The homeless were paid something like US $30 for a three-day stay and were treated for such minor complications as skin eruption and dehydration, and the state was billed thousands of dollars in the scam, the indictment alleges.
Just last month, in a separate federal lawsuit stemming from alleged Medicare and Medicaid false claims involving a Chula Vista psychiatric hospital, an appeals court upheld a US $15.6 million award against Dr Sabaratnam and several other associates.
Although Dr Sabaratnam did not prepare or sign the cost reports, Judge Robert Beezer announced that the doctor acted with 'deliberate indifference' when he agreed to submit cost reports without making any inquiry into the veracity of its contents.
Mills, who faces a 140-year maximum sentence, set up an Assessment Center four years ago and hired a co-conspirator, who became a government informer recently, as well as 'stringers' and 'runners' to recruit homeless people, according to the indictment.
The fraud allegedly perpetrated by Dr Sabaratnam, CEO and part owner of the City of Angels Medical Center, and Mills could exceed US $1 million. If he is found guilty, Sabaratnam, 64, faces a maximum of 50 years in prison.
In a related development, Dr Urmundalvaru Mallikarjuna, a paediatrician from DeFuniak Springs, Florida was arrested last month for allegedly billing the state Medicaid program over US $100,000 in the last three years for services for which he knew he should not be reimbursed. If the charges are proved, he faces up to 30 years in prison.
Both doctors are out on bail, but neither they nor their lawyers were available for comment.
'The indictment (against Dr Sabaratnam and several other LA hospitals) alleges a sophisticated scheme to defraud important taxpayer-financed healthcare programs, a scheme that ranged from street-level operatives to the chief executive of a hospital,' said United States Attorney Thomas PO'Brien in a statement.
'There is too much money being stripped from public healthcare programs, and the potential impact to those with legitimate needs is too great to let those orchestrating such frauds escape prosecution.'
Salvador Hernandez, Assistant Director in Charge of the FBI in Los Angeles, told India Abroad that the allegations listed in the indictment detail criminal activity which defrauded government programs. The losers in the end are the American taxpayers, he added.
"The depravity with which the scheme was carried out is startling in that the defendants are accused of preying on the homeless and exploiting their desperate conditions for personal gain," he said.
Los Angeles City Attorney Rocky Delgadillo announced last week he has filed a civil suit against several hospitals including City of Angels Medical Center, their executive officers and their co-schemers.
'These criminals thought they could get away with this scheme because they figured no one cares about the homeless on Skid Row. They were dead wrong,' he said.
Florida's Attorney General Bill McCollum said investigators had uncovered how Dr Mallikarjuna created a scheme to bill the Medicaid program for providing Medicaid-recipient children with a minor complaint, a physical exam, or a 'well visit' to double his payment from Medicaid. His colleagues and staff had warned Mallikarjuna against the practice for several months, the attorney general's aides said.
Dr Mallikarjuna allegedly submitted more than 2,600 false claims affecting between 100 to 200 patients, many of them duplicates, according to the attorney general's office. He is also charged with allegedly billing Medicaid for office visits 'that were in reality brief phone conversations with their parents,' a statement from McCollum's office said.
