State, City Settle Case Alleging Medicaid Fraud

We have posted on a variety of settlements of cases alleging health care fraud, but this one has a new twist, as reported by the NY Times,

New York State and New York City officials agreed this week to repay the federal government for more than half a billion dollars in improper Medicaid claims, averting a potential court battle but adding more red ink to the state’s and city’s finances.

The settlement, which federal officials said was the largest recovery of Medicaid funds in history, ends a lengthy dispute with the federal government over whether school districts around the state improperly sought Medicaid payments for speech therapy and other services dating to the early 1990s.

Under the agreement, which was announced Tuesday, the city will repay about $100 million. The state will pay about $332 million in 10 installments over the next five and a half years and will also give up $107.9 million worth of Medicaid claims now owed by the federal government.

Though neither city nor state officials are required to admit wrongdoing under the agreement, it does require the state’s Department of Education to submit to independent monitoring of its Medicaid-financed programs.

Since the 1980s, Medicaid has helped school districts pay for the cost of services like speech therapy and psychological counseling for schoolchildren, including the cost of transportation to therapists’ offices. School districts in New York have been among the most aggressive in the country in seeking such aid: one federal study found that New York accounted for 44 percent of all student health services.

Those lawsuits, filed under the federal False Claims Act, spurred several audits by the Department of Health and Human Services of city and state programs that finance speech therapy and other programs for disabled children. Those audits found substantial potential for fraud, reporting that a vast majority of the claims submitted did not meet federal requirements, and that in many cases there was no evidence that the services had actually been provided.

This may be the first settlement of health care fraud allegations we have discussed in which all the involved parties were government agencies.

The current fervent debate in the US about health care reform has focused on ever rising health care costs. However, this debate has largely ignored the ethics of health care, and the sorts of leadership of health care organizations that has lead to rampant and costly mischief, of which this case is just the latest example. How can we control costs while so many health care leaders are seeking every angle to make more money, whatever the consequences?

1:25 PM

Sanofi-Aventis Settles

Here is another addition to the parade of multi-million dollar legal settlements by health care corporations. As reported by the AP:

Drugmaker Sanofi-Aventis has agreed to pay nearly $100 million to settle allegations it cheated Medicaid on the cost of nasal sprays.

The Justice Department said Aventis Pharmaceutical Inc., a wholly owned subsidiary of Sanofi-Aventis U.S. LLC, has agreed to pay the government $95.5 million to settle the charges.

The government charged that between 1995 and 2000, Aventis and its corporate predecessors did not offer Medicaid the best prices for the sprays Azmacort, Nasacort and Nasacort AQ.

In reaching the settlement, Sanofi-Aventis U.S. did not admit any wrongdoing. The company, based in Bridgewater, N.J., issued a statement saying it believed the old pricing system was legal.

Under the law, the company was required to tell Medicaid the lowest price that it charged companies for those products, and offer state Medicaid programs rebates based on those prices.

Prosecutors contend that in order to dodge that obligation, Aventis entered into a private deal with the HMO Kaiser Permanente that repackaged Aventis drugs under a new label, allowing them to overcharge Medicaid programs for the same product.

It seems that scarcely a week goes by without a settlement of charges of unethical behavior by some major health care organization. The ongoing parade of such cases ought to inspire some worry about the ethics of the leaders of such organization. Given the current very public discussion of how expensive health care has become, one would think that there would be some discussion of how much of this expense is due to various kinds of deceptive and unethical behavior by some of the biggest, richest, and most powerful health care organizations. But perhaps that would be too upsetting for those who make so much money running these organizations.

As we have said before, most recently here, while human beings authorized or committed the acts that got the organization in trouble, rarely do these people seem to suffer any negative consequences. At most, the organization may pay a fine. In this case, the fine was, in corporate terms, of modest size. However, even a large fine, may come out of dividends or the stock price, dispersing the cost to stock-holders, or out of salaries across the board, dispersing the cost to all employees. Thus, those who got the organization into trouble are unlikely to feel pain from it. Perhaps because of reverence for all organizations related to health care, and fear that the bankruptcy of any health care organization will leave patients in the lurch, prosecutors do not seem inclined to actually prosecute such organizations. The net effect, though, seems to be that dishonest executives of health care organizations can continue to act with impunity.Until bad leadership of health care organizations leads to negative consequences for those practicing it, health care leadership can be expected to continuously degrade.

ADDENDUM (2 June, 2009) - See these comments on the Effect Measure blog.

1:20 PM