How the wealthy and powerful have become able to play by a different set of rules than those affecting ordinary people may be the defining issue of our time. Yesterday, President Obama's State of the Union message asked for an economy in which "everyone plays by the same set of rule." We posted about how this issue, which got national attention due to the Occupy movement, affects health care here.
We have previously posted again and again about how the penalties for misbehavior by large US health care organizations seem to be so minimal as to be incapable of deterring future bad behavior (e.g., see posts about legal settlements). At most, corporations often pay fines that are no more than a cost of doing business. They rarely have to admit guilt, and when they do, it is usually to a relatively trivial charge. The people who authorized, directed, or implemented the bad behavior almost never suffer any negative consequences. Thus, the leaders of large US health care organizations seem to have impunity.
Similar complaints have been made about the lack of accountability of the leaders of the finance firms that lead us into the global financial crisis, or great recession.
However, while I have reviewed now hundreds of stories about such minimal organizational punishments, I have also seen hundreds of stories discovered by my automatic news searches of much more severe penalties paid by individuals who have been accused of similar misbehavior. I have never previously made an explicit comparison of how health care corporate and individual misbehavior are handled.
A recent set of examples of organizational misbehavior invites such a comparison. Here they are, in chronological order.
On December 6, 2011, the St Louis Post Dispatch reported:
KV Pharmaceutical Co. has agreed to pay $17 million to federal and state authorities to settle Justice Department allegations that it defrauded federal health care programs.
The settlement resolves allegations that KV, as the Bridgeton-based parent company of now-defunct Ethex Corp., misrepresented the regulatory status of two of its drugs that did not qualify for coverage under federal health care programs, the Justice Department said today.
The Justice Department alleges that Ethex submitted false quarterly reports to the federal Centers for Medicare and Medicaid Services related to the two drugs: nitroglycerin extended release capsules and hyoscyamine sulfate extended release capsules.
Company leadership made the usual sort of comment. CEO Greg Divis said:
The closure of this matter is another step forward as KV moves ahead as a women's healthcare focused branded specialty pharmaceutical company.Corporate leaders seem to love putting such unpleasantness in the past and moving on, especially when they personally are not held accountable for the previous misbehvior.
Note that this is just the latest settlement for KV Pharmaceutical:
KV shut down Ethex after the subsidiary pleaded guilty in March 2010 to two felony counts of criminal fraud for failing to report to the Food and Drug Administration that it was making oversize drugs - and drew $27.6 million in fines and restitution.
Catholic Healthcare West, Sutter Health
On December 8, the Sacramento Bee reported:
Two of Sacramento's biggest health care players paid a combined $2.3 million to the federal government to settle allegations that 61 of their hospitals double-billed Medicare for therapies and services, U.S. Department of Justice officials announced Wednesday.
Catholic Healthcare West paid more than $875,000 and Sutter Health nearly twice that – more than $1.43 million – for alleged duplicate charges for infusion therapies and treatments to break up kidney and bladder stones, in what Lauren Horwood, a spokeswoman in the Sacramento U.S. attorney's office, called 'a significant settlement.'
Officials at the two health networks admitted no wrongdoing in agreeing to the settlement, Horwood said. No charges will be filed.
Again, however, this was not the first such issue to affect these large non-profit organizations:
In 2006, Sutter Health agreed to grant discounts and refunds to uninsured patients the network was accused of overcharging, stemming from a 2004 class-action lawsuit.
Blue Shield (California)
On December 29, 2011, the Los Angeles Times reported:
More than a year after the healthcare reform law sought to prevent sick patients from losing medical coverage, insurers are still paying for their alleged abuses.
Blue Shield has agreed to pay $2 million to resolve accusations that the company improperly dropped policyholders after they got sick and needed expensive treatment.
The settlement, announced Wednesday by Los Angeles City Atty. Carmen Trutanich, ends an investigation into more than 1,000 so-called rescissions by Blue Shield, a San Francisco-based not-for-profit company.
As usual, there was no admission of guilt, and a company spokesperson claimed that while the company decided to pay out the money in response to the allegations, it, of course, was blameless:
Blue Shield spokesman Steve Shivinsky said the firm settled to avoid litigation.
'Our process meets or exceeds all legal and regulatory requirements,' Shivinsky said in a statement. 'In every instance, we provide immediate notice, ensure multiple layers of review, involve a medical director in the decision, give members an opportunity to provide additional information before we take any action, and follow the guidance of an independent third party review.'
Note that rescission is now against US federal law:
President Obama made rescission a central theme in his push for a healthcare overhaul. In September 2010, a ban on rescissions for unintentional application errors became one of the first pieces of the healthcare law to take effect.
On December 29, 2011, the Detroit Free Press reported (via USA Today):
Pharmaceutical giant GE Healthcare will pay $30 million to the U.S. Department of Justice to settle claims in a case filed by a Michigan salesman, alleging one of its companies marketed a diagnostic drug used in cardiology tests as one that could be diluted and stretched to more patients than intended.
GE admitted no wrongdoing in the settlement.
This was despite the fact that the actions alleged may have harmed patients as well as defrauding the government:
For patients, the diluted product resulted in more false positives during cardiology tests and exposed them to additional and unnecessary testing....We have posted previously about some previous questionable behavior by GE in the health care sphere.
On January 3, 2012, Bloomberg reported:
Two units of Actavis Group Hf will pay $84 million to settle a lawsuit over drug pricing, Texas officials said, less than half the amount an Austin jury said the company should pay.
The state accused Actavis Mid-Atlantic LLC and Actavis Elizabeth LLC, subsidiaries of the Iceland-based company’s U.S. division, of inflating billings to the Texas Medicaid program by falsely reporting drug prices. The state court jury in February ordered the units to pay the state $170 million.
The settlement resolves that litigation, Texas Attorney General Greg Abbott said today in a statement.
Note that Medicaid is a joint federal-state insurance program for the poor.
The company's statement had a familiar ring to it:
'Actavis denies any and all wrongdoing, and denies that it has any liability relating to the Texas judgment,' the company and the state said in the settlement agreement. The parties reached a settlement 'to avoid the delay, uncertainty, inconvenience and expense of continuing the litigation.'
Nothing to see here, just move along.
Denver Health Medical Center
On January 5, 2012, the Denver Post reported:
Denver Health Medical Center will pay $6.3 million to federal and state officials for overbilling Medicare and Medicaid, state and U.S. attorneys said.
After investigating a whistleblower's lawsuit, government officials said Denver Health was classifying patients with an "inpatient" status when it should have been listing them as 'outpatient' or under 'observation' status, which paid less under government rules.
Oops, missing from this story was the pro forma denial of blame, wrongdoing, misconduct by organizational leadership. However, the Denver Business Journal was able to add that:
Denver Health, in a statement, said it and the government agreed to the settlement to avoid 'protracted litigation' over the allegations. It did not admit guilt in agreeing to the settlement.
Of course, again despite having to pay millions, the organization asserted that it is fine and upstanding:
'Denver Health has, and will continue to, strive to ensure that its billing systems are accurate,' the hospital said in a statement, adding that the hospital has implemented a system to correct and improve billing accuracy.
Whoever wrote the statement seemed to overlook the implication that flowed from the need to "correct" the system.
On January 12, 2012, the Baltimore Sun reported:
The Federal Trade Commission announced that CVS Caremark Corp. agreed to pay $5 million to settle a complaint that it misinformed seniors about the price of certain Medicare Part D prescription drugs sold through CVS and Walgreens pharmacies.
The action by the company, according to the FTC, caused seniors and consumers with disabilities to pay significantly more for drugs. It also pushed them more quickly into the so-called 'doughnut hole,' in which drug costs aren’t covered by the federal program.
Despite its multimillion dollar payment, the company admitted no guilt, of course, and asserted its exemplary corporate citizenship:
CVS Caremark released a statement:
'During the course of this two year investigation, our company cooperated fully with the FTC and provided to the government millions of documents as well as access to numerous members of our management team who participated in voluntary interviews and depositions,' said Douglas A. Sgarro, Executive Vice President and Chief Legal Officer of CVS Caremark.
He also took comfort from the fact that there were not even more charges:
It is important to note that, at the conclusion of this comprehensive investigation, the FTC made no allegations of antitrust law violations or anti-competitive behavior associated with any of our business practices, products or service offerings.
On January 18, 2012, Bloomberg reported:
A Stryker Corp. (SYK) unit agreed to plead guilty and pay a $15 million fine while the medical-device maker was on trial on charges it marketed an unapproved mixture of products for strengthening human bone growth.
The unit, Stryker Biotech, and three Stryker sales representatives were on trial in federal court in Boston on a 13-count criminal indictment claiming conspiracy and wire fraud. The trial began Jan. 9 with jury selection.
Stryker Biotech agreed to plead to one misdemeanor count of misbranding a medical device, according to a letter dated yesterday from the U.S. Attorney’s Office in Boston and filed with the federal court.
This did involve an admission of guilt, but to what amounts to a financial violation when there were allegations that patients may have been harmed:
The U.S. had charged Stryker Biotech with misbranding and its sales force with conspiring to defraud surgeons into combining the company’s OP-1 and OP-1 Putty with the bone filler Calstrux. Some patients suffered adverse side effects and required more surgery, the U.S. said.
'That mixture was never studied clinically,' Assistant U.S. Attorney Susan Winkler told the jury in her opening statement on Jan. 12. 'They did not know if it worked. They did not know if it was safe, and they marketed it to doctors anyway.'
We have presented eight cases in which major US health care organizations settled cases involving allegations of financial gain under false pretenses. Nearly all involved US federal charges, and the others included alleged misbehavior that affected a federal program or that now would be illegal under federal law. All the cases were resolved with fines over $1 million. However, while these fines may seem big to most people, they were trivial compared to the revenues of the organizations. None of the settlements involved any penalties to actual people who authorized, directed, or implemented the misbehavior. No individuals at any of the involved organizations admitted any mistakes, much less wrong doing.
While the volume of such settlements indicates the prevalence of misbehavior by large health care organizations, it is not clear that their results, which amount to slaps on corporate wrists, have any deterrent effect.
In comparison, see what happens when little people obtain money from the government under false pretenses. I found a convenience sample of such cases reported in the last month through a Google search.
On January 9, the San Francisco Chronicle reported:
A Los Angeles woman who pleaded guilty to committing $6.2 million in Medicare fraud has been sentenced to 5 years in prison.
Federal Health and Human Services officials say 47-year-old Carolyn Ann Vasquez has also been ordered to pay $6.2 million in restitution.
Vasquez admitted to conspiring with others to use a series of fraudulent Los Angeles-area medical clinics to defraud the federal health care insurance program for people over age 65 and the disabled.
Between 2007 and 2008, Vasquez obtained a physician's personal information and Medicare provider number and used it to print prescription pads.
She then had a physician's assistant, David Garrison, write fraudulent prescriptions for pricey medical equipment.
On January 7, 2012, the [Jacksonville] Florida Times-Union reported:
A federal judge sentenced the would-be owner of a Brunswick prosthetic business to three years and six months in prison for his organization and leadership of a scheme that defrauded Medicare of more than $250,000.
In addition to prison, Wood sentenced Curtis to repay $254,750.94 to Health and Human Services and serve three years’ probation. She dismissed eight other counts as part of his plea agreement.
In stark contrast to the stories above about cases of fraud involving large health care organizations:
Samuel Curtis III, who had submitted false claims from Preferred Prosthetics and Orthotics in Brunswick and Team Orthotics and Prosthetics of Houston, had pleaded guilty in July to conspiring to commit health care fraud.
Curtis, 38, apologized and asked U.S. District Judge Lisa Godbey Wood for leniency during his sentencing hearing Friday.
On January 12, 2012, the Sacramento Bee reported:
A Los Angeles physician who assumed the role as co-owner of a Sacramento medical clinic has been sentenced to federal prison for his participation in a Medicare fraud scam.
Alexander Popov, 47, was sentenced today by U.S. District Judge Morrison C.England Jr. to eight years and one month in prison for committing health care fraud and conspiring to commit health care fraud, according to a federal Department of Justice news release. He was found guilty by a jury in July.
In sentencing, Judge England found that Popov was responsible for more than a million dollars in fraudulent billings submitted to Medicare and more than $600,000 in payments made on false claims.
Evidence at trial showed that Popov gave false testimony and manufactured evidence at trial, amounting to an obstruction of justice, officials said.
Vardges Egiazarian previously pleaded guilty in the case and is serving 78 months in prison.
On January 20, 2012, Medscape reported:
A former Idaho psychiatrist was ordered to pay nearly $95,000 in a legal judgment this week, adding to a prison sentence of up to 5 years, which he received in November for obstruction and falsifying records relating to Medicaid fraud.
The judgment, obtained by the US Attorney's Office against Michael Applebaum, MD, of Nampa, Idaho, involved a civil lawsuit in which he was accused of submitting false Medicare and Medicaid claims for undocumented and ineligible services from 2004 through 2009.
Prosecutors claimed Dr. Applebaum failed to properly document services for approximately 502 claims, including falsifying service dates on 49 claims to make them appear eligible for reimbursement under Medicaid's rule of submitting claims within 12 months of the date of service.
As we noted above, if a large organization, such as a hospital system, pharmaceutical company, or health insurance company is accused of fraud against the government, the outcome is likely to be a large fine that is nonetheless small compared with the organization's revenue, no admission of guilt or responsibility, and no penalties for any individuals who authorized, directed or implemented the misbehavior. However, if an individual or small business is accused of such fraud, the results are likely to include fines sufficient to bankrupt either, admissions of guilt, and years of jail time.
Yet such actions by large organizations are likely to be more harmful to individuals and society than those of individuals or small businesses.
This seems like a glaring, stark example of unequal justice in health care. If an individual does something bad in a health care context, the punishment is likely to be severe and life altering. If an individual who is a leader of a large health care organization does something equally bad, he or she is likely to receive no punishment at all.
This is an example that ought to unite the left and the right, liberals and libertarians in outrage. Liberals are supposed to believe in the rights of the individual and economic justice. Libertarians are supposed to believe in economic freedom and the economic rights of the individual. In this example, the government and large corporations seem to have gotten together to let corporate leaders play by different rules than individuals. Corporate leaders seem to be above the law, the same law that can ruin individuals who violate it.
If we really want to reform health care, we need to make sure that its rules apply equally to all individuals, whether humble or rich, whether they are individual professionals of corporate CEOs. As long as the rich and powerful can play by different rules, we only fuel cynicism and anger. Down that road lies disaster.