healthy4u: corporate integrity agreement

"Slap on the Wrist" for a "Too Big to Fail" Hospital - Judge Rejects WakeMed Settlement

Maybe we are reaching an inflection point in how misbehavior by big health care organizations is handled in the US legal system.  We have frequently discussed the march of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a> made by big health care organizations.  Many of these settlements indicated severely bad behavior, often behavior that seemed overtly dishonest, sometimes criminal, and had the potential to harm patients.  Yet most of these settlements involved only fines, and sometimes written agreements that pledge the organization will do better in the future, often in the form of <a href="http://hcrenewal.blogspot.com/search/label/deferred%20prosecution%20agreement">deferred prosecution</a> or <a href="http://hcrenewal.blogspot.com/search/label/corporate%20integrity%20agreement">corporate integrity agreements.</a>  Yet the fines were often small compared to the amount the organization stood to make from the bad behavior.  It is not clear that any written agreements were enforced, or caused major penalties if the organization did not fulfill them.  And almost never did any individual within the accused organization suffer any negative consequences for authorizing, directing or implementing the bad behavior, even if such individuals may have personally profited from high compensation partially fueled by the bad behavior. Now and then, though, there are cases that are different.  Perhaps one has just come along that may signal things are going to change. The Basics of the Case The case was first <a href="http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html">reported</a> by the Raleigh (NC)  News & Observer in December, 2012.  Here are the basics: <blockquote class="tr_bq">WakeMed has agreed to pay $8 million to settle an investigation into its practice of billing Medicare for expensive overnight care when the patients had been treated and discharged the same day. The settlement came after a lengthy criminal investigation into Medicare billing procedures used by nurses at the private, not-for-profit hospital’s Heart Center Observation Area. Nurses there, according to federal court documents, routinely ignored physicians’ orders for how a patient should be classified. Their actions resulted in the hospital receiving millions of unwarranted Medicare dollars for outpatients who were classified wrongly as inpatients. Though some WakeMed managers were aware of the billing practices, according to court documents, investigators found no evidence of anyone personally benefiting from the system. No one, according to WakeMed officials, lost their job or was disciplined because of the investigation. </blockquote>The US Attorney made the usual sort of announcement: <blockquote class="tr_bq">'This case will serve as a reminder that hospitals, just like individual health care providers, will be held accountable for their actions,' [Thomas] Walker, the U.S. Attorney for the Eastern District of North Carolina, said in a statement. </blockquote><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy</div> So far, this is pretty usual.  There were accusations of inflated billing, a monetary fine that might look big to the average citizen, but that pales next to the revenue of the offending organization (over $943 million in the 2010-2011 fiscal year according to the <a href="http://www.guidestar.org/FinDocuments/2011/566/017/2011-566017737-087a1d7c-9A.pdf">WakeMed 2011 US form 990</a>),a stern statement by the US Attorney, but again no penalties for any individual, and here, a rather implausible statement that no one benefited from the deceptive practices. However, there were also some immediately appreciable atypical elements to this case. Atypical Elements In addition to the fine to be paid, the case was to be settled using a deferred prosecution agreement: <blockquote class="tr_bq">The hospital faces two criminal charges – making material false statements relating to health care matters and aiding and abetting, but under the settlement reached Wednesday, prosecution will be deferred. If the hospital complies with provisions in the settlement agreement, such as paying $8 million and allowing further monitoring, the charges will be dismissed in two years, according to court documents. As part of the agreement, which has yet to be approved in court, [Wakemed CEO Bill] Atkinson acknowledged the wrongdoing described by prosecutors. He further acknowledged that WakeMed was responsible for the acts of the health-care organization’s employees and officers.</blockquote><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy</div><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy</div><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy</div>While we have sometimes seen deferred prosecution agreements used in cases in which for-profit health care corporations were accused of violating the law, they are rarely used in cases involving non-profit hospitals.  (The biggest one I recall was that of the University of Medicine and Dentistry of New Jersey, a complex case we started discussing in 2005.  See relevant posts <a href="http://hcrenewal.blogspot.com/search/label/UMDNJ">here</a>.)  Criminal charges against a non-profit hospital are also unusual.  Note also that as stated above the hospital system CEO seemed to admit that the hospital did wrong, raising further doubt about the conclusion above that no individual personally profited. The plot further thickened when the CEO seemed to contradict his own statement within the deferred prosecution agreement that acknowledged wrong-doing. <blockquote class="tr_bq">In an interview Wednesday, Bill Atkinson, WakeMed’s president and CEO, wavered between accepting the charges – saying repeatedly  'I don’t want to minimize it, and I don’t want you to hear me doing that' – and being adamant that the hospital’s actions were simply a misinterpretation of complicated federal Medicare guidelines. Even though he endorsed a settlement agreement in which prosecutors contend two crimes occurred, Atkinson said he doesn’t believe the hospital’s actions were criminal. 'I don’t think so, but the federal government thinks they could certainly turn it that way,' he said. That description differs vastly from what prosecutors contend. 'They’re not going to minimize the media effect,' Atkinson said.</blockquote><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy</div><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"></div> The plot thickened further when in the same interview Atkinson seemed to deny that any individual did anything wrong: <blockquote class="tr_bq">Heidi McAfee, who retired earlier this year, was director of Patient Access during much of the period when the problematic billing occurred. Efforts to reach McAfee on Wednesday were unsuccessful, but Atkinson praised her years of work with WakeMed. 'Do I think anybody intentionally did anything wrong?' Atkinson said. 'No, I don’t.' He said WakeMed had not reported McAfee or any of the nurses to the N.C. Board of Nursing for ignoring doctor’s orders. </blockquote> So did the hospital acknowledge wrongdoing, or did it not?  If wrongdoing did occur, did any individual do it, or was it done by ghosts or spirits?  From this account, it was unclear. This Time the Inconsistencies and Ambiguities are not Ignored Many of the <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">settlements we have discussed</a> seem to have been based on similar illogic.  For example, they often involved accusations of bad behavior, often bad enough to put patients at danger, yet the settlements may included ritualistic statements by defendant organizations that they neither admitted nor denied wrongdoing.  Thus, the settlements left ambiguous and unknown what really happened, and their own appropriateness.  (Note that similar settlements are made all the time by big financial firms, and one intrepid judge did point out how little sense they make, see this <a href="http://hcrenewal.blogspot.com/2011/11/will-citigroup-ruling-challenge-health.html">post.</a>) Yet in most cases, the illogic is rapidly swept under the rug, noticed, if at all, by lowly outsiders like your humble bloggers on <a href="http://hcrenewal.blogspot.com/">Health Care Renewal.</a> This time, though, it was different. Why Would the Nurses Ignore Doctors' Orders? An important part of the argument by the US Department of Justice in this case was that nurses "routinely ignored doctors' orders."  If it were true, this would be very unusual and would threaten the integrity of health care at the particular institution, since every hospital operates on the assumption that the doctors make management decisions and order tests, treatments, etc, and then the nurses, as well as technicians and therapists carry out these orders. However, In this case, a local nurse immediately and publicly disputed the notion that the nurses were independently flouting the doctors' orders.  As<a href="http://www.newsobserver.com/2012/12/22/2561738/nurse-rejects-wakemeds-claim-that.html"> reported</a> again by the News & Observer in December, 2012, <div class="entry-content" id="story_text_top"><blockquote class="tr_bq">When Vicki Hewitt-McNeil read about WakeMed’s $8 million settlement for wrong Medicare billing, the Raleigh nurse didn’t buy the story. According to the settlement, a nursing director instructed her staff to admit patients as inpatients and ignore doctors’ orders to treat them on the less expensive outpatient basis. With two decades of nursing experience, Hewitt-McNeil didn’t like that the blame was shifted down the totem pole to nurses, who don’t wield the power of administrators and doctors. 'I honestly cannot believe this was the nursing department that did this,' Hewitt-McNeil said. 'That’s just not possible.'</blockquote> Furthermore, <blockquote class="tr_bq">[Ms Hewitt-McNeil]  also worked shifts at WakeMed as a pool nurse, similar to working as a substitute teacher. 'Nurses at WakeMed don’t have the autonomy to do anything,' Hewitt-McNeil said. 'You have to call a doctor for everything.'</blockquote><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.newsobserver.com/2012/12/22/2561738/nurse-rejects-wakemeds-claim-that.html#storylink=cpy</div> Again, the contention that the nurses systematically disobeyed doctors or pretended to be following non-existent orders implied a fundamental break-down of the system and widespread unprofessional, unethical behavior by the nurses.  In addition, the charges did not suggest why the nurses would do something so bad, especially since they were in no position to personally benefit from their actions.  What Did the Hospital Leadership Actually Admit? <div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.newsobserver.com/2012/12/22/2561738/nurse-rejects-wakemeds-claim-that.html#storylink=cpy</div></div><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.newsobserver.com/2012/12/22/2561738/nurse-rejects-wakemeds-claim-that.html#storylink=cpy</div> It took a few weeks, but someone - it is not clear who it was - noticed that while the Department of Justice asserted that the hospital CEO had admitted wrongdoing, the CEO's public statement seemed to equivocate.  So in mid January, 2013, as <a href="http://www.newsobserver.com/2013/01/15/2607671/wakemed-clarifies-statements-on.html">reported</a> again by the News & Observer, <blockquote class="tr_bq">Deb Laughery, a spokeswoman for the hospital, issued a clarification on Monday. 'In an abundance of caution, WakeMed confirms that it has agreed to a settlement with the United States as set forth in the Deferred Prosecution Agreement,' the statement said, adding further that statements of fact laid out in the agreement were 'true and accurate.' In the clarification, WakeMed officials acknowledged that the hospital formally faced federal criminal charges. The hospital also retracted any suggestions that the settlement only involved a small number of cases.</blockquote> The hospital public relations person apparently could not bring herself to say that the hospital admitted wrongdoing, but by acknowledging that statements of fact in the deferred prosecution agreement were "true and accurate," she seemed to be indirectly admitting again that wrongdoing occurred, and that the hospital was responsible for the actions of its employees. The Judge Notices the Emperor Has No Clothes Despite their internal inconsistencies and illogic, most legal settlements of accusations of wrongdoing by big health care organizations are accepted by judges.  In this case, again things were different.  As <a href="http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html">reported</a> yesterday, on 17 January, 2013 again by the News & Observer, <blockquote class="tr_bq"> WakeMed officials and federal prosecutors spent two years hammering out an $8 million proposal to settle a Medicare fraud investigation. A federal judge shredded the 116-page agreement in less than 30 minutes on Thursday. U.S. District Judge Terrence Boyle ticked off a list of his grievances about the proposal, forcing federal prosecutors into the unusual position of defending the defendants. </blockquote><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy</div> Quelle surprise!  The judge took particular offense that the settlement seemed disproportionately lenient, <blockquote class="tr_bq"> The agreement, Boyle said, appeared to be a 'slap on the hand' for a 'too big to fail' corporate giant. Only the day before, Boyle told the lawyers, he sentenced a woman to a year in prison in a $235,000 insurance fraud case.</blockquote> Furthermore,  <div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy</div> <blockquote class="tr_bq">Boyle was irked that no criminal charges had been filed in the case. He ended the hearing by telling the prosecutor either to fold his briefcase or take it to a federal grand jury for official indictments. 'There are lots of corporations that steal from the government,' Boyle said. 'Most of them are convicted, fined and banished.'</blockquote> Also, <blockquote class="tr_bq">'Why are you coming to court if you tell me you don’t need me?' Boyle asked Gilmore, the prosecutor who rose before him Thursday. 'I’m just window dressing in this case.' 'Why not take a guilty plea, defer imposition of the judgment and sentence, and come back in two years later and take a post hoc dismissal?' Boyle asked later. Boyle lamented the increased number of health care fraud cases across the country. 'Who are the victims in this case?' Boyle asked before answering his own question. 'Every American wage earner and every American citizen.' Boyle continued: 'It’s very difficult for society and the court to differentiate between the everyday working Joe or Jane who goes to prison and the nonprofit corporate giant who doesn’t go to jail, who gets a slap on the hand and doesn’t miss a beat.'</blockquote> Exactly.   And finally, just to demonstrate the sense of impunity of the leadership of this particular nonprofit corporate giant <blockquote class="tr_bq">Boyle, who’s been a federal judge for 28 years, also criticized WakeMed for failing to send a top administrator or a board member to answer his questions. It’s rare for a criminal case to be resolved without a defendant at the defense table. Deb Laughery, a WakeMed spokeswoman, said after the hearing that none attended because the board approved a resolution earlier in the week supporting the proposed settlement.</blockquote> Summary For years now the leadership of large health care organizations have grown rich while denying accountability for their actions that made this so.  This denial has been largely abetted by governmental regulators and law enforcers, who while often recognizing that corporate misbehavior has occurred, have seemed unable or unwilling to pursue anything but the most lenient resolutions of such cases.  These resolutions are often fines that might appear big to gullible members of the public, but are actually small in comparison to the money to be made; sometimes deferred prosecution and corporate integrity agreements that rarely are enforced; and almost never any negative consequences for the people who authorized, directed, or implemented the bad behavior.  Thus the leaders of health care organizations have enjoyed impunity, have become the new untouchables, and thus health care organizations become ever better at raking in money and ever worse at providing good health care. As I have said again and again,  until the people responsible for the bad behavior experience negative consequences from that behavior, they will continue to perform, direct, and condone bad behavior. We will not achieve real health care reform in the US until we effectively deter unethical, self-serving behavior by leaders of health care organizations. <div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy</div><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy</div><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy</div><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.newsobserver.com/2013/01/15/2607671/wakemed-clarifies-statements-on.html#storylink=cpy</div>

"Slap on the Wrist" for a "Too Big to Fail" Hospital - Judge Rejects WakeMed Settlement

Maybe we are reaching an inflection point in how misbehavior by big health care organizations is handled in the US legal system. We have fr...

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Just the Latest Legal Settlement for HCA

Last month, we<a href="http://hcrenewal.blogspot.com/2012/08/paging-doctor-ebdita-how-private-equity.html"> posted</a> about investigative reports that suggesting that for-profit hospital chain HCAwas pushed by its private equity owners to put short-term revenue ahead of good patient care.  A legal settlement announced this week corroborates these concerns.  As <a href="http://www.wrcbtv.com/story/19584753/hca-to-pay-165-million-to-resolve-health-care-fraud-charges">reported</a> by television station WRCB in Chattanooga, TN, <blockquote>HCA Inc., one of the nation's largest private hospital chains, has agreed to pay $16.5 million to settle alleged violations of the Ethics in Patient Referrals Act (also known as the Stark law), the False Claims Act, and other federal and state laws and regulations in connection with the operation of its subsidiary, Parkridge Medical Center, Inc., in Chattanooga. In addition, Parkridge Medical Center has entered into a comprehensive five-year Corporate Integrity Agreement with the Office of Inspector General of the U.S. Department of Health and Human Services (HHS-OIG) to ensure its continued compliance with federal health care benefit program requirements. As alleged in the settlement agreement, during 2007, HCA, through its subsidiaries Parkridge and HCA Physician Services (HCAPS), entered into a series of financial transactions with a physician group, Diagnostic Associates of Chattanooga, through which it provided financial benefits intended to induce the physician members of Diagnostic to refer patients to HCA facilities. The financial benefits included lease of office space from Diagnostic at a rental rate well in excess of fair market value to meet the mortgage obligations of the Diagnostic members and release of Diagnostic members from a separate lease obligation. These financial arrangements violated the Ethics in Patient Referrals Act and the Anti-Kickback Statute – laws designed to protect patients as well as the integrity of government-funded health care benefit programs such as Medicare, Medicaid, TRICARE, and TennCare. </blockquote>The issue here were allegations that HCA and its subsidiaries were paying physicians extra so that they would refer patients to an HCA hospital. Obviously, physicians are supposed to put each patient's interests ahead of extraneous considerations, and hence should make referral decisions based on the patients needs, and the likely benefits and harms of the referral, not the amounts the physicians might make from such payments. Referrals for particular services can be very lucrative for hospitals.  So this settlement seems to provide more evidence that to get profitable referrals, HCA was willing to subvert physicians' values by paying physicians to induce to make what might have been the wrong decisions for individual patients.  Of course, in this situation some physicians were hardly blameless, since they were also willing to set aside their values to receive the payments that generated those referrals. This fits with the thesis we advanced last month.  While hospitals are supposed to have a mission to put care of the sick ahead of all else, it appears that for-profit hospitals, and especially those owned by private equity are more likely to put short-term revenue ahead of patient care. As an aside, while this settlement provides useful information, do not think of it as a solution to the immediate problem.  As we have frequently asserted, it is doubtful that the relatively small payment and the relatively unlikely to be enforced corporate integrity agreement imposed in this settlement will change the company's behavior, in the absence of any negative consequences for the people who authorized, directed or implemented the bad behavior.  HCA once made a $1.7 billion fraud settlement, at the time the biggest such settlement ever made (see <a href="http://hcrenewal.blogspot.com/2010/05/how-did-ceo-who-presided-over-company.html">this post</a>).  However, the company's CEO at the time, Rick Scott, left the firm with a golden parachute and no negative consequences, and is now Governor of Florida.  If that previous huge settlement did not deter the more recent bad behavior in the absence of any penalties for company executives, why should we expect that the current comparatively tiny settlement also in the absence of such penalties will have any effect? As we have now said many, many times, we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich. Furthermore, as I <a href="http://hcrenewal.blogspot.com/2012/08/paging-doctor-ebdita-how-private-equity.html">wrote</a> last month, we need to challenge the notion that direct health care should ever be provided, or that medicine ought to be practiced by for-profit corporations. Before market fundamentalism became so prominent, many stated prohibited the corporate practice of medicine, and the American Medical Association <a href="http://hcrenewal.blogspot.com/2007/12/relman-in-jama-on-threats-to-physicians.html">forbade the commercialization of medicine.</a> It is time to heed that wisdom. I submit that we will not be able to have good quality, accessible health care at an affordable price until we restore physicians as independent, ethical health care professionals, and until we restore small, independent, community responsible, non-profit hospitals as the locus for inpatient care.

Just the Latest Legal Settlement for HCA

Last month, we posted about investigative reports that suggesting that for-profit hospital chain HCAwas pushed by its private equity owner...

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Gentiva's Odyssey Healthcare Settles Again, Signs Yet Another Corporate Integrity Agreement

The Milwaukee Journal-Sentinel <a href="http://www.jsonline.com/news/milwaukee/whistleblower-case-on-hospice-fraud-settled-for-25-million-e54d9un-141143483.html">reported</a> a legal settlement worth noting.  Here are the basics: <blockquote>One of the nation's largest providers of hospice care has agreed to pay $25 million to settle a Medicare fraud case initiated after a former company nurse in Milwaukee filed a whistle-blower suit. It was the second such settlement in six years for Odyssey Healthcare Inc., which paid the federal government $12.5 million in 2006 after another Wisconsin-based employee sued.</blockquote> Also, <blockquote>Medicare provides a benefit meant to cover hospice care for the terminally ill. It covers 24-hour in-home nursing service only during limited crisis periods. But from 2006 to 2009, Odyssey practiced a pattern of enrolling and recertifying non-terminal patients, and billing for continuous care that wasn't necessary or reasonable, according to the False Claims Act suit filed in 2008 but just unsealed Thursday.</blockquote> As is usual in such cases, Odyssey's parent company denied that it did anything wrong: <blockquote>Odyssey, which operates in 26 states, is now part of Atlanta-based Gentiva Health Services, which runs hospice offices in West Allis and Burlington. Gentiva officials declined to comment, but referred to an announcement it posted on its investor relations website last month. 'Gentiva cooperated fully with this investigation, which covered a period prior to our acquisition of Odyssey, and the settlement is consistent with our efforts to instill Gentiva's culture of compliance throughout the company,' said John Camperlengo, general counsel and chief compliance officer. The statement said the firm is proud of the care its thousands of hospice clinicians provide, and of Gentiva's efforts to ensure strict compliance with all regulatory requirements.</blockquote> The Implications of the Need for a New Corporate Integrity Agreement However, there are some disturbing aspects of this case that require a bit more explanation. First, as noted by the Associated Press (in a story available <a href="http://www.thonline.com/news/iowa-illinois-wisconsin/article_d2a4d2d0-8f73-53c2-86dc-e6ff3c7e2ab5.html">here</a> from the Dubuque [Iowa] Telegraph-Herald), <blockquote>Besides agreeing to pay the $25 million settlement, Odyssey entered a five-year corporate integrity agreement with the federal government.</blockquote> Now corporate integrity agreements are not known for their effectiveness. In fact, as we noted in <a href="http://hcrenewal.blogspot.com/2011/07/executives-get-rich-despite-ethical-and.html">this blog post</a>, according to <a href="http://files.shareholder.com/downloads/GTIV/1338648526x0x456437/CEA1782E-FB2C-4850-A530-9CF06AA6C55B/Gentiva_AR_2010.pdf">Gentiva's 2010 annual report</a>, its Odyssey subsidiary had been subject to a corporate integrity agreement arising from its 2006 settlement, one which was apparently not effective in preventing its misbehavior from 2006 to 2009. However, corporate integrity agreements do serve as markers for the need to improve the integrity of the corporations who need to make them. In this case, why would Gentiva be asked to sign such an agreement if its integrity were already beyond reproach? So Gentiva's current "culture of compliance" is open to question. The Implications of "Enrolling and Recertifying Non-Terminal Patients" A quick read of the Journal-Sentinel and Associate Press stories above might give the impression that what Odyssey did wrong involved a billing technicality, admittedly, one that allowed it to collect more money that that to which it would otherwise be entitled. This story actually goes beyond the issue of fraud, and raises important concerns about patient care. The enrollment  by a hospice of patients who are actually not terminally ill could have serious adverse effects on such patients. As we noted in <a href="http://hcrenewal.blogspot.com/2011/07/prepare-them-to-die-for-profit-hospices.html">this post</a>, hospices are meant for patients with very limited life expectancies. The goal of hospice is to provide comfort and palliation, not active treatment of illnesses. So if patients who actually do not have such severely limited life expectancies are admitted to a hospice, they might be denied therapy that could actually make them feel better, or even cure acute illnesses or prolong their lives. For example, a hospice patient who developed an open wound might not get maximal wound therapy, as in an example (allegedly involving a different commercial hospice provider) in the post above. So it is possible that Odyssey's enrolling and re-certifying of non-terminally ill patients could have lead to failure to provide some of these patients with the care they should have had. Whether this did or did not occur in individual cases, and what adverse effects may have been produced is not clear from the coverage of this case.   Summary As I wrote in 2011, .... There has been a lot of blather from politicians in the US about "death panels" in debates about health care reform. Many such politicians seem worried that the US government has or will have death panels under the new health care reform legislation. We have criticized that legislation for not addressing many important health care problems. No one, however, has convincingly demonstrated how its provisions would convene "death panels." Wendell Potter argued in his book, <a href="http://wendellpotter.com/deadlyspin">Deadly Spin</a>, (see <a href="http://hcrenewal.blogspot.com/2011/02/wendell-potters-deadly-spin.html">this post</a>) that for-profit insurance companies had their own "death panels." The Bloomberg article strongly suggests that for-profit hospices may also act like death panels. In search of more revenue, for-profit hospices may enroll patients who are not at the end of life, but then provide them only "comfort care," so that if they develop new conditions that are treatable, they are likely to die in the absence of treatment. I am waiting for the politicians who so enthusiastically condemned the supposed "death panels" to be found in health care reform legislation to condemn for-profit hospices for behaving like death panels. In my humble opinion, the case discussed above are the strongest argument yet that we need to reconsider our headlong rush to turn health care, particularly the direct care of patients, over to relatively unregulated, for-profit corporations. The cases above suggest that the pursuit of revenue ahead of patients' welfare by such organizations may lead to sick and dead patients. I cannot see how for-profit direct patient care can be made safe for patients without intense government regulation. If any of those vocal advocates of "free market" health care (in the absence of any good explanation of how health care can ever be an ideal free market, see <a href="http://hcrenewal.blogspot.com/2010/08/how-fallacy-of-perfect-health-care.html">this post</a>) can explain to me how for-profit hospices can be made safe for patients without such regulation, I would welcome their attempts. Meanwhile, this just calls out for legislative and legal investigation, and urgent policy changes.   By the way, the case above also shows how the current approach used by the government to address misbehavior in health care does not work.  We have noted previously how these <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a> often only lead to financial penalties imposed on companies, not individuals, which diffuses their impact, and provides no disincentives to future bad behavior by individuals.  Sometimes <a href="http://hcrenewal.blogspot.com/search/label/corporate%20integrity%20agreement">corporate integrity agreements</a> are added, but as in the current case, they also seem not to deter future bad behavior.   So, I further conclude, de rigueur, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Gentiva's Odyssey Healthcare Settles Again, Signs Yet Another Corporate Integrity Agreement

The Milwaukee Journal-Sentinel reported a legal settlement worth noting. Here are the basics: One of the nation's largest providers of...

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Will the Citigroup Ruling Challenge Health Care Leaders' Impunity?

A federal judge's refusal to approve yet another cozy settlement that was supposed to resolve allegations of wrong-doing by a giant corporation has left the financial world atwitter.  It may be that this ruling will also affect the coziness between giant health care corporations and government regulators.  Summary of the Citigroup Case We first discussed this case twp weeks ago <a href="http://hcrenewal.blogspot.com/2011/11/parallels-between-health-care-and.html">here</a>.  Here is a summary of the government's (in this case, the Securities and Exchange Commision's) original allegations <a href="http://www.nytimes.com/2011/11/29/business/judge-rejects-sec-accord-with-citi.html">from the New York Times</a>. <blockquote>According to the Securities and Exchange Commission, Citigroup stuffed a $1 billion mortgage fund that it sold to investors in 2007 with securities that it believed would fail so that it could bet against its customers and profit when values declined. The fraud, the agency said, was in Citigroup’s falsely telling investors that an independent party was choosing the portfolio’s investments. Citigroup made $160 million from the deal and investors lost $700 million.</blockquote>The Problems with the Proposed Settlement Judge Jed Rakoff refused to approve the settlement because of a series of problems, listed below as summarized by <a href="http://www.economist.com/node/21540667">the Schumpeter columnist in the Economist</a>. <blockquote>Mr Rakoff faulted the SEC for prosecuting Citigroup for negligence when a fraud prosecution was warranted; for failing to provide the court with 'any proven or admitted facts upon which to exercise even a modest degree of independent judgment'; for erroneously contending that 'public interest…is not part of [the] applicable standard of judicial review'; and for wrongly arguing that 'if the public interest must be taken into account, the SEC is the sole determiner'.</blockquote>Furthermore, <blockquote>Mr Rakoff also attacked a second condition of the settlement. Citigroup had agreed to operate under a court injunction if it ever violated the deal, which could lead to contempt charges. Whatever threat this carried, Mr Rackoff wrote, it was mitigated because Citigroup, as other financial firms, had been cited similarly over the past decade—and never faced any consequences. </blockquote>The Parallels with Legal Settlements Made by Health Care Organizations Several of the features of the settlement that the Judge found so objectionable are commonly also features of the <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">settlements</a> we have seen involving health care organizations. Government regulators often seem to make much milder charges that were warranted by the apparent facts. They make the organizations party to <a href="http://hcrenewal.blogspot.com/search/label/corporate%20integrity%20agreement">corporate integrity</a> or <a href="http://hcrenewal.blogspot.com/search/label/deferred%20prosecution%20agreement">deferred prosecution</a> agreements, even though sometimes the same corporations were already subject to such agreements when they appeared to misbehave again. The agreements often allow the organizations to neither admit to or deny any charges, leaving the facts of the case forever in doubt. <a href="http://www.rollingstone.com/politics/blogs/taibblog/federal-judge-pimp-slaps-the-sec-over-citigroup-settlement-20111129">Matt Taibi in the Rolling Stone</a> provided some pithy comments on these commonly seen features of legal settlements. <blockquote>By accepting hundred-million-dollar fines without a full public venting of the facts, the SEC is leveling seemingly significant punishments without telling the public what the defendant is being punished for. This has essentially created a parallel or secret criminal justice system, in which both crime and punishment are adjudicated behind closed doors. This system allows for ugly consequences in both directions. Imagine if normal criminal defendants were treated this way. Say a prosecutor and street criminal come into a judge’s chamber and explain they’ve cooked up a deal, that the criminal doesn’t have to admit to anything or plead to any crime, but has to spend 18 months in house arrest nonetheless. What sane judge would sign off on a deal like that without knowing exactly what the facts are? Did the criminal shoot up a nightclub and paralyze someone, or did he just sell a dimebag on the street? Is 18 months a tough sentence or a slap on the wrist? And how is it legally possible for someone to deserve an 18-month sentence without being guilty of anything? Such deals are logical and legal absurdities, but judges have been signing off on settlements like this with Wall Street defendants for years.</blockquote>As we have said numerous times before, (starting <a href="http://hcrenewal.blogspot.com/2008/07/amerigroup-settles.html">here</a> in 2008) the current manner of regulation, in which organizations pay fines (and sometimes submit to corporate integrity or deferred prosecution agreements), rarely admit any guilt, but in which individuals who directed, authorized or implemented the alleged misbehavior almost never suffer any negative consequences, fails to deter future bad behavior. We have noted that the costs of the settlements are paid by the organization as a whole, and thus simply regarded as costs of doing business by executives. The leaders' impunity will allow the bad behavior to be repeated again and again. Here is how Taibbi and Rakoff put it: <blockquote>these crappy settlements have evolved into a kind of cheap payoff system, in which crimes may be committed over and over again, and the SEC’s only role is to take a bribe each time the offenders slip up and get caught. If you never have to worry about serious punishments, or court findings of criminal guilt (which would leave you exposed to crippling lawsuits), then there’s simply no incentive to stop committing fraud. These SEC settlements simply become part of the cost of doing business, as Rakoff notes: <blockquote>As for common experience, a consent judgment that does not involve any admissions and that results in only very modest penalties is just as frequently viewed, particularly in the business community, as a cost of doing business imposed by having to maintain a working relationship with a regulatory agency, rather than as any indication of where the real truth lies. This, indeed, is Citigroup's position in this very case.</blockquote> That line, 'a cost of doing business imposed by having to maintain a working relationship with a regulatory agency,' is one of the more brutally damning things you’ll ever see a judge write. Rakoff is essentially saying that these fines are payoffs to keep the SEC off the banks’ backs. They’re like the pad that numbers-runners or drug dealers pay to urban precinct-houses every month to keep cops from making real arrests. That's what he means when he refers to 'maintaning a working relationship.' It's heavy stuff.</blockquote> What the Judge appears to be saying is that the whole system stinks of <a href="http://hcrenewal.blogspot.com/search/label/regulatory%20capture">regulatory capture</a>, and that the settlements paid by the organizations are the moral equivalent of bribes paid to government officials. That is indeed "heavy stuff." Now that Occupy Wall Street has made it socially acceptable to discuss the economic dysfunction that lead to the great recession or global financial collapse, I can only hope that this discussion will lead to a parallel discussion about health care dysfunction. It certainly seems that the regulatory capture that seems to be part of the dismantling of regulation of finance is similar to regulatory capture affecting health care. But I await someone beyond us few lonely bloggers to take up this topic. I might as well end with this sentiment<a href="http://hcrenewal.blogspot.com/2009/09/biovail-settles-and-judge-explains-why.html"> from 2009</a> regarding another case over which Judge Rakoff presided: Again, in my humble opinion, until the people responsible for the bad behavior experience negative consequences from that behavior, they will continue to perform, direct, and condone bad behavior. We will not achieve real health care reform in the US until we effectively deter unethical, self-serving behavior by leaders of health care organizations.

Will the Citigroup Ruling Challenge Health Care Leaders' Impunity?

A federal judge's refusal to approve yet another cozy settlement that was supposed to resolve allegations of wrong-doing by a giant corp...

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Another Month, Another Set of Legal Settlements, Deferred Prosecution Agreements, and Jury Findings Adverse to Large Health Care Corporations

Another month, another series of adverse legal rulings suggesting misbehavior by large health care organizations.  In alphabetical order,... Baxter, McKesson, Teva Pay Punitive Damages As <a href="http://www.businessweek.com/news/2011-10-11/teva-jury-awards-162-5-million-in-damages-over-anesthetic.html">reported</a> by Bloomberg, <blockquote>A jury said Teva Pharmaceutical Industries Ltd. unit and two other drugmakers must pay $162.5 million in punitive damages for selling the anesthetic Propofol in a way that led three colonoscopy patients to develop Hepatitis C. Jurors in state court Las Vegas ordered Teva Parenteral Medicines Inc., Baxter Healthcare Corp. and McKesson Corp. to pay so-called punishment damages over sales of the anesthetic in vials large enough to be reused by doctors. Anne Arnold, Richard Sacks and Anthony Devito contend they contracted Hepatitis C from reused vials during colonoscopy procedures. They had sought more than $700 million in damages. It’s the second punitive award against Baxter and the unit of Petach Tikva, Israel-based Teva over a 2008 hepatitis outbreak in Nevada tied to Propofol. The first case resulted in a punitive verdict of more than $500 million against the drugmakers. Teva has agreed to cover all damage awards arising from the Nevada cases on behalf of Baxter and McKesson.</blockquote> In particular, <blockquote>The patients’ lawyers allege Teva intentionally sold Propofol in jumbo-sized vials to encourage doctors to reuse them, even with the risk of spreading blood-borne diseases such as hepatitis, an incurable liver disease.</blockquote> So the allegations are that the company intentionally put financial gain ahead of the safety of patients. Boston Scientific Settles Over-Billing Allegations Again <a href="http://www.businessweek.com/news/2011-09-26/boston-scientific-to-pay-9-25-million-in-whistleblower-case.html">per</a> Bloomberg: <blockquote>Boston Scientific Corp.’s Guidant LLC unit will pay $9.25 million to settle a whistleblower’s claim that the company over-billed the U.S. and private hospitals for heart pacemakers and defibrillators.</blockquote> The details: <blockquote>Guidant allegedly reneged on credits owed to the U.S. Department of Veterans Affairs for replacement of units still under warranty and is accused of over-charging hospitals for the devices, causing them to over-bill Medicare, according to an e-mailed statement from the Justice Department.</blockquote> Note that we have quite a extensive files on <a href="http://hcrenewal.blogspot.com/search/label/Boston%20Scientific">Boston Scientific</a>, and on <a href="http://hcrenewal.blogspot.com/search/label/Guidant">Guidant</a>, now its subsidiary. Hil-Rom Settles Fraud Allegations <a href="http://www.knoxnews.com/news/2011/sep/27/feds-announce-418-million-settlement-in-fraud">Reported</a> by the Knoxville News-Sentinel: <blockquote>Federal prosecutors announced Tuesday a $41.8 million civil fraud settlement in a 'whistle-blower' lawsuit against international medical equipment supply company, Hill-Rom Company Inc.</blockquote> The results also were that <blockquote>As part of the settlement, Hill-Rom has entered into a five-year 'corporate integrity agreement,' in which the firm will face close scrutiny by federal officials, Killian said.</blockquote>The allegations were: <blockquote>'Hill-Rom submitted false claims for medical equipment for patients who did not qualify for the equipment, including patients who had died, were no longer using the equipment or had been moved to nursing homes,' [US Attorney Bill] Killian said.</blockquote> In particular, <blockquote>The lawsuit alleged the firm was ripping off Medicare with its faulty billing practices. According to the lawsuit, unsealed Tuesday, Hill-Rom offered its sales representatives $200 gift certificates and 42-inch televisions as reward for boosting billings and, in 2001, laid off the lion's share of staff dedicated to ensuring compliance with Medicare rules.</blockquote> Note that this suggests a pattern of providing incentives to employees who "make their numbers," no matter how they do so. We have seen how making the financial numbers seems to take precedence over all else, including patients' well-being, in many contemporary health care organizations. Maxim Healthcare Settles Fraud Allegations In a <a href="http://www.baltimoresun.com/business/bs-bz-maxim-healthcare-settlement-2-20110912,0,4024222.story">story</a> in the Baltimore Sun, <blockquote>A Columbia-based health care firm has agreed to a $150 million settlement with the federal government and 43 states to resolve criminal and civil charges that it submitted claims for millions of dollars of work that it did not perform and operated offices that were not properly licensed, officials said Monday. A five-year federal investigation found that Maxim Healthcare Services Inc., one of the country's largest providers of home healthcare services, submitted $61 million in false claims for services to the federal government's Medicaid and Veterans Affairs health programs over an 11-year period from 1998 to 2009. Investigators said managers and workers at Maxim repeatedly modified time sheets and documents to cover up the fraud, creating a culture in which submitting false claims became 'common practice.'</blockquote> The settlement was of criminal as well as civil charges: <blockquote>The settlement includes a $20 million criminal fine and $130 million in civil settlements.</blockquote> It will also involve a deferred prosecution or corporate integrity agreement: <blockquote>In addition to the fines, Maxim also has been charged criminally with conspiracy to commit health care fraud. But the company could avoid conviction if it meets requirements outlined in the settlement.</blockquote> Unlike many such cases, this one involved criminal charges for and guilty pleas by some people involved in the wrong-doing, in this case, middle managers: <blockquote>Several regional account managers, a home health aid and a clinical services director also pleaded guilty to criminal charges, government officials said. They could face as much as $250,000 in fines and jail time for their roles in the fraud.</blockquote> Another atypical result was that the CEO who presided over the misbehavior actually suffered some consequences, although he did not have to pay fines for face criminal charges, <blockquote>Maxim officials said they take full responsibility for the violations. The company said it hired a new CEO in 2009 and changed its business practices to protect against a repeat.</blockquote> ProPublica published an <a href="http://www.propublica.org/article/troubled-health-care-staffing-chain-settles-with-government-for-150-million">article</a> at the same time which noted that Maxim's practices had come into question before, <blockquote>A different set of problems involving Maxim came up during a ProPublica investigation into the oversight of registered nurses in 2009. We identified several nurses who were hired by the Maryland-based company despite having a record of problems.</blockquote> Although that previous article did not mention the company's name: <blockquote>The articles focused on how regulators across the country did little to scrutinize troubled nurses who crossed state lines to continue working. Our earlier stories did not identify Maxim by name. </blockquote> We have noted that organizations which misbehave once are likely to misbehave again. This may stem from an organizational culture that puts revenue ahead of ethics and patients' and the public's health, and the lack of negative consequences that people who respond to the resulting positive financial incentives are likely to suffer. Medicis Settles Shareholder Class-Action Lawsuit <a href="http://www.azcentral.com/business/news/articles/2011/09/28/20110928medicis-auditor-will-pay-18-million-settle-suit.html">Noted</a> by the Arizona Republic, <blockquote>Medicis Pharmaceutical Corp. and its auditing firm, Ernst & Young, have agreed to pay $18 million to settle a shareholder class-action lawsuit stemming from the pharmaceutical company's financial statements.</blockquote> The shareholders alleged that Medicis was not honest about its financial affairs: <blockquote>The shareholders' lawsuit stems from Medicis' announcement in September 2008 that it would restate earnings from 2003 through the first half of 2008. Shareholders alleged that Medicis offered its wholesale customers generous return policies for prescription drugs as part of an effort to inflate the company's revenue. Medicis would accept returned products that were expired or about to expire at either no cost or substantial discounts to the wholesale customers, according to the lawsuit.</blockquote> Summary The constant march of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements </a>by, jury verdicts against, and in some cases <a href="http://hcrenewal.blogspot.com/search/label/crime">criminal convictions </a>of or guilty pleas by large health care corporations indicate how common misbehavior by such organizations has become. Since it is likely that much misbehavior does not lead to publicly announced legal actions, what is published can only provide a floor for an estimate of how common it is. The march, which we have been documenting since starting Health Care Renewal, shows how sleazy and often corrupt health care has become, and how that sleaziness and corruption is prevalent not just among small players, but among the biggest and richest health care organizations, and their top leaders. One reason the situation continues to be so bad is that while the unethical behavior does sometimes result in pontificating by the civil authorities, and fines that may only be costs of doing business, it rarely leads to meaningful negative consequences for those who authorized, directed or implemented it. This was noted in the reporting of the Maxim Healthcare case above. For example, in the Baltimore Sun <a href="http://www.baltimoresun.com/business/bs-bz-maxim-healthcare-settlement-2-20110912,0,4927923,print.story">article</a> we found, <blockquote>One watchdog group called the penalty a drop in the bucket for a company that had $2 billion in reimbursements from 2003 to 2009. 'That is hardly crippling,' said Joe Newman, a spokesman for the Project on Government Oversight, which tracks government contractors. 'It is certainly something that stings Maxim's pocketbook, but they will be fine after that.' 'They won't be barred from the Medicaid program. That would hurt them.'</blockquote> Also, Sun columnist Jay Hancock <a href="http://www.baltimoresun.com/business/bs-bz-hancock-prmc-accountability-20110919,0,1446559.column">wrote</a>: <blockquote>Corporations are happy to be treated as people under the law, as we know from recent court decisions. They can own property. They can seek redress in Congress and the courts. They can make huge political contributions. But when it comes to being penalized for cheating the government, corporations quickly abandon their personhood and go back to being abstract blobs. 'I don't know about you, but if I hired a contractor to work on my house and he charged me a ton of extra money for work he didn't do, I wouldn't use that contractor again,' Minnesota Sen. Al Franken said in Congress a few months ago. 'And I would make sure my friends knew not to use them either. It seems like the same should be true of government contractors.'</blockquote> But that is often not the case. For years, government agencies have not vigorously enforced the law when doing so might inconvenience big corporations and their well-paid executives. Maybe this lenience stems from the loony philosophy of former Chairman of the Federal Reserve Alan Greenspan, who was once regarded as some sort of economic genius, who seemed to think that fraud cannot occur in his idealized idea of a free market, because somehow all bad actors would become widely known and therefore all counter-parties would avoid them. In an <a href="http://www.stanfordalumni.org/news/magazine/2009/marapr/features/born.html">article</a> in Stanford Magazine, <blockquote>The influential Greenspan was an ardent proponent of unfettered markets. Born was a powerful Washington lawyer with a track record for activist causes. Over lunch, in his private dining room at the stately headquarters of the Fed in Washington, Greenspan probed their differences. 'Well, Brooksley, I guess you and I will never agree about fraud,' Born, in a recent interview, remembers Greenspan saying. 'What is there not to agree on?' Born says she replied. 'Well, you probably will always believe there should be laws against fraud, and I don’t think there is any need for a law against fraud,' she recalls. Greenspan, Born says, believed the market would take care of itself. For the incoming regulator, the meeting was a wake-up call. 'That underscored to me how absolutist Alan was in his opposition to any regulation,' she said in the interview.</blockquote> It is a measure of the insanity of recent years that one of the chief leaders of government economic policy did not believe there was any need for laws against fraud. It appears that this daft idea has carried over to and still influences how many in government and out deal with health care. However, as we have d<a href="http://hcrenewal.blogspot.com/2010/08/how-fallacy-of-perfect-health-care.html">discussed</a>, health care is not and probably cannot ever be an ideal free market. Also, in health care, most of the bad actions remain <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic</a>, and in many cases it may be hard for counter-parties to avoid bad actors because they may dominate the market. Also, it may be those that make decisions about whether to deal with particular organizations may be executives, and sometimes health care professionals who have become indifferent to the ethical issues. As I have said again and again, pervasive bad behavior by large health care organizations has got to be a major cause of our ongoing health care dysfunction. So, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue.

Another Month, Another Set of Legal Settlements, Deferred Prosecution Agreements, and Jury Findings Adverse to Large Health Care Corporations

Another month, another series of adverse legal rulings suggesting misbehavior by large health care organizations. In alphabetical order,......

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Two More Settlements, One More Corporate Integrity Agreement for Novo Nordisk

And the legal settlements for health care organizations keep right on marching along.  Here are the basics, <a href="http://online.wsj.com/article/SB10001424052702304259304576377430323510242.html">per</a> the Wall Street Journal, starting with the outline of the first settlement for Novo Nordisk: <blockquote>Drug maker Novo Nordisk A/S's U.S. affiliate has agreed to pay more than $25 million to end investigations by U.S. authorities related to the marketing of NovoSeven and several diabetes drugs. In one settlement, Novo Nordisk Inc., the U.S. affiliate, agreed to pay $25 million to end a probe and settle a civil lawsuit related to alleged improper marketing practices regarding Novo Seven, which is used to treat patients suffering from rare bleeding disorders. The complaint had alleged that Novo Nordisk promoted NovoSeven for unapproved uses. </blockquote>Here is the outline of the second settlement: <blockquote>Separately, the U.S. affiliate also agreed to pay $1.73 million in a settlement with the U.S. government to resolve allegations that its sales representatives accessed confidential patient information and submitted false Medicaid claims related to the marketing of diabetes drugs, including Novolin and Novolog. Federal prosecutors in Brooklyn, N.Y., had alleged Novo Nordisk representatives made payments to pharmacists in exchange for recommendations for Novolin and Novolog products. As part of their activities, the pharmacists, or Novo Nordisk sales representatives, accessed confidential patient information, according to the settlement agreement. </blockquote>Here is the usual pro forma denial by a company spokesperson that the company had done anything wrong: <blockquote>'We are committed to running our business according to high legal and ethical standards and have been cooperating with the government since the investigation began,' said Jim Shehan, corporate vice president and U.S. general counsel for Novo Nordisk Inc. 'With this settlement, we avoid the distraction and costs of a lengthy legal battle, which would not have been in the best interest of the company or its stakeholders.' Novo Nordisk denies any wrongdoing related to NovoSeven marketing....</blockquote>Also, <blockquote>Novo Nordisk didn't admit wrongdoing in the Novolin pact. </blockquote>By the way, here is the brief mention of the corporate integrity agreement: <blockquote>[Novo Nordisk] agreed to enter a five-year corporate integrity agreement with the U.S. Department of Health and Human Services in which it will add additional reporting and other procedures to its compliance program. </blockquote>Why would a company that professes "high ethical and legal standards" not contest allegations that it engaged in improper marketing, paid health care professionals to recommend its products, and instigated breaches of patient confidentiality?  Setting that aside, however, the coverage of this story <a href="http://articles.baltimoresun.com/2011-06-10/news/bs-md-factor-vii-20110610_1_factor-vii-novoseven-novo-nordisk">in the Baltimore Sun </a> raises further questions. First, how Novo Nordisk allegedly promoted Novo Seven, and the uses for which it was promoted are disturbing: <blockquote>the government [did not] back down from its charge that the company engaged in unlawful marketing that helped persuade the Army to treat combat casualties with a largely experimental drug that was not approved for such use by the Food and Drug Administration. Beginning in 2000, according to the government's claims, Novo Nordisk promoted the drug, also known as NovoSeven, to military doctors and entered into research agreements with Army hospitals. It provided funding for trials in which military officers participated, and gave 'donations and other gifts' to nonprofit foundations on behalf of military physicians. Those practices 'caused the military to use NovoSeven in its trauma patients,' the agreement states.</blockquote> There was no evidence that Novo Seven decreased the morbidity and mortality of battlefield trauma, but there were reasons to believe the drug increased thrombosis risk: <blockquote>Numerous clinical studies have since shown, however, that Factor VII is ineffective at controlling traumatic bleeding and can potentially cause blood clots that lead to heart attacks and strokes. </blockquote>This was not just paying physicians and institutions to market an expensive, but innocuous drug.  It was paying US military physicians and institutions to market a drug that put injured soldiers at risk, but gave them no benefit.  Given the degree of deference public officials give to the brave soldiers that serve the country on the battlefield, one would think that putting them at risk, and putting the honor of their officers and military institutions at risk ought to be a big deal, maybe a big deal requiring more than even a $25 million fine. On the other hand, although $25 million seems like a lot of money, it pales beside the amounts Novo Nordisk were making from Novo Seven: <blockquote>Last year Novo Nordisk reported annual sales of NovoSeven of almost $1.6 billion — mainly for treatment of hemophilia. Company officials say roughly 15 percent of its sales are for unapproved uses, or as much as $250 million last year.</blockquote> So while the settlement seems expensive compared to the cost of defending the suit in court, and it trades the distraction of a corporate integrity agreement for avoiding the "distraction" of further legal action, maybe a settlement equal to only one-tenth of the yearly sales of the relevant drug seemed a good deal for the company. Since the company was already laboring under a deferred prosecution agreement in the US related to charges of illegal foreign kickbacks (see <a href="http://hcrenewal.blogspot.com/2009/05/novo-nordisk-accepts-deferred.html">this post</a>), maybe adding a corporate integrity agreement did not seem like all that much distraction. On the other hand, the big question is: why was this deal a good one for the US government, or the people which it is supposed to protect? The amount involved only seems like a cost of doing business, and seems disproportionately small given that the allegations involved unlawful marketing that apparently threatened to corrupt US military doctors and hospitals, and were made against a company already under a deferred prosecution agreement for illegal kickbacks. Finally, since the impact of even the relatively small financial payment could be spread among all corporate employees and stockholders, and the deal involved no negative consequences for any individual who authorized, directed or implemented the bad behavior, why would it defer corporate insiders from authorizing or directing future bad behavior?  . We have heard a series of threats from US government officials that they are about to crack down on big health care companies that misbehave, and, in particular, actually try to impose some negative consequences on the people in those companies that authorized, directed, or implemented bad behavior (see <a href="http://hcrenewal.blogspot.com/2011/05/fresenius-fined-82-million-for-false.html">this post</a>). However, we continue to see settlements like this, involving relatively small financial penalties imposed on rather large corporations, and corporate integrity agreements and/or deferred prosecution agreements that do not obviously seem to change how the companies operate. Although a year ago we <a href="http://hcrenewal.blogspot.com/2010/06/attempt-to-hold-health-care-leaders.html">discussed</a> threats by the US government to hold health care leaders accountable using the "Responsible Corporate Officer Doctrine," which has been available since 1943, so far there is no evidence that this concept has been made operational. The continuing <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">march of legal settlements</a> now seems to have included most of the previously well reputed commercial health care firms in the US. The length of this march is an indication of how pervasive is bad behavior by such health care organizations, especially when the marchers were accused of behavior that appeared clinically, not just financially unethical. I assert again that pervasive bad behavior by large health care organizations has got to be a major cause of our ongoing health care dysfunction. So, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable.    As long as they are not, expect the bad behavior to continue.

Two More Settlements, One More Corporate Integrity Agreement for Novo Nordisk

And the legal settlements for health care organizations keep right on marching along. Here are the basics, per the Wall Street Journal, st...

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Was the Wright Medical CEO Really "Pleased" to "Continue Our Commitment to the Highest Standards of Legal and Ethical Conduct?"

This story fits into the "if you believed that one, I have a bridge to sell you" category.  Let's go back seven months to 2010, when we <a href="http://hcrenewal.blogspot.com/2010/10/wright-medical-settles-but-wait-there.html">discussed</a> the legal settlement, which included submission to deferred prosecution and corporate integrity agreements by Wright Medical, a device manufacturer.  We noted that the company CEO, one Gary D Henley, said he was "pleased to announce these agreements and look[ing] forward to working with the independent monitor as we continue our commitment to the highest standards of ethical and legal conduct."  At the time, we wondered whether the only real reason he was pleased was that he got to keep his job (with total compensation of greater than $2 million a year) and hang onto his stock options (then consisting of 436,601 shares). Now it is 2011, and the Memphis Daily News <a href="http://www.memphisdailynews.com/editorial/Article.aspx?id=58418">reported</a> that last month, Mr Henley was out of a job: <blockquote>It was just last month that [Chairman David] Stevens was appointed interim president and CEO after Gary D. Henley resigned from the position, which he had held since 2006. Stevens at that time asked not to be considered for the permanent position. Henley tendered his resignation prior to a board of directors meeting called to discuss management’s oversight of the company’s ongoing compliance program. The board accepted Henley’s resignation, but deemed it to be without 'good reason' under the terms of his employment agreement, making him ineligible for severance.</blockquote> He was accompanied out the door by <blockquote>Frank S. Bono, the company’s senior vice president and chief technology officer, for failing to exhibit appropriate regard for Wright’s ongoing compliance program.</blockquote> It appeared that the previous company leadership may not have been all that "pleased" to work with external monitors to "continue our commitment to the highest standards of ethical and legal conduct." The Daily News also reported: <blockquote>Wright Medical Group Inc. on Thursday announced that it received a letter from the United States Attorney’s Office for the District of New Jersey pursuant to Paragraph 50 of the Deferred Prosecution Agreement stating that the USAO believes Wright Medical Group knowingly and willfully breached material provisions of the DPA.</blockquote> Also, Corporate Counsel <a href="http://www.law.com/jsp/cc/PubArticleCC.jsp?id=1202493182276&US_Attorney_Accuses_Wright_Medical_Group_of_Breaching_Deferred_Prosecution_Agreement">reported</a>: <blockquote>Two days after its general counsel departed abruptly, the Wright Medical Group, Inc., said Thursday that the U.S. attorney’s office believes the company 'has knowingly and willfully' breached its deferred prosecution agreement. As a result, the company said it could face 'significant liability' including potential criminal and civil litigation. It also faces possible exclusion from federal health care programs such as Medicare, 'which would have a material adverse effect on our financial condition.' The Tennessee-based company revealed the legal problems in 8-K filings on Wednesday and Thursday with the Securities and Exchange Commission. Wright has declined further comment.</blockquote> One explanation for the company's pessimism: <blockquote>The board recently received a tip about non-compliance and hired unnamed outside counsel to conduct an internal investigation. The probe found 'credible evidence of serious wrongdoing,' which the board communicated to the U.S. attorney’s office on Wednesday.</blockquote> The Memphis Daily News noted that another slew of managers just went out the door: <blockquote>Raymond Kolls, senior vice president, general counsel and secretary, Alicia Napoli, vice president of Clinical and Regulatory Affairs, and Cary Hagan, senior vice president of EMEA Commercial Operations, have all stepped down from their positions.</blockquote> So should we believe Wright Medical Chairman and now interim CEO Stevens when he said: <blockquote>The board is committed to maintaining the highest standards of ethical conduct and we remain diligent in ensuring that Wright Medical complies with all applicable laws and regulations...</blockquote>? Are you looking to buy a bridge? I know a nice one in Brooklyn. More seriously, day in and day out we hear righteous, if not pompous pronouncements from health care organizational leaders about their organizations' integrity, brilliant performance, quality of care, devotion to patients, etc, etc, etc. Meanwhile, we have seen an astonishing <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">parade of legal settlements</a>, sometimes including guilty pleas to <a href="http://hcrenewal.blogspot.com/search/label/bribery">bribery</a>, <a href="http://hcrenewal.blogspot.com/search/label/fraud">fraud</a>, <a href="http://hcrenewal.blogspot.com/search/label/kickbacks">kickbacks</a>, and other <a href="http://hcrenewal.blogspot.com/search/label/crime">crimes</a> by top health care organizations.  This parade raises serious questions about the performance and integrity of some of our biggest and best known health care organizations. In nearly all cases, these settlements did not include specific negative consequences for those who authorized, directed or implemented the bad behavior that caused the need for the settlements. In nearly every case, the top leaders of the organizations continued to get generous compensation, often more generous than Mr Henley's $2 million plus a year. Yet rarely does the media, much less health care scholarship check back later to see if the righteous pronouncements turned out to be true. Rarely do they check back to see if the settlements lead to better behavior. Here is one vivid anecdote that suggests that the pronouncements may be nothing more than vapid PR, and the settlements lead to no change in behavior as long as the people who were in charge when the bad behavior occurred remain in charge, and richly remunerated. So the next time you see a corporate health care CEO's boasts, think about that bridge in Brooklyn To reprise: we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich. [Originally posted on <a href="http://hcrenewal.blogspot.com/">Health Care Renewal</a> by Roy Poses]

Was the Wright Medical CEO Really "Pleased" to "Continue Our Commitment to the Highest Standards of Legal and Ethical Conduct?"

This story fits into the "if you believed that one, I have a bridge to sell you" category. Let's go back seven months to 2010...

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Elan, Eisai Settle for Related Reasons

The <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">parade of legal settlements</a> of bad behavior by major health care organizations marches on. The latest to shuffle by are Elan Corp, based in Ireland, and Eisai Inc, based in Japan, for actions taken in the US.  According to <a href="http://www.businessweek.com/news/2010-12-16/elan-to-pay-203-million-unit-to-plead-guilty-in-zonegran-probe.html">Bloomberg</a>: <blockquote>Elan Corp. will pay $203 million and a U.S. unit of the Irish drugmaker will plead guilty to a misdemeanor charge to resolve an investigation of its marketing of the epilepsy medicine Zonegran. Elan will pay $102.9 million to resolve civil claims and $100 million in criminal fines and forfeitures, according to the U.S. Justice Department. Japanese drugmaker Eisai Inc., which bought the drug from Elan in 2004 for $128.5 million, also will pay $11 million to settle civil claims. The Elan Pharmaceuticals unit will plead guilty in federal court in Boston to a charge of misbranding Zonegran, which was approved by U.S. regulators for treatment of epileptic seizures in adults over age 16, the Justice Department said yesterday in a statement. Dublin-based Elan promoted Zonegran for uses including mood stabilization, bipolar disorder, migraine headaches, weight loss and seizures in children. 'Elan’s off-label marketing efforts targeted non-epilepsy prescribers and the company paid illegal kickbacks to physicians in an effort to persuade them to prescribe Zonegran for these off-label uses,' according to the statement.</blockquote> The details were: <blockquote>In 2002, EPI [Elan Pharmaceuticals Inc] 'came under significant financial pressure' because of an investigation of its financial practices by the U.S. Securities and Exchange Commission that caused shares to drop to $2 from $65 in six months, according to the criminal charge. In evaluating its options, EPI 'decided to retain Zonegran because of its large potential for growth, particularly in unapproved areas,' prosecutors said. EPI then trained its sales staff to promote Zonegran for off-label uses, including for children, pain, psychiatric disorders, migraines and movement disorders, prosecutors said. Letters sent to pediatricians described how to administer Zonegran to a child by putting a capsule’s contents into applesauce, according to the document, which EPI will admit to in its guilty plea. Doctors with the potential to write many prescriptions were invited on expense-paid trips to Bermuda, Key Largo, Florida, Banff in Alberta and Tucson, Arizona, to hear speeches on off- label uses, according to the charge. Sales 'increased dramatically,' rising 80 percent from August 2001 to August 2002, while 2003 revenue increased 87 percent over the previous year, prosecutors said.</blockquote> So here we ago again, another week, another multi-hundred million dollar settlement. Once again, the settlement is of charges of deceptive marketing practices and kick-backs to physicians. Once again, the settlement involves criminal charges and a corporate integrity agreement, but does not involve any negative consequences for any individual who authorized, directed, or implemented the unethical practices. We have noted recent cases, <a href="http://hcrenewal.blogspot.com/2010/11/former-kv-pharmaceutical-ceo-and.html">one</a> in which a corporate executive was banned from doing business with the federal government, <a href="http://hcrenewal.blogspot.com/2010/11/this-is-really-going-to-set-peoples.html">another </a>in which a corporate executive was indicted, but not yet tried on criminal charges.  However, in most cases, the parade of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a> made by health care organizations has just marched on, sometimes including guilty pleas to criminal charges, often involving charges of kickbacks, fraud, conspiracy, and other colorful offenses. Most of these settlements entailed fines or other payments by the organizations that may seem huge, but were fractions of the amounts made by the practices that lead to the charges that were settled.  With the few exceptions above, (plus one other known exception, the disbarment from federal business of three former executives of Purdue Pharma, story <a href="http://www.nytimes.com/2010/12/16/business/16purdue.html">here</a>), almost never have the cases involved penalties for any individuals who authorized, directed, or implemented the misbehavior.  We have also been saying (seemingly <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">endlessly</a>, but most recently <a href="http://hcrenewal.blogspot.com/2010/12/abbott-laboratories-and-pig-roasts.html">here</a>) that such settlements may be viewed by organizations as merely the costs of doing business, and so until the actual people who were involved in the bad behavior suffer some negative incentive or penalty, expect the behavior to continue.  Health care costs keep rising, access keeps declining, quality gets worse. We moan and wring our hands, but as long as we allow the rot to worsen, and the muck to grow, expect these trends to continue until the whole smelly mess collapses of its own weight (with all those rich executives escaping to their mansions.) If we really want high quality accessible, reasonably priced health care, we need true health care reform that reduces concentration of power in large organizations, and makes health care organizations' leadership accountable, ethical, and transparent. That will not be easy. (FULL DISCLOSURE - I own 3200 shares of Elan.  This is the only health care stock I own.  I have held it a long time, not bothering to sell since the shares have been worth little for years.  This has provided a lesson about how the share-holders of big health care corporations rarely profit from the executives' risk taking.)

Elan, Eisai Settle for Related Reasons

The parade of legal settlements of bad behavior by major health care organizations marches on. The latest to shuffle by are Elan Corp, base...

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Wright Medical Settles, ... But Wait, There is Less

Everyone loves a parade, and so the <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">parade of legal settlements</a> by prominent health care organizations continues.  The latest to march into view is Wright Medical Group, as <a href="http://www.bloomberg.com/news/2010-09-30/wright-medical-technology-to-pay-7-9-million-end-criminal-civil-probes.html">reported</a> by Bloomberg: <blockquote>Wright Medical Technology Inc. agreed to pay $7.9 million to resolve U.S. criminal and civil investigations into whether it paid kickbacks to induce doctors to use its hip and knee devices. Prosecutors in Newark, New Jersey, today charged Wright with conspiring to violate a federal anti-kickback statue through consulting contracts with orthopedic surgeons. The U.S. agreed to drop the case in 12 months if a monitor agrees that Wright has reformed the way it hires consultants. Wright, based in Arlington, Tennessee, also agreed to a $7.9 million civil settlement with the Justice Department and inspector general of the Health and Human Services Department to resolve fraudulent-marketing claims. The company entered into a five-year corporate integrity agreement. </blockquote> Here we go again. A company is accused of giving kickbacks, aka bribes, to individual doctors, in this case orthopedic surgeons, to get them to use the company's products. Such payments clearly violate medical ethics (especially doctors' obligations to put the interests of patients ahead of their personal financial interests), leading to decision making not in the best interests of the patients. However, the penalty to the company itself is minuscule, only a fraction of the company's revenue, <a href="http://www.google.com/finance?q=NASDAQ:WMGI&fstype=ii">according to Google Finance</a>, in 2009, just under $500 million. As we have noted endlessly before, financial penalties to corporations are diffused among all shareholders and employees, and possibly customers and patients. Do we really expect that this penalty will change anything, or deter future bad behavior by this or any other company? But our government continues to treat the corporate employees who authorize, direct, or implement bad behavior like this as essentially above the law. In this case, like in many others we have discussed previously, no one who authorized, directed or implemented the bad behavior will have to pay any sort of penalty or suffer any sort of negative consequences.  Does anyone in their right mind believe that Wright Medical really is <blockquote>pleased to announce these agreements and look[ing] forward to working with the independent monitor as we continue our commitment to the highest standards of ethical and legal conduct</blockquote> That was a quote from Wright Medical CEO Gary D Henley. He may be pleased to announce the agreements, since they really amount to such a tiny pinprick of a penalty. After all, Mr Henley will be able to to continue to use Wright Medical's revenues, virtually unaffected by this penalty, to justify his compensation (per <a href="http://services.corporate-ir.net/SEC/Document.Service?id=P3VybD1odHRwOi8vaXIuaW50Lndlc3RsYXdidXNpbmVzcy5jb20vZG9jdW1lbnQvdjEvMDAwMDk1MDEyMy0xMC0wMzUxMjEvZG9jL1dyaWdodE1lZGljYWxHcm91cEluYy5wZGYmdHlwZT0yJmZuPVdyaWdodE1lZGljYWxHcm91cEluYy5wZGY=">the 2009 proxy statement</a>, $2,036,517 in 2009, and his continuing accumulation of wealth, e.g., 436,601 shares of stock, currently valued at $13.86/ share <a href="http://www.google.com/finance?q=NASDAQ%3AWMGI">according to Google Financial</a>.) I leave an assessment of what the company's previous commitment to "the highest standard of ethical and legal conduct" was to our dear readers. We will not have true health care reform until we end the unholy alliance between big government and big health care organizations, that is, <a href="http://hcrenewal.blogspot.com/2010/10/novartis-settles-but-wait-theres-more.html">health care corporatism</a>. Then, maybe, we can make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Wright Medical Settles, ... But Wait, There is Less

Everyone loves a parade, and so the parade of legal settlements by prominent health care organizations continues. The latest to march into...

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An Attempt to Hold Health Care Leaders Accountable for Their Organizations' Bad Behavior?

We have <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">frequently noted</a> how health care organizations accused of kickbacks, fraud, and other unethical and sometimes illegal behavior involving how they produce or market health care products or services often are allowed to settle the charges only with a fines to the companies, and sometimes with corporate integrity agreements.  Almost never are the people who authorized, directed, or implemented the unethical behavior required to pay any sort of penalty.  We recently <a href="http://hcrenewal.blogspot.com/2010/06/sequenom-executive-pleads-guilty-banned.html">commented</a> on a case in which an executive of a medical device company accused of exaggerating the performance of a diagnostic test in development was charged, not with misleading doctors or patients by the US Food and Drug Administration (FDA), but with misleading investors by the US Securities and Exchange Commission (SEC).  That executive lost her job, and will be barred from leading any public company. So up to now, a corporate executive responsible for misleading doctors or patients about issues that could affect clinical decisions or outcomes likely would never pay a penalty, but one responsible for misleading  investors about similar issues could lose his or her job and livelihood. Now, per <a href="http://money.cnn.com/2010/06/04/news/companies/astrazeneca_pharmaceutical_fines.fortune/index.htm">an article in Fortune</a>, it appear the situation may be changing, <blockquote>The federal government is fed up with the amount of fraud, especially recurring fraud from the same companies, happening in the pharmaceutical industry. So regulators have decided that when it comes to punishments, it's time to get personal. From now on, individual executives risk being ejected from their jobs -- and perhaps even barred from the industry -- for fraud their companies commit, even if they did not participate or even know about the crimes.</blockquote> Furthermore, <blockquote>The new approach, emerging from the unusually powerful Inspector General's office in the Department of Health and Human Services, reflects frustration with corporate recidivism even in the face of ramped-up fines, penalties and disgorgements. 'We are going to start to use that authority in the appropriate circumstances to get high level executives out of companies, so that the company has a better shot at changing its behavior, so that it does not become a recidivist,' explains Lewis Morris, chief counsel to the Inspector General.</blockquote> The article noted some cases in which even large fines and corporate integrity agreements seemingly failed to deter future bad behavior by the companies which paid these penalties. For example, <blockquote>In the government's most recent major settlement -- in which AstraZeneca agreed to pay $520 million -- the fine represented 16.5% of the $8.6 billion income (between 2001-2006) from U.S. sales of Seroquel, a powerful anti-psychotic. AstraZeneca (AZN) turned this narrowly approved drug into a cash cow by marketing it for much wider use, including by the elderly and children, even though they are particularly vulnerable to 'serious and debilitating side effects.' All the while, AstraZeneca was operating under a corporate integrity agreement (CIA) with the Inspector General, imposed after a 2003 off-label marketing case. </blockquote> We discussed the AZ settlement <a href="http://hcrenewal.blogspot.com/2009/10/astrazeneca-settles.html">here</a> in October, 2009. We asked then, "Does anyone really still believe that integrity agreements, and settlements assessed against huge corporations deter such profitable bad behavior?" Another example: <blockquote>Drug company Pfizer (PFE, Fortune 500), which was fined $2.3 billion just last September, is now on its third CIA. Steeper fines and harsh individual penalties should help put more teeth into these agreements and keep companies from flouting them.</blockquote> We discussed the repeated lack of effect of settlements by Pfizer <a href="http://hcrenewal.blogspot.com/2009/09/pfour-legal-settlements-for-pfizer-why.html">here</a> in September, 2009. We concluded, "So will even a $2,300,000,000 settlement and yet another corporate integrity agreement make Pfizer or any other health care corporation act more ethically? I doubt it." The Fortune article quoted Peter Rost, former Pfizer executive turned whistle-blower and ethics advocate (and to <a href="http://peterrost.blogspot.com/2010/06/fortune-hhs-learns-from-sec-fraudster.html">whose blog </a>I offer a hat tip for first mentioning the Fortune article), on aspects of corporate culture and corporate incentives that foster repeated unethical behavior by management, <blockquote>'Usually by the time someone becomes a senior executive they are very aware of the pitfalls in the organization, and they have become masters at not doing something wrong or not getting caught doing something wrong,' explains Peter Rost, a former senior Pfizer executive turned industry gadfly. Incentive-based compensation systems -- typically 40% to 50% of salespeople's income comes from hitting their numbers -- are one weak point. 'They are going to work real hard to increase those numbers and do whatever it takes, and if they think somebody gave them a wink about doing this or that, they are going to run with it.' says Rost. Booting senior executives out for any fraud under their watch might end the wink-and-nod system, giving hope to critics.</blockquote> In my humble opinion, the government's new approach looks like real progress. Giving corporate executives personal impunity was a recipe for increasing unethical, and sometimes criminal behavior. The sorts of marketing fraud they authorized or directed certainly lead to increasing costs, and overuse of unnecessary and sometimes harmful tests and treatments. While there have years of complaints about health care's increasing costs and decreasing quality in health policy circles, it is just amazing that until now, there has been so little action against the bad behavior that was undoubtedly responsible for much of these problems. So three cheers for making health care organizations' leaders accountable for the bad behavior of their organizations. After cheering, however, there ought to be some serious inquiry about why they were not held accountable much sooner.  It turns out that there has been legal justification for holding leaders so accountable available for a long time: <blockquote>All that's required for the government to flex this remarkably broad authority -- embedded in the Responsible Corporate Officers Doctrine -- is that the executives were in a position to have stopped the fraud that resulted in a criminal conviction or plea.</blockquote> Note that the Responsible Corporate Officers Doctrine apparently <a href="http://www.venable.com/files/Publication/814e9bf3-e36f-4dde-afe1-4a1a2babb6bc/Presentation/PublicationAttachment/d7047ed5-bd76-4e2f-89c9-e46a501d7234/524.Pdf">derives</a> from a US Supreme Court case about the selling of misbranded or adulterated drugs into interstate commerce under the US Food and Drug Act, decided in 1943. However, it looks like in the hyper laissez faire climate of the last 20 or more years, no one wanted to bother to invoke it. After all, the formerly highly regarded leader of the US Federal Reserve believed there was no need for regulators to punish fraud, because the magic of the market would take care of it. US health care has paid a heavy price for such breathtaking naivete (see the PBS Frontline show, <a href="http://www.pbs.org/wgbh/pages/frontline/warning/">"The Warning."</a> )

An Attempt to Hold Health Care Leaders Accountable for Their Organizations' Bad Behavior?

We have frequently noted how health care organizations accused of kickbacks, fraud, and other unethical and sometimes illegal behavior invo...

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Omnicare, IVAX Settle

Settlements and kickbacks and corporate integrity agreements, oh my (to the tune of "lions and tigers and bears, oh my") To quote the <a href="http://www.businessweek.com/bwdaily/dnflash/content/nov2009/db2009114_700374.htm">BusinessWeek version</a> of the story: <blockquote>A $112 million settlement involving alleged drug kickbacks that the Justice Dept. announced with the nation's largest nursing home pharmacy and a generic drug manufacturer on Nov. 3 is part of a wide-ranging investigation of suspected Medicaid fraud by the pharmaceutical industry. Under Tuesday's settlement, Omnicare will pay $98 million plus interest to the federal government and a number of state Medicaid programs to settle allegations that it participated in kickback schemes with IVAX, J&J [Johnson & Johnson], and two nursing home chains. IVAX, a subsidiary of Israel's Teva Pharmaceutical Industries (TEVA), agreed to pay $14 million plus interest. Omnicare and IVAX entered 'corporate integrity agreements' to establish new training and policies to prevent future problems. Neither company admitted any wrongdoing. </blockquote> Here are some details of the alleged wrong-doing: <blockquote>Omnicare is a publicly traded pharmacy benefit manager for long-term care facilities that operates in 47 states, the District of Columbia, and Canada. It had revenues of $6.3 billion in 2008. According to the settlement, Omnicare allegedly received $8 million in payments from IVAX in 2000-04 to buy $50 million in generic drugs and recommend that physicians prescribe them to their nursing home patients. Omnicare entered the contract even though its outside counsel repeatedly warned it might violate the federal anti-kickback law, the government alleged in its complaint, filed in March. Omnicare also took payments from New Brunswick (N.J.)-based J&J from 1999 to 2004 to aggressively persuade doctors to prescribe Risperdal, an anti-psychotic drug, and discourage use of alternative medications, according to the settlement. In addition, Omnicare allegedly paid $50 million to nursing home chains Mariner Health Care and SavaSeniorCare in 2004 to keep referring their Medicaid and Medicare patients to Omnicare for pharmacy services. </blockquote> It is noteworthy that these activities went on despite repeated advice of at least one attorney: <blockquote>According to the government's complaint, Omnicare again ignored its outside counsel's advice that the payment was illegal. </blockquote> The activities also went on despite Omnicare's participation in a previous corporate integrity agreement. <blockquote>This isn't the first time Omnicare has had to settle civil fraud complaints filed by the government. In 2006, Omnicare agreed to pay $102 million to settle Medicaid fraud cases in 43 states, without admitting wrongdoing, including a $52.5 million settlement with Michigan. One complaint accused Omnicare of switching two drugs from tablet to capsule form to boost Medicaid payments. Omnicare had to enter a five-year corporate integrity agreement. </blockquote> As I have written again and again regarding many other cases that resulted in <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a> or <a href="http://hcrenewal.blogspot.com/search/label/crime">guilty pleas</a>, the companies involved only need to pay fines, and no individual who performed, directed or approved unethical or illegal acts will suffer any negative consequences. I submit once again that such fines are viewed merely as costs of doing business by the affected companies, and do not deter future bad behavior. For once, the coverage of this case included some opinions similar to mine: <blockquote>The Office of Inspector General of the Health & Human Services Dept. has the authority to bar health-care companies from participating in the Medicaid, Medicare, and other federal health programs as a penalty for violating anti-fraud laws. That's a severe sanction given the huge size of those programs. The settlements with Omnicare and IVAX left open the possibility of exclusion. Some experts say Omnicare should be barred as a repeat offender, to send a strong message to other pharmaceutical industry players that fraud will no longer be tolerated. 'If the government were really serious, they'd give Omnicare the death sentence,' said Erik Gordon, a business professor at the University of Michigan who follows the pharmaceutical industry. 'Then all the other players would say this isn't just the cost of doing business, this is a bet-the-company thing.' West declined to comment on whether the Justice Dept. will recommended the exclusion of the two companies, saying only that his office works closely with the OIG's office on appropriate penalties. [Patrick] Burns, with Taxpayers Against Fraud, said the government has been hesitant to exclude health-care companies for fraud, fearing it will be seen as overzealous. But he believes that's the wrong attitude. 'Doing business with the U.S. government is a privilege, not a right,' he said. 'I think Omnicare has abused the privilege.' </blockquote> Finally, note that the description of this case suggested that the kickbacks had effects on physicians' prescribing and hence the use of specific drugs. The Justice Department's filing alleged that in return for the payment from IVAX, Omnicare tried to get physicians to prescribe that company's products, and that in return for the payment from J&J, Omnicare pushed them to prescribe the atypical anti-psychotic Risperdal. Thus the activities that went on this case could have lead to the use of inappropriate, useless or even harmful drugs by certain patients. I submit that would-be health care reformers who want to improve care, reduce costs and improve access should advocate for real negative consequences for people who implement, direct or approve the various versions of fraud, kickbacks, and miscellaneous corruption and malfeasance we have discussed on Health Care Renewal. By the way, it appears one of the members of <a href="http://ir.omnicare.com/phoenix.zhtml?c=65516&p=irol-govboard">Omnicare's Board of Directors</a> is also a leader in academic health care.  She is Andrea R. Lindell, DNSc, RN, who is also <a href="http://webcentral.uc.edu/eProf/viewoutput.cfm?Action=PublicDoc&code=WebPage&shci=0&epid=OTAwNA%3D%3D">Dean of the College of Nursing</a> at the University of Cincinnati.  One would think that someone who thus <a href="http://nursing.uc.edu/">boasts</a> "the success of our students, faculty, staff and alumni who work together to promote excellence in education, research, service and practice" needs to keep a closer eye on the ethical aspects of her company's management.

Omnicare, IVAX Settle

Settlements and kickbacks and corporate integrity agreements, oh my (to the tune of "lions and tigers and bears, oh my") To quote ...

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