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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


LENGTH: 1082 words



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

"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

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

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."