Posted by D. Cupples | Every tax dollar devoted to waste or fraud is one less dollar for legitimate healthcare services. As the presidential candidates propose their healthcare plans, they should consider one of the root causes of America's skyrocketing healthcare costs: private contractors.
In 2003, the Department of Justice (DoJ) said that healthcare contractors' settlements were the "lion's share" of fraud-suit settlements from 2000-2003 (larger, even, than defense contractors' settlements). Since 2000, America's two largest for-profit hospital chains (HCA and Tenet) settled massive DoJ fraud suits over conduct that had allegedly occurred for years. Contractors tend to settle fraud suits without admitting guilt, because if contractors are found guilty of fraud, the government can bar them from receiving contracts.
It's not just the big fish who've been sued, and it's not just hospitals. Below are more than a dozen examples of healthcare contractors that faced lawsuits or prosecution, their alleged conduct, and the outcomes.
In 2006, Tenet Healthcare (America's second largest for-profit hospital chain) settled DoJ suits for $900 million after allegedly false billing of Medicare and other federal programs. The alleged conduct included: "upcoding" patient diagnoses (billing for more expensive treatment than was done or called for), unreasonable inflation of charges, and illegal kickbacks to doctors.
In 2005, Health South settled DoJ suits for $327 million after (among other things) allegedly charging for false claims for outpatient physical therapy, over-billing Medicare for hospital costs, and billing Medicare for unallowable costs (like employee travel, entertainment, and an administrator's meeting at Disney World).
By 2003, HCA (America's largest hospital chain) had agreed to pay $1.7 billion to settle DoJ suits. The alleged conduct included: falsifying hospital-cost reports, charging Medicare for unallowable costs, and giving doctors illegal kickbacks for patient referrals. Some of the alleged conduct dated back to the 1980s.
Drug Companies & Pharmacies
In 2005, GlaxoSmithKline settled a DoJ suit for $140 million after allegedly submitting false claims to Medicare and other federal programs by falsely reporting inflated drug prices -- "knowing that those prices would be used by federal programs to set reimbursement rates."
Retail pharmacies Wal-Mart (2004) Rite Aid (2004), Eckerd (2002), and Walgreen (1999) settled unrelated DoJ suits for a combined $23.4 million after allegedly charging federal healthcare programs full price for partially filled prescriptions. Federal programs including Medicare, Medicaid and TRICARE (military health) were affected.
In 2003, AstraZeneca settled DoJ suits for $280 million after, among other things, allegedly conspiring with healthcare providers to charge federally funded insurance programs for free samples of a prostate cancer drug.
In 2003, Abbott Laboratories settled DoJ suits for $382 million after getting snared in a federal undercover investigation called “Operation Headwaters." Apparently, a division of Abbot had offered kickbacks to federal agents to buy the company’s products, then “advised them how to fraudulently bill the government for those items.”
In 2002, four individuals in Florida were sentenced to prison and ordered jointly to pay a total of $11.7 million after conspiring to defraud Medicare and Medicaid by submitting false claims for laboratory tests that were not actually performed.
In 1997, SmithKline Beecham laboratories settled a DoJ fraud suit for $325 million after allegedly over-billing Medicare and other federal programs by: double billing for tests for kidney dialysis patients; paying illegal kickbacks to doctors; and billing for tests that weren’t done, weren’t medically necessary, or weren’t ordered by a doctor.
HMOs & Insurance Companies
In 2002, General American Life settled a Medicare-fraud case for $76 million after allegedly failing to perform its contractual duties to the Centers for Medicare and Medicaid Services (CMS). The duties included assessing eligibility and processing claims submitted by Medicare beneficiaries and healthcare providers. General American allegedly failed to process claims, submitted false information to CMS, failed to report errors, and disguised true error rates by deleting claims selected for CMS-review.
In 2002, PacifiCare Health Systems agreed to pay $87 million to settle allegations that it (and its predecessor companies) had inflated insurance claims while contracted to provide government-employee benefits under the Federal Health Benefits Program.
In 2004, Lovelace Health Systems, (a Cigna-owned hospital and HMO) settled a DoJ suit for $24.5 million after allegedly falsifying Medicare cost reports for ten years. Among other tactics, the company reportedly shifted the costs of its HMO patients to Medicare.
In 2000, an Ohio medical supplier was ordered to pay $15.1 million and sentenced to 70 months in prison after pleading guilty to defrauding Medicare by billing for urinary incontinence supplies that were not provided and by falsifying paperwork to hide the schemes from Medicare.
In 1997, Olympus of America settled a DoJ suit for $22.8 million after allegedly overcharging the Department of Veterans Affairs (VA) for medical-imaging equipment. After the VA negotiated to receive the best discount that Olympus offered to private businesses, Olympus reportedly told the VA that it gave no discounts to private businesses (when Olympus did give discounts), thereby overcharging the VA according to the contract's terms.
In 2004, a Connecticut pediatrician pleaded guilty to fraud and agreed to pay back $548,000 after billing Medicaid and other insurance programs for childhood vaccines that the doctor had received free-of-charge via the joint federal/state Vaccines For Children program. The doctor reportedly carried out the scheme from 1997-2002.
In 2000, a Texas doctor and his lawyer brother were convicted and sentenced to prison after carrying out a "sophisticated scheme to defraud local, state and federal heath programs and private insurers of over $46 million from 1986 to 1998." In the process, the doctor upcoded his services, falsified medical reports and engaged in multiple billing. During 1994, he would have had to work for 90 hours a day to accomplish the number of office visits he'd billed for. The scheme's other participants included an accountant, a physician's assistant, a physical therapist, and multiple office managers.
In 2001, a U.S. doctor was sentenced to 10+ years' prison after conspiring to dispense/distribute controlled substances, committing Medicare fraud, and taking illegal kickbacks. He was also ordered to pay $229,384 in restitution. Reportedly, the doctor routinely wrote large quantities of prescriptions for highly addictive pain medication, billed Medicare for services not provided, and upcoded office visits. A pharmacy owner was also convicted, sentenced to 16 years' imprisonment and fined $56,400.
In 2004, four California defendants were convicted after participating in a scheme to defraud Medicare of $2.6 million for equipment -- including motorized wheelchairs, accessories, and hospital beds -- that were not medically necessary or were not delivered. The defendants included a doctor, a wheelchair storeowner, and a wheelchair repair-shop owner.
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