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House cracks down on cases like Scott’s

By Carol Gentry
9/22/2010 © Health News Florida

Four years ago, Omnicare paid almost $50 million to settle charges of cheating Medicare and Medicaid. No one at the giant drug supply company was criminally charged. No one was fired.

Since then, the Kentucky company has repeatedly paid settlements on false claims and kickbacks, totaling nearly $200 million. Each time, it denied doing anything wrong and signed a “corporate integrity agreement.” No one was held responsible.

Indeed, when he retired this week, Omnicare President and CEO Joel Gemunder walked away with an estimated $130 million in pension, severance and other benefits, according to The Wall Street Journal.

To Taxpayers Against Fraud’s Patrick Burns, Omnicare is a perfect example of what’s wrong with the system: “For the little stealing, they put you in jail and exclude you (from Medicare) for life. For the big stealing they let you carry on and walk away with a $130 million Golden Parachute."

(Update) Wednesday, the House passed a bill intended to plug holes in the law that enable companies and executives to keep defrauding Medicare and Medicaid without serious penalties.

Reps. Pete Stark and Wally Hedger, the chair and ranking member of the powerful House Ways and Means Committee, introduced HR 6130 last week after a briefing from the Office of Inspector General (OIG) Chief Counsel Lewis Morris in June.

Morris said the new Affordable Care Act offers a lot of tools for cracking down on small-time corruption but he needs different ones to deal with billion-dollar corporations and executives who have “plausible deniability,” those who “hatch schemes and push them downstream for others to carry out.”

Even if criminal prosecution isn’t feasible, Morris said, at the very least the government should be able to kick such executives out of the Medicare program.

They need to “understand that they will be held personally accountable,” Morris said at the hearing. “(T)he way we are going to change corporate cultures is by focusing on individuals.”

The bill, titled Strengthening Medicare Anti-Fraud Measures Act, addresses two gaps in existing law:

--Executives who preside over companies while they’re committing health fraud are able to jump to another company, without suffering consequences.

The bill would let OIG bar them from continuing to do business with federal health programs.

(This part of the bill is similar to HR 5044, filed earlier this year by two Florida House members, Democrat Ron Klein and Republican Ileana Ros-Lehtinen.)

--Companies that engage in fraud often set up shell companies to take the fall, shielding the parent company from any real penalty.

OIG would have authority to ban the parent company from participating in the Medicare program – the so-called “kiss of death” for a health-care company.

“Exclusion from the program is seen by companies and individuals as the ultimate penalty,” said Joe Baker, president of the Medicare Rights Center. “It’s probably the most powerful tool the government has to discourage the behavior in first place.”

If this bill had been in effect in the 1990s, the case of Columbia/HCA and its CEO Rick Scott could have turned out very different.

After four years of FBI investigations and negotiations with the Justice Department, the huge hospital company had two of its subsidiaries – by then, defunct – plead guilty to Medicare fraud, while the parent company claimed to have done nothing wrong. It settled the civil case for $1.7 billion in fines in 2001 and 2002 but was never barred from continuing to participate in Medicare or Medicaid.

By then, Scott was long gone, having been ousted by the board in 1997, shortly after the federal investigation became public. Scott moved to Florida and founded Solantic, a fast-growing chain of urgent-care clinics that today has contracts with both Medicare and private insurers.

And he grew interested in politics.Today, Scott is the Republican candidate for governor of Florida, running neck-in-neck with the Democrat, Chief Financial Officer Alex Sink.

Whenever the Columbia/HCA contretemps comes up, Scott says he didn’t know about the fraud going on. On his campaign website, he says:

“I’ve made mistakes in my life. And mistakes were certainly made at Columbia/HCA. I was the CEO of the company and as CEO I accept responsibility for what happened on my watch. I learned very hard lessons from what happened and those lessons have helped me become a better businessman and leader.
Lessons I will bring to the Governorship with your support and vote.”

Several calls and e-mails to Scott's campaign were not returned.

--Questions and letters to the editor are welcome. Contact Editor Carol Gentry at 727-410-3266 or by e-mail.

Carol Gentry, founder and special correspondent of Health News Florida, has four decades of experience covering health finance and policy, with an emphasis on consumer education and protection.