The Record (Bergen County, NJ)
February 22, 2000, TUESDAY; ALL EDITIONS
Copyright 2000 North Jersey Media
Group Inc., All Rights Reserved
The Record (Bergen County, NJ)
February 22, 2000, TUESDAY; ALL EDITIONS
SECTION: NEWS; Pg. A1
LENGTH: 1082 words
HEADLINE: FOUNDER OF
FAILED HMO IN NO PAIN ;
HOSPITALS,DOCTORS SUFFERING, THOUGH1 NEW3
BYLINE: LINDY WASHBURN,
Staff Writer
BODY:
A year after a Medicaid HMO accused of misusing
state and federal
funds was dissolved by the state, its founder is still enjoying a
millionaire's income while the hospitals and doctors who allegedly
were
defrauded delay programs for the poor and fight for restitution.
Although the state last year sued American Preferred Provider Plan
Inc., accusing its founder of bleeding the health maintenance
organization of more than $ 9 million, the civil case is stalled
in state
court. No officers of the failed HMO have been criminally
prosecuted.
Only a fraction of the more than $ 45 million owed to hospitals
and
doctors has been recovered, and none of it paid to them.
Meanwhile, lawmakers are moving closer to approval of a plan to
use
state funds and an assessment against the state's remaining HMOs
to pay
$ 100 million in bills left by APPP and HIP Health Plan of New
Jersey,
another failed HMO. The state Senate's Budget Committee held a
hearing
on the plan Thursday.
APPP's founder, Saddle River neurologist Magdy Elamir, continues
to
practice medicine in a Jersey City storefront office and lives in
a $ 1.8
million mansion in one of Bergen County's toniest suburbs, court
records
show. His car leases alone total $ 65,000 per year, the records
show.
The Egyptian immigrant also operates a chain of MRI facilities in
Newark, Irvington, and Paterson, a limousine company, and a
medical
management company. Combined with his medical practice, his income
totals more than $ 18,000 weekly, nearly $ 1 million a year,
records
show.
"He's still in good spirits,"said Michael Chertoff, the former
U.S. attorney in Newark whom Elamir hired as his defense lawyer.
Chertoff said his client would not speak with reporters.
The state cannot attack Elamir's income because "there's been no
judicial determination that Elamir is liable,"said William Heine,
a
spokesman for the state Department of Banking and Insurance.
Public records in the civil case contain no reference to a
criminal
investigation, but court officials said some documents in the case
were
under seal. The state Attorney General's Office would neither
confirm
nor deny an investigation. The state's Medicaid fraud division is
not
involved in the case, a Medicaid spokesman said.
As for APPP's finances, capital for the HMO's 1995 start-up and
subsequent expansions was obtained through loans against Elamir's
Bergen
County home and a downtown Newark office building. Also, Elamir
promised
income from two of his then-unlicensed MRI facilities as a
guaranty for
the HMO's cash flow, but that income was never used to pay claims.
The state has since moved to change the criteria for HMO licenses,
to require more liquid assets and a firmer financial foundation.
Additionally, HMOs must undergo stricter audits before beginning
operations and while in business.
"I've got some problems with the taxpayers footing the bill for
anything, realizing that this company should never have been in
business
in the first place,"said Rep. Bill Pascrell Jr., D-Paterson, in
whose
Passaic County district most of the failed HMO's members live.
The congressman has sponsored a federal"HMO Solvency Act"he
says
would prevent companies like American Preferred Provider from
receiving
Medicaid contracts without first receiving a full audit and
undergoing
regular monitoring.
Former state Insurance Commissioner Jaynee LaVecchia, who was
recently named a state Supreme Court justice, charged in her
initial
filing against APPP that it had improperly paid Elamir's other
businesses more than $ 5 million and illegally lent $ 4 million to
two
HMOs he was trying to start in Michigan and Washington.
The state accused Elamir of paying himself $ 800,000 for"medical
consultations"on top of the $ 400,000 annual salary he collected.
It
also accused him of improper payments to his brother, Mazhar
Elamir, an
officer in the HMO.
"There was such disgust among so many people when they heard a
year ago the list of perks he and his family had,"said Patrick
Wardell, president and chief executive officer of St. Joseph's
Hospital
and Medical Center in Paterson, which is owed $ 15 million.
"Everyone was
horrified at someone profiting so much, while everyone else
suffered
so badly."
The state Medicaid program was paying APPP $ 6.6 million monthly
when it folded, money intended for the care of 44,000 of the
state's
poorest citizens. Doctors and hospitals said they were owed more
than
$ 45 million in unpaid claims.
But as the civil case drags on, the question of Elamir's
responsibility has not been resolved.
It took months, for example, for the court to approve Elamir's bid
to substitute real property for the $ 848,000 cash bond that the
state
demanded, and which he could not produce. Finally, Judge Anthony
Parrillo in Superior Court in Mercer County allowed substitution
of
three pieces of property as surety, the only properties with any
significant value after Elamir's mortgages were taken into
account.
Elamir's property and bank accounts are worth more than $ 8.8
million, according to his financial statement, but mortgages and
other
liens reduce his net worth to $ 760,000. All his assets were
frozen by
Parrillo.
The judge last year approved the sale of APPP's Michigan
subsidiary
and its remaining New Jersey business. Proceeds totaling about $ 5
million from the sales are in a state account and have not been
used to
pay the HMO's many creditors, pending the judge's approval.
Creditors
can expect to get about 20 cents on the dollar, says Heine, the
spokesman for the state Department of Banking and Insurance.
One creditor, St. Joseph's, is eager for restitution.
The hole in the budget left largely by APPP's failure has slowed
several hospital projects, Wardell noted. Plans to screen 40,000
people
for hypertension have moved forward"on a shoestring,"rather than
with
the full program intended. Construction of a 60-unit, $ 15 million
dialysis center, which he said would be the nation's largest, has
been
delayed.
Hospital officials, meanwhile, wonder about the accountability of
the HMO's founder, Elamir. "You kind of hoped that he would pay in
some
way or another,"Wardell said.
Heine noted, "Just because it's a year later, and the money hasn't
come in yet, doesn't mean it's not going to."
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