Hospital CEO, CFO arrested in $2M kickback scheme

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The owner and chief financial officer of Sacred Heart Hospital in Chicago, along with four affiliated physicians, have been arrested and charged with conspiracy to pay and receive kickbacks for referrals of Medicare and Medicaid patients to the 119-bed hospital, the U.S. Justice Department announced today.

Those arrested by the FBI include Edward J. Novak, Sacred Heart's owner and CEO, Roy M. Payawal, the hospital's CFO, and four physicians. Agents with the FBI and the Office of the Inspector General seized about $2 million in Medicare payments from various hospital bank accounts.

According to the complaint filed yesterday in federal court, Novak and Payawal allegedly tried to conceal the scheme by masking payments as fictitious rental payments, paying the salaries of physicians' employees, providing physicians ghost contracts for duties without any real responsibilities, and purporting to pay physicians to supervise and teach non-existent medical students. Announcement