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Failure to get Medicare, a buyer or financing closes hospital

Sacred Heart Hospital West Side Tuesday April 16 2013. | Brian Jackson~Sun-Times

Sacred Heart Hospital on the West Side Tuesday, April 16, 2013. | Brian Jackson~Sun-Times

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Updated: August 4, 2013 6:23AM

A day after Sacred Heart Hospital abruptly closed on Monday, the hospital sent a letter to state officials explaining that the closure was in part because of a loss of Medicare payments after allegations of criminal acts there.

“Due to unforeseen conditions resulting from, among other things, a suspension of Medicare funding, the inability to sell its assets to a buyer and the inability to obtain financing to continue operations,” Sacred Heart Hospital would be closed on July 1, 2013 and all employment would be terminated on that date, the letter said, which was sent to the Illinois Department of Public Health on Tuesday.

The letter also said, “We view this as a temporary suspension…in that the hospital is hopeful that a willing buyer will purchase the hospital in the near future.”

The letter was signed by Karen Davis, who identified herself as the acting CEO of Sacred Heart Hospital and also is an employee with the prominent restructuring firm Alvarez & Marsal Holdings LLP. The New York-based firm was hired to turn the hospital around and find a new buyer after the hospital at 3240 W. Franklin Blvd., came under a federal microscope for medical fraud and kickbacks.

Davis said that Medicare was discontinued to the hospital on May 7 because of “credible allegations of fraud.” She declined to make any other comment.

The federal government took $3.2 million from Sacred Heart because of the alleged crimes, leaving the hospital with only $500,000 in cash to run it, which was not enough to keep it open, Davis said in the letter.

Six weeks before the hospital was closed Monday, the FBI announced two hospital executives, including owner Edward Novak, 58, of Park Ridge, and five doctors were charged in a kickback and health care fraud scheme in which unnecessary medical services were performed to collect fees from Medicare and Medicaid insured patients.

In a statement from Novak, he said, “I strongly deny the allegations” of the criminal acts.

Eight patients from Sacred Heart were discharged either to their home or to other health care facilities when the hospital abruptly closed, the Illinois Department of Public Health said Tuesday.

Ambulances also were instructed to go to other nearby emergency departments.

Exactly which emergency departments patients were taken to was not provided, but IDPH spokeswoman Melaney Arnold said there are about a dozen such facilities within five miles of Sacred Heart.

Larry Langford, a spokesman for the Chicago Fire Department, said the loss of Sacred Heart shouldn’t be a problem.

“It’s not a hospital with heavy traffic for us,” Langford said.

The Illinois Department of Public Health received a phone call Monday informing officials that the hospital was closing. They moved quickly to ensure patient safety at the hospital.

The IDPH intended to revoke Sacred Heart’s license for failure to provide the department with a 90 day notification that it would close. But Sacred Hospital disagreed that they violated the 90-day rule, “as this is not a permanent closure, but rather a temporary one.”

Contributing: Tim Novak

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