical Center, the FBI said.
FBI 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 expected to be arraigned Wednesday afternoon.
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.
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."
There were no residential phone listings in Los Angeles for Sabaratnam or Mitts and it was not immediately known if they had attorneys.
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.
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.
Frank Mateljan, a spokesman for the city attorney's office, said Skid Row workers "were receiving kickbacks up to $20,000 a month from some of these hospitals and they were delivering between 30 and 50 patients a month."
Mitts ran the 7th Street Assessment Center, which screens people for health needs and takes them to hospitals if necessary.
The lawsuit said the "patients" were picked up by recruiters who sent them to the 7th Street center, where they were given phony diagnoses and forms were filled out justifying their eligibility for government medical programs.
Medi-Cal and Medicare would be billed for the ambulance and hospital stay, Mateljan said.
After their hospital stays, the homeless patients would be returned to Skid Row shelters, but "they would go back multiple times," he said.
In the lawsuit, "Recruit X" said she "received very little medical treatment, and none of the treatment that she received was necessary."
At least once, she suffered a serious drop in blood pressure after she was given a nitroglycerin patch for a nonexistent cardiopulmonary condition, the suit claimed.