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Sept. 7 , 2009
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1. A little more than a week after it requested executive compensation data from more than 50 health plans, the House Energy and Commerce Committee is investigating whether health plans intentionally “purge” their small-employer clients when claims costs increase significantly.
The top executives at six companies — UnitedHealth Group, WellPoint, Inc., Aetna Inc., Humana Inc., Medica and Wellmark Blue Cross Blue Shield — were asked to provide detailed information about policies sold to groups of 100 or fewer employees since January 2007. The letters, sent Aug. 31, were signed by Committee Chairman Henry Waxman (D-Calif.) and Rep. Bart Stupak (D-Mich.) who chairs the Subcommittee on Oversight and Investigations. The committee, according to the letter, has information that suggests “health insurance companies terminate the coverage of small businesses that have become expensive to insure by cancelling their policies or by raising their premiums to unaffordable rates.”
Industry trade association America’s Health Insurance Plans (AHIP) criticized the letters as being part of a politically timed and politically motivated “fishing expedition” being used to justify the creation of a government-run insurance option. “Health plans are already highly regulated at both the federal and the state level,” says AHIP spokesperson Robert Zirkelbach.
The investigation appears to have been prompted by the testimony of a former CIGNA Corp. executive. At a June 24 hearing before the Senate Committee on Commerce, Science and Transportation, Wendell Potter, who retired last year as CIGNA’s vice president for corporate communications, testified that large health insurers routinely and intentionally boost premium rates for small employers that have high claim costs in an effort to get them to switch carriers.
While CIGNA is not among the six companies to have received a letter, that company is working to comply with a separate request from Sen. John D. “Jay” Rockefeller IV (D-W.Va.). In an Aug. 5 letter to CIGNA Chairman and CEO Edward Hanway, Rockefeller asked for an explanation of the term “purging,” which was used by CIGNA President and Chief Operating Officer David Cordani during a February conference call to discuss fourth-quarter 2008 earnings results. CIGNA spokesperson Chris Curran says the company submitted its response on Sept. 2.
Most of the health plans contacted by HPW declined to comment on the latest round of letters beyond saying that the request was being reviewed. Medica spokesperson Larry Bussey, however, expressed surprise that a regional not-for-profit company was being investigated alongside publicly traded behemoths such as United and WellPoint. One possible explanation, he says, is an Aug. 7 Business Week article that profiled a Medica client that saw a 72% rate increase after one of its employees was treated for pancreatic cancer. “What that article didn’t say was that we reduced the [rate] increase by half, and that group did renew with us,” Bussey says. He adds that as a not-for-profit health plan, Medica competes for members and doesn’t have the same financial motive to eliminate high-cost employer clients. Moreover, he says, state regulators must approve Medica’s benchmark renewal rate for clients with 50 or fewer enrollees. “And we apply standard underwriting procedures based on [claims] experience with protections to mitigate against high-claims experience,” he tells AIS.
2. A California-based consumer group alleged that UnitedHealth Group and WellPoint, Inc. coerced employees into writing letters to members of Congress and attending “town-hall” meetings, during business hours, in an effort to “weaken health reform.” Both health plan operators deny the allegations. In a Sept. 2 letter to California Attorney General (AG) Jerry Brown (D), Consumer Watchdog called for an investigation into tactics used by the insurers, which the group contends violate the state’s Labor Code. In addition, Consumer Watchdog said both companies urged employees to attend and participate in town-hall meetings to demand that health reform “not contain any Medicare-like public non-profit alternative to private insurance,” according to Consumer Watchdog. In a prepared statement provided to HPW, United called the allegations “completely false and particularly disappointing, as we have been one of the biggest proponents for modernizing our health care system.” The company says it made information available to its employees who wanted to voluntarily participate in town-hall meetings or write to their elected officials. “We have told our employees to participate as individuals, not on behalf of the company, with their unique messages and personal perspective,” United said. A WellPoint spokesperson says the company has not yet seen the complaint, but asserted, “we believe it is important and permissible to provide up-to-date information about health reform to our associates.” To see a copy of the group’s letter, visit www.consumerwatchdog.org/pr..…In an unrelated matter, AG Brown on Sept. 3 announced that his office has launched an inquiry into how HMOs review and pay insurance claims submitted by doctors, hospitals and other medical providers. The investigation, according to Brown’s office, was prompted by reports that California’s five largest health insurers deny insurance claims at rates of up to 39.6%.
3. Pfizer Inc. was already under a corporate integrity agreement (CIA) stemming from an earlier Department of Justice (DOJ) settlement when it allegedly broke civil and criminal laws, triggering the largest health fraud settlement in American history. Now the pharmaceutical manufacturer will break another record, implementing what is believed to be the most extensive CIA ever imposed by the HHS Office of Inspector General (OIG).
DOJ announced Sept. 2 that Pfizer and its subsidiary, Pharmacia & Upjohn, agreed to pay $2.3 billion to resolve criminal and civil liability stemming from the alleged illegal promotion of certain pharmaceutical products. What’s striking about this case is that it results from the actions of one drug sales rep and other whistleblowers, which is testimony to the power of the False Claims Act’s whistleblower provisions.
According to DOJ, Pharmacia & Upjohn will plead guilty to violating the Food, Drug and Cosmetic Act for misbranding the anti-inflammatory drug Bextra with the intent to mislead or defraud. Pharmacia & Upjohn will pay a criminal fine of $1.195 billion, which is “the largest criminal fine ever imposed in the United States for any matter,” DOJ says. “Pfizer promoted the sale of Bextra for several uses and dosages that the FDA specifically declined to approve due to safety concerns,” DOJ says. The medication was taken off the market in 2005.
On the civil side, Pfizer is paying $1 billion to resolve allegations it violated the False Claims Act in connection with illegally promoting four drugs (Bextra, the anti-psychotic Geodon, the antibiotic Zyvox, and the anti-epileptic Lyrica) for uses that were not medically accepted and then billing Medicare and Medicaid for them, DOJ alleges. Pfizer also is accused of paying kickbacks to providers to prescribe the drugs, DOJ contends.
The whistleblower lawsuit filed in 2003 by former Pfizer sales representative John Kopchinski “kicked off the federal and state investigations that led to Pfizer’s record-breaking $2.3 billion settlement today,” says his lawyer, Erika Kelton.
Kopchinski was employed by Pfizer for 11 years, Kelton says. She notes he was “personally hired” in 1992 by Edward Pratt, Pfizer’s then-CEO after Kopchinski, while serving as an Army officer in the Gulf War, started corresponding with Pratt. As a whistleblower, his share of the settlement will be $51.5 million.
Pfizer, one of the largest pharmaceutical manufacturers in the world, was already under a CIA when it was called on the carpet over Bextra and the other medications. Its previous CIA, required by OIG in connection with activities by another subsidiary, Warner-Lambert, ended in May 2009. Warner-Lambert, which Pfizer bought in 2000, settled a case in connection with off-label uses of its drug Neurontin, an OIG spokeswoman says. The first CIA contained the usual stuff, including: a mandatory compliance officer and committee, a code of conduct, internal training on its compliance program and promotional activities, and the use of an independent review organization to review Pfizer’s overall compliance and transactions.
CIAs are a substitute for Medicare exclusion because exclusion would mean beneficiaries would not get their goods or services paid for by the federal government. With their mandatory compliance measures, CIAs allow the government to reduce the chance the company will re-offend.
According to Fort Lauderdale, Fla., attorney Gabe Imperato, with Broad and Cassel, “Congress and the administration vigorously promote whistleblower claims, whether they have merit or not. I don’t know anything about how [Pfizer] behaved in the past, but I am sure their current CIA reflects a concern by OIG that they were not careful enough in the past.”
Pfizer is not the first organization to commit alleged violations while under a CIA, and OIG had pledged to crack down on repeat offenders. “I don’t believe in CIAs,” says Pat Burns, spokesman for Taxpayers Against Fraud in Washington, D.C. “Do you know how many drugs were involved [in the Pfizer case]? At a certain point, a CIA becomes a piece of paper.” He says fraud in the health care industry is endemic. “We are getting to the point where corporate CEOs need to go to jail” in order to change behavior, Burns says.
The new, five-year CIA — which is 79 pages long and full of oversight requirements — “has much more internal and external monitoring,” says the OIG spokeswoman. “Pfizer has to look proactively to determine whether any of its activities are inappropriate.”
For example, this CIA is the first to require an organization to “proactively” identify risks associated with promoting specific products and devise a plan to mitigate the risks. This includes hiring an independent reviewer to evaluate risk-mitigation practices.
The CIA also requires the Pfizer board, its audit committee and its senior executives to certify the effectiveness of the compliance program annually. Pfizer must also tell physicians about the settlement and create a way for them to report questionable conduct by any Pfizer representative. The Pfizer Web site also must post payments to physicians, such as honoraria, travel or lodging.
4. HHS Sec. Kathleen Sebelius has named Georgina Verdugo, a civil rights attorney and former official in the Department of Justice during the Clinton administration, to be the new head of the Office for Civil Rights, with Aug. 31 as her first day on the job.
Prior to joining OCR, Verdugo was general counsel in the law firm of Garcia Calderon Ruiz LLP in Los Angeles. She also served as a federal prosecutor with the U.S. Attorney’s Office in Southern California, and as associate general counsel for the Los Angeles County school system.
According to information provided to RPP by the Mexican American Legal and Educational Fund, which Verdugo also once led, she was appointed by President Clinton to serve as deputy assistant attorney general in the U.S. Department of Justice, “where she was the highest ranking Latina at the department.”
She also has experience on Capitol Hill, having worked as chief of staff for Rep. Lucille Roybal-Allard, (D-Calif.), and she also headed Americans for a Fair Chance, a civil rights consortium project focusing on affirmative action and public education.
Verdugo replaces Winston Wilkinson, whose term was up with President Obama’s election. The OCR director does not have to be confirmed by the Senate.
5. HealthMarkets, Inc. and two subsidiaries have been ordered to leave the Massachusetts market and pay $17 million in “consumer relief, penalties and costs” for what AG Martha Coakley (D) said were unfair and deceptive marketing practices used to convince self-employed people and small businesses to purchase limited-benefit plans. Coakley’s office said the insurer also failed to provide benefits mandated by state law and denied health plan membership based on pre-existing conditions. Coakley’s office on Aug. 31 said it had resolved a lawsuit against HealthMarkets and its subsidiaries MEGA Life and Health Insurance Co. and Mid-West National Life Insurance. In a prepared statement released that same day, HealthMarkets said its subsidiary insurance companies will focus solely on marketing its ancillary vision, dental and related specialty plans in Massachusetts and will discontinue marketing health insurance products in the state after Sept. 30. The insurer and its subsidiaries also were banned for at least five years from selling their health plans in Massachusetts and are required to exit the Massachusetts health plan business completely. They are allowed to renew existing health plans with individuals and small businesses through 2012, giving current policyholders ample time to obtain other coverage, according to Coakley’s office. The settlement, the result of a multi-year investigation, is believed to be the largest consumer-protection settlement against a health plan in Massachusetts history. Visit Coakley’s office at http://tinyurl.com/lhdfh8 or HealthMarkets at www.healthmarkets.com.
6. On Sept. 3, Maine Gov. John Baldacci (D) announced that the state will receive $8.5 million this year from HHS to provide affordable health insurance for uninsured part-time, seasonal and direct-care workers at companies with more than 50 employees. The grant was announced as HHS Sec. Kathleen Sebelius visited Maine. The state also is eligible for up to $8.5 million each year for the next four years, for a total of $42.5 million over the five-year project period. Along with helping to insure more people, the cash infusion will help Dirigo Health, the state’s ailing universal coverage initiative, to become an insurance exchange, according to Baldacci’s office….On Aug. 24, Maine enacted the Health Care Bill of Rights, which gives the state’s insurance superintendent greater authority to oversee health plan rate increases. The new law will also require health plans to provide clear, understandable explanations of the benefits when a claim is filed so that enrollees have a better understanding of what is covered under their policy.
7. The federal government will extend authorization for SeniorCare, Wisconsin’s popular prescription drug program, through 2012, Gov. Jim Doyle (D) said Aug. 18. SeniorCare is the state’s alternative to the federal Medicare Part D prescription drug coverage program. The state program was slated to end Dec. 31. In a prepared statement, the governor said President Obama and HHS Sec. Kathleen Sebelius granted the extension after reviewing the merits of the program, which is the only one of its kind in the nation. Approximately 90,000 Wisconsin seniors are enrolled in the program. SeniorCare has a $30 annual enrollment fee, an income-based deductible and copayments of $5 for generic drugs or $15 for brand drugs. Unlike Part D, the program does not have a strict enrollment period or enrollment penalty. The annual federal cost per enrollee for SeniorCare is $588 and is significantly lower than the average Part D annual beneficiary cost of $1,690. To see the letter of approval outlining the terms of the agreement, visit www.wisgov.state.wi.us/docview.asp?docid=17381.
8. A physical therapist in Detroit pleaded guilty to participating in a conspiracy to defraud Medicare out of $18.3 million, according to the Department of Justice. Jay Jha admitted that while working as a contract therapist for a co-conspirator between 2003 and 2005, he signed more than 330 fake physical therapy files, which indicated that he had performed services that he had not performed. He also admitted that he was paid between $90 and $110 for each file. The false bills totaled $1.6 million in Medicare claims, of which Medicare paid $772,000. Jha worked with several other co-conspirators who controlled sham Medicare providers, through which Medicare was billed, and who paid cash kickbacks to Medicare beneficiaries in return for their identification numbers and signatures for the false documents. Jha faces up to 10 years in prison and a $250,000 fine. Visit http://www.usdoj.gov/opa/pr/2009/August/09-crm-876.html.
9. New Jersey Gov. Jon Corzine (D) signed legislation on Aug. 31 that prohibits hospitals and physicians from billing CMS for certain hospital-acquired conditions (HACs). Specifically, the bill states hospitals should not seek payment from a patient or third-party payer for costs associated with “transfusion reaction; air embolism; foreign body left during the procedure; surgery on the wrong side, wrong body part, or wrong person; or wrong surgery performed on a patient.” The provider can obtain payment for other services rendered. In addition, the bill outlines 14 hospital-specific patient safety indicators that will now be included in annual hospital performance reports, which are available to the public. Assemblyman Louis Greenwald (D) was quoted in the governor’s press release as stating, “When preventable medical mistakes occur, hospitals should not be rewarded. Denying payment for these types of errors will send a message loud and clear: When dealing with matters of life and death we will not tolerate any margin of error.” The New Jersey Hospital Association worked with the bill’s sponsors to finalize the measure. See the bill at http://www.njleg.state.nj.us/2008/Bills/S2500/2471_R2.PDF.
Reprinted from the Sept. 7, 2009 issue of REPORT ON MEDICARE COMPLIANCE
10. Medicare paid four times the average amount paid by suppliers for standard power wheelchairs in the first half of 2007, and twice the amount paid for complex rehabilitation wheelchairs, according to an OIG report (OEI-04-07-00400) released Aug. 28. The report also states that Medicare spending on power wheelchairs rose 350% between 1999 and 2003. At a Senate Finance committee hearing, Sen. Chuck Grassley (R-Iowa) expressed indignation over the wasteful spending and challenged Medicare officials to stop the scams. “At a time when every health care dollar counts, it’s infuriating to learn that the government is throwing away money and is still overpaying for power wheelchairs,” Grassley said. “It’s only common sense that you don’t pay more for something than what’s on the price tag — but too often common sense rules don’t seem to apply in Washington.”
11. HHS Sec. Kathleen Sebelius has delegated authority over the grants and loans funding sections of the HITECH Act to National Coordinator for Health Information Technology David Blumenthal. Beginning on Aug. 7, Blumenthal is administering all but one part of Sections 3011 through 3017 of Subtitle B, “Incentives for the Use of Health Information Technology.” His duties include overseeing state grants, managing funding for the development of standards for the nationwide exchange of data, and analyzing the effectiveness of grant and loan programs. Visit http://edocket.access.gpo.gov/2009/E9-19709.htm.
12. Providers and hospitals will have to be in compliance with the HIPAA privacy and security rules in order to receive payments for meaningful use of electronic health records (EHRs) under the HITECH Act, according to July recommendations made by the Office of the National Coordinator for Health Information Technology’s HIT Policy Committee. Payments would be withheld if providers have violated either of the rules and have not resolved the issues. The committee also recommends that state Medicaid agencies withhold meaningful use payments at the state level if providers and hospitals have unresolved privacy or security violations. Visit http://healthit.hhs.gov, click on “Meaningful Use,” and then click on “Meaningful Use Matrix.”.
13. A certified nurse aide in Plattsburgh, N.Y., was accused of text messaging a photo of the genitals of a 49-year-old male resident with traumatic brain injury to a female co-worker. According to a press release from the attorney general’s office, 33-year-old Shane Spooner, a former employee of the Clinton County Nursing Home, was arrested on Aug. 6 and charged with “unlawful surveillance in the second degree and dissemination of an unlawful surveillance image in the first degree, both class E felonies.” He allegedly admitted to the accusations when questioned by an investigator, and “conceded that he took and sent the photograph for his own amusement.” Spooner now faces a maximum of four years in prison. Visit http://www.oag.state.ny.us/media_center/2009/aug/aug6a_09.html.
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New • The AIS Guide to Medicare Compliance Risks & Strategies • Health Plan Facts, Trends and Data 2009-2010 • Complying With the Mental Health Parity and Addiction Equity Act • The AIS Guide to Blue Cross & Blue Shield Plans* Best
Sellers • Guide to Managing Never Events and HACs • The Aging of America: Implications for the Business of Health Care *Not affiliated with BlueCross BlueShield Association or its member companies See full
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