Edward Novak was sentenced to 4.5 years in federal prison and fined $770,000 in one of the most gruesome and savage Medicare fraud cases in Illinois history. That he only received 54 months was amazing. And now that Novak will soon be released, he still doesn’t want to repay taxpayers or accept responsibility for his actions.
Novak was the CEO of Sacred Heart Hospital, a once busy 119 bed hospital in Chicago. Originally opened as the Franklin Boulevard Community Hospital in the 1920’s, the hospital went private in 1998. When the FBI raided the facility several years ago, it was owned and operated by Edward Novak. After Novak and 12 others affiliated with the hospital were indicted, the Chicago Sun Times called the Sacred Heart a maggot infested substandard facility. We called it a house of horrors.
Despite being convicted by a jury of his peers, Novak demanded the court set aside the jury verdict. When that didn’t work, he demanded a new trial. Failing in that, he appealed. His bids to sidestep responsibility for conditions at the hospital were rejected every step of the way.
Even at his sentencing, prosecutors say that Novak showed no remorse and did not accept responsibility for his failings.
And now that Novak will soon be released? He is arguing that he shouldn’t have to pay millions of dollars in restitution. He claims that despite the Medicare fraud scheme, patients still received good care and the government got what it paid for!
To better understand the absurdity of Novak’s position, some history about conditions at Sacred Heart is needed. A history lesson that includes allegations of spraying patients in the operating rooms with Off! to keep bugs out of a patient’s open wounds and unnecessary (and often fatal) surgeries.
Sacred Heart Hospital – a Modern Day House of Horrors
In 2013, the feds indicted 13 people affiliated with Sacred Heart. Among them was Edward Novak. Many physicians and staff members ultimately cooperated with the Feds. Novak was one of the few exceptions and the most defiant.
Records show one Sacred Heart physician was called the “butcher.” There were also allegations that operating room nurses sprayed patients with “Off!” bug repellent to keep flies away from incisions during surgery.
Novak’s number two man, Anthony Puorro, turned on Novak and testified. He was the hospital’s Chief Operating Officer. Purro said the hospital paid kickbacks disguised as “educational stipends” to physician assistants and doctors who brought in the most patients. (Patient recruitment schemes involving kickbacks are highly illegal.)
A patient recruiter testified that when beds were empty, staff were told to troll for patients. If a recruiter didn’t meet his or her “quota,” they were fired.
And what was Edward Novak doing? Puorro says he actively tracking the referrals made by each of the professional staff.
Many patients also came forward, sometimes it was the families of patients who died at the facility. The families of two patients who died at Sacred Heart said one of doctor there was performing unnecessary tracheotomy surgeries. Not only was he operating on people who didn’t need surgery, his safety record was horrible. They say he had a horrific mortality rate of 17.85%, far in excess of other doctors performing similar procedures.
Prosecutors claimed that ambulance drivers were bribed to take critical care patients to Sacred Heart even if other facilities were much closer. When seconds count, ambulance drivers were going out of their way to take patients to the hospital that paid them a kickback.
The False Claims Act Suit Against Edward Novak
Many of those indicted pleaded guilty. Others stepped forward and voluntarily cooperated. By the time Novak’s criminal trial started, the hospital was for all practical purposes closed.
A defiant Novak was convicted and tried every legal maneuver in the book to avoid prison. He failed.
And now we fast forward to today.
The government believes Novak made millions of dollars in profits from his Medicare fraud scheme. Not only must he pay the $770,000 fine levied in the criminal case, the government wants him to repay taxpayers. Medicare and Medicaid are funded with tax dollars. When you rip off Medicare, you are ripping off every hard-working American taxpayer.
Did a few years in the can make Novak any wiser? Apparently not. Now the battle rages on as to whether Novak should be forced to pay restitution. Incredibly, he still doesn’t appear to take any responsibility for his action. This isn’t a case over how much restitution is owed, rather Novak doesn’t believe he should pay anything! Zero, zip, zilch, nada!
In February, Novak asked a federal judge to toss the government’s request for restitution. “[T]he United States cannot carry its burden of demonstrating that it sustained any financial loss as a result of Mr. Novak’s conduct, and without evidence demonstrating a financial loss, there is no material question of fact for trial on the issue of False Claims Act damages. Additionally, the imposition of any False Claims Act penalties would violate Mr. Novak’s rights under the Excessive Fines Clause of the Eighth Amendment.”
Novak argues that the government can’t prove that it sustained lost any money because prosecutors have “failed to produce evidence showing that any medical care at issue in this case was illusory, unnecessary, or worth an amount less than what Medicare or Medicaid paid for that care. There is no dispute that the medical care at issue was provided to Sacred Heart patients who needed it.”
True, care was provided to those who needed it and according to witnesses at trial, to some folks who didn’t need it. But was the care worth what was paid? Can you even call it “care”? In our humble opinion, a jury of twelve already made that determination. There is a reason why Edward Novak is in jail and it certainly isn’t because he was providing good care.
Defendants in False Claims Act cases often claim there are no damages because a service or product was delivered. Would you pay for a surgery by a doctor called the butcher or one who had a horrific survival rate? How much would you pay for unnecessary surgery? Or for being sprayed with bug repellant to keep the flies and maggots away during surgery?
A federal appeals court has already dealt with this same issue, a case in which illegal kickbacks were at issue. There like here, the wrongdoer argued that since the patients received services, there were no losses. A three-judge panel in Chicago ruled in that case:
“Nor do we think it important that most of the patients for which claims were submitted received some medical care—perhaps all the care reflected in the claim forms . . . Edgewater did not furnish any medical service to the United States. The government offers a subsidy (from the patients’ perspective, a form of insurance), with conditions. When the conditions are not satisfied, nothing is due. Thus the entire amount that Edgewater received on these 1,812 claims must be paid back.”
In simple terms, the court said the government should not have to pay if the care provided was substandard or involved kickbacks. Play by the rules and you get paid. Why should Uncle Sam reward healthcare providers who fail to play by the rules?
And Novak’s second argument? His alleged violation of his Eighth Amendment excessive penalties?
That is also easy to address. It is not uncommon for wrongdoers to face both criminal and civil prosecution for the same offense. A drunk driver who runs over a pedestrian can be prosecuted for the drunk driving offense and even sent to prison. That doesn’t stop the pedestrian who got run over from also suing for damages.
Here the victims are you and I. Taxpayers. And Congress says that those that defraud Medicare and violate the False Claims Act can face triple damages. Is that cruel and unusual punishment? No. The only people who were cruelly treated were patients in Novak’s hospital.
False Claims Act, Whistleblowers and Preventing Harm to Patients
The government’s civil case against Edward Novak was brought under the False Claims Act, a Civil War era anti-fraud statute. Prosecutors love the law because it has real teeth, high penalties and triple damages.
Healthcare workers like the law because it has strong anti-retaliation provisions and allows whistleblowers to earn huge cash awards. Under the statute, whistleblowers with inside information about Medicare fraud can keep 15% to 30% of whatever the government collects from wrongdoers.
Earning an award isn’t difficult. But taking the first step is. Congress recognized that is why such generous awards are offered.
Medicare fraud usually involves overbilling, kickbacks and the like. Taxpayers are the victims in most healthcare fraud cases. Sometimes, however, they involve unnecessary surgeries and substandard care. When that happens, tragedy can occur. Patients can die. (Edward Novak was never convicted of abusing or hurting patients but as owner of the facility, we hold him responsible for the care received by patients in his hospital.)
If you are a healthcare professional with inside knowledge of Medicare, Tricare, Medicaid or other healthcare fraud, call us immediately. The conversation is free and without obligation. We can help you determine if you are entitled to an award, help protect you from retaliation and stop the fraud.
For more information, visit our Medicare fraud whistleblower page. Ready to talk? Contact us online, by email or phone 202-800-9791. You will be relieved you did.