Another Reminder of Why Corporations Cannot Police Themselves

This article, written by Reuben Guttman and Traci Buschner who practice law with Guttman, Buschner & Brooks PLLC in Washington DC. Published in the McClatchy-Tribune News Service on August 13, 2014.

What kind of people would knowingly expose someone to the risk of infection just to make a buck?

Read carefully the allegations underlying the recent $97 million settlement between the U.S. Department of Justice and Community Health Systems and that question may be answered.

Responding to lawsuits brought under the False Claims Act by multiple whistleblowers, the government investigated and came to terms with the Nashville-based hospital giant resolving allegations that patients were admitted from emergency rooms to overnight stays not for medical necessity but for the purpose of racking up Medicare and Medicaid revenue and bilking private payers.

No harm, no foul. Right? Just skimming a few dollars off the government with no potential harm to patients? Right? Wrong on both counts!

While hospitals are places to get well, staying in a hospital is – these days – a place to acquire a hospital infection. According to allegations brought by three of the whistleblowers, including a physician at a CHS-owned Philadelphia hospital, overnight admission to a hospital absent medical necessity is not prudent medical practice. And, the rationale behind that conclusion is not just about saving dollars. It is a question of health and safety.

So, according to the allegations spanning multiple whistleblower law suits – as the publicly traded CHS was gobbling up community hospitals across the country, it was supporting its buying fling by admitting patients who allegedly did not need hospitalization.

And so the story goes; once again whistleblower lawsuits brought under the False Claims Act – a law allowing private citizens with knowledge of wrongdoing to bring suit in behalf of the government – was being used to recover taxpayer dollars and expose conduct placing citizens at risk. Technically these suits are about the submission of false claims for government payment or approval. In reality they are about much more.

In recent years, whistleblower litigation under the False Claims Act has uncovered conduct by giant pharmaceutical manufacturers including Abbott, GlaxoSmithKline, Amgen and Pfizer that has resulted in criminal convictions and billions of dollars in recovery for hard-pressed government payers. In each case the Government paid hundreds of millions of dollars in reimbursement for prescriptions that were the resulted of marketing tactics that violated the law. Patients were given medicine for reasons not solely grounded in medical necessity or rationale.

To be clear where companies including Abbott and Glaxo pleaded guilty to marketing schemes that placed patients at risk, they did so knowingly and in each case told the court they were pleading guilty because they were indeed guilty.

The tragedy is that the CHS settlement – a civil settlement – is yet another reminder that people captured by a corporate culture have willingly placed countless unwitting citizens at health risk all for the purpose of making additional profit. That is indeed the tragedy. The travesty is that even after the health care providers we once trusted have plead guilty to conduct that places people at risk, the U.S. Chamber of Commerce – or at least a few lawyers speaking on its behalf – still claim that these purportedly outstanding companies need to be cut some slack. Testifying before the U.S. House of Representatives’ Judiciary Committee Subcommittee on the Constitution and Civil Justice on July 30, lawyers for the Chamber attacked the False Claims Act, arguing that corporations should police themselves with whistleblowers being required to first report their concerns to corporate internal compliance personnel before alerting government officials.

Of course, these mouthpieces for the Chamber neglected to mention that every pharmacy giant that has pleaded guilty over the last five years had internal compliance programs that did not work so well. Actually, come to think of it, CHS also had an internal compliance program.

So what kind of people would knowingly expose someone to the risk of infection just to make a buck? One quick answer is definitely not the kind of people we want policing themselves for good behavior.

CHS Cites ‘Shifting’ Standards in Fraud Allegation Settlement

This interview with Reuben Guttman, who practices law with Guttman, Buschner & Brooks PLLC in Washington DC. and who represented three Plaintiff-Relators in United States ex rel. Doghramji v. Community Health Systems Inc., was conducted by John Commins, Senior Editor with HealthLeaders Media. The interview was published online on August 6, 2014.

An attorney representing one of the whistleblowers alleging that Community Health Systems committed fraud says that as a nation, “we have a healthcare delivery system where doctors and individual decision making, to some degree, have been shoved to the side by corporate managers.”

Community Health Systems, Inc. and federal prosecutors have agreed to a $98.1 million payout to settle system-wide fraud allegations levelled by whistleblowers against the Franklin, TN-based for-profit hospital chain.

While they have agreed on a settlement, CHS and federal prosecutors disagree on what prompted 119 hospitals in the nation’s largest acute care hospital chain to allegedly overbill Medicare, Medicaid, and TRICARE from 2005-2010 for inpatient services for patients who may not have needed to be hospitalized.

CHS Chairman and CEO Wayne T. Smith said the hospital chain was struggling “to operate in a complex and everchanging regulatory environment.”

“The question of when a patient should be admitted to a hospital is, and always has been, a matter of medical judgment by the individual physician responsible for a patient’s care,” Smith said in a media release.

“Unfortunately, shifting and often ambiguous standards make it extremely difficult for physicians and hospitals to consistently comply with the regulations. We are committed to doing our best, despite these challenges. Because this is an industry-wide issue, we hope the government will work to devise sound and reasonable rules for the important decision about whether to admit an individual for inpatient care, and we appreciate the opportunity to engage in meaningful dialogue with the government over these incredibly complicated issues.”

A CHS spokesperson amplified Smith’s point by saying that the shifting standards, “such as the two-midnight rule, which has had numerous updates, clarifications, and additional guidance attached to it since it was issued in August 2013… make it difficult for ALL providers to consistently comply with regulations.”

Federal prosecutors said flatly that the fraud allegations stemmed from a “deliberate corporate-driven scheme.”

“Charging the government for higher-cost inpatient services that patients do not need wastes the country’s healthcare resources,” said Assistant Attorney General Stuart F. Delery for the Justice Department’s Civil Division. “In addition, providing physicians with financial incentives to refer patients compromises medical judgment and risks depriving patients of the most appropriate healthcare available.”

Even though the settlement terms don’t include a guilty plea, Daniel R. Levinson, inspector general of the Department of Health and Human Services said that “in an effort to ensure the company’s fraudulent past is not its future, CHS agreed to a rigorous multi-year Corporate Integrity Agreement requiring that the company commit to compliance with the law.”

CHS had already set aside $102 million to cover the settlements and legal bills.

The settlement also resolves several whistle-blower lawsuits levelled by CHS employees in hospitals in several states. The whistleblowers’ share of the settlement has yet to be determined, DOJ said.

Reuben Guttman, an attorney with Grant & Eisenhofer representing whistleblower James Doghramji, MD, a former emergency physician at CHS’s Chestnut Hill Hospital in Philadelphia, spoke with HealthLeaders Media about the settlement. The following is an edited transcript.

HLM: CHS CEO Wayne Smith says that the billing irregularities are due to complex and shifting federal requirements. Do you buy that?

RG: I don’t think he has a legitimate point. This is a company that is crying out for additional scrutiny and oversight and this is a poster child for a Congressional investigation. In theory, doctors are supposed to make decisions.

In practice, people like Mr. Smith and companies like CHS have set up a dynamic where individual patient medical necessity is secondary to marketing and money. We are at a point where we have a healthcare delivery system where doctors and individual decision making to some degree have been shoved to the side by corporate managers.

This is a story about a company that was gobbling up suburban hospitals for no medical rationale. It’s not that they can run them better or that they were providing significant expertise. It was just about extracting cash from the Medicare/Medicaid system.

CHS was designing its admissions criteria on a centralized basis. CHS in Nashville was tracking exactly what was going on in all of these hospitals. They knew the economics at a micro level. I don’t think plausible deniability exists here.

HLM: Do you have a sense of the value of the alleged fraud versus what CHS is paying for?

RG: If you actually look the cash flow for this company, this is a very significant amount of money that they have put off. It is probably not significant in relation to the actual cost to the United States government or individual payers or what the government could extract if they tried the case, but it is a number that pushed the edge of the envelop in terms of paying something that is significant but allows the company to go forward.

The most significant thing about these cases is that they make the wrongdoing to some degree transparent as a catalyst perhaps for Congressional oversight. The reality is that unfortunately, many of these settlements are nothing more than the fee for a license to continue to break the law. What is apparent to us is that a lot of large companies are gaming the system and thinking ‘what is the likelihood of getting caught, and if we get caught what is the penalty?’ The penalty becomes part of the game.

We have to have a penalty system that is hard to calculate in advance and that will make it more difficult. But in reality you have to change the healthcare delivery system in the sense that we rely on the integrity of these types of corporations that have put medical decision making secondary to making money.

You can see when a train wreck is about to occur when you look at the debt service for a company. You are not going to create additional sick people. There are only a certain number of sick people. This is a situation that is going to be ripe for fraud.

HLM: Was there a smoking gun for prosecutors or whistleblowers in this case?

RG: In all of these cases, the complexity of the cases, you don’t find smoking guns. It requires you to find the smoke and the pieces to the gun and put it all together. Then, the trick for somebody who is doing lots of fraud cases is to look at the facts that aren’t there, or the rules that don’t exist, or to see what appears to be facially neutral practices are driving impropriety.

For example, if you have an innocuous practice that says when somebody comes into an emergency room and there is a rule that says they should be put on an IV, you can look at that and say that is not a smoking gun, putting someone on an IV.

But wait a second, when you put someone on an IV that means you are going to streamline them into an admissions situation as opposed to giving them bottles of water, maybe they will be OK, and we will send them home. You have to look at facially neutral practices and how they are driving an unlawful result. That is the trick to uncovering fraud. It’s extraordinarily complicated.

You have two things that are going on. One is you have companies engaged in these facially neutral practices that have an unlawful result for the purpose of deceiving regulators. Two, more significantly, it is a way of creating a cult and convincing people internally that they don’t have to worry about it because nobody internally is putting the pieces together. People who are paid well generally don’t want to do it.

This is the simple question you need to ask: What person or entity knowingly exposes somebody to infectious diseases in order to make a buck? That is the cutting question, because the reality is that while hospitals are places to get well they are also places that are dangerous because there are infectious diseases in hospitals. You don’t want to admit somebody unless it is medically necessary.

There are corporate executives who are knowingly and recklessly putting people at risk. That is unconscionable.

HLM: Do you feel this is a fairly widespread practice in the hospital sector?

RG: I wouldn’t be surprised.

A CHS spokesperson reached for comment late Tuesday said “This investigation was not about the quality of care provided or the location of the care that was provided for any patient–or even how long patients were in the hospital. It is about whether the hospital could rely on the physician’s signed orders in the medical chart to establish the patient status as inpatient–and then bill for the exact care that was provided. It is about the “status” of the patient–inpatient or observation–while that patient was in the hospital.

Reuben Guttman on “Internal Compliance”

With the growth of multinationals whose business transcends geographic boundaries and whose revenue streams exceed the gross national product of some nations, legislators and regulators—at least in the United States—have looked to leverage the resources of whistleblowers to bolster compliance enforcement. Under the right circumstances whistleblowers can be an invaluable resource.

First, whistleblowers can surface information not readily available, or otherwise concealed from regulators. Second, in places like India and China they add eyes and ears with cultural and language sensitivity and skills that the enforcement agency itself may not have available, at least in these particular locales. Third, they can have technical or scientific skills in areas that will assist the enforcement agency. Fourth, they often come equipped with counsel who can spend the time translating lay complaints into cogent legal arguments.

Read the entire article at Harvard University, Edmond J. Safra Center for Ethics.