On a Sunday afternoon two years ago, five homeless people being dropped off on Los Angeles' skid row by an ambulance caught the attention of police officers.
The officers videotaped what they thought was a case of hospitals dumping patients in a section of the city where few would notice or care.
But as investigators began to unravel the incident, they say they found something far different: a massive scheme to defraud taxpayer-funded healthcare programs of millions of dollars by recruiting homeless patients for unnecessary medical services.
The elaborate enterprise churned thousands of indigents through hospitals over the last four years and billed Medicare and Medi-Cal for costly and unjustified medical procedures, federal, state and local investigators said Wednesday.
Those involved in the alleged conspiracy "ranged from street-level operatives to the chief executive of a hospital," U.S. Atty. Thomas P. O'Brien said.
After raids on three hospitals in Los Angeles and Orange counties Wednesday, one hospital chief executive faces criminal charges and executives at two other facilities were accused of fraudulent business practices in a related civil lawsuit filed by Los Angeles City Atty. Rocky Delgadillo.
Some of the homeless patients involved received tests or treatments that were potentially harmful, authorities said.
The "depravity" of the alleged scheme startled authorities, said Salvador Hernandez, assistant director in charge of the FBI's Los Angeles office.
"The defendants are accused of preying on the homeless and exploiting their desperate conditions for personal gain," he said.
Arrested on federal charges were Dr. Rudra Sabaratnam, an owner and chief executive of City of Angels Medical Center, and Estill Mitts, an alleged patient recruiter who operated a storefront facility called the Assessment Center in the heart of skid row. A 21-count grand jury indictment accuses the pair of healthcare fraud and receiving illegal kickbacks.
Mitts, who was released Wednesday afternoon on $25,000 bail and confined to his home, is also charged with money laundering and income tax evasion. His attorney declined to comment. Late Wednesday, Sabaratnam's attorney, John Vandevelde, argued at a court hearing that the charges against his client were "not that significant." But the doctor was being held in custody until another hearing today.
