Accountable Strategies blog

A blog about accountability issues in the public, private, and nonprofit sectors

Archive for November, 2007

Health care fraud and whistleblowers

Posted by David Kassel on November 25, 2007

Cynthia Fitzgerald filed one of the largest whistleblower lawsuits on record—a suit, which names companies such as Johnson & Johnson, Becton Dickinson, and Merck as participants in massive health care overcharges, The New York Times reported last week.

Yet, in a full-page editorial in The Times yesterday on the reasons for the high cost of health care, health care fraud isn’t even mentioned.  The editorial argues that the main driver of high medical spending is our wealth, which causes us to rely on costly specialists who overuse advanced technologies.  The editoral goes on to recommend several solutions, never once suggesting that we make an effort to control fraud, starting with better protections for whistleblowers and better auditing.

Why does health care fraud go so unrecognized as a driver of health care costs?  Not only do papers such as The Times ignore fraud as a factor even as they print stories about it, but Congress appears uninterested as well. 

Like many whistleblowers, Fitzgerald lost her job after she complained to company higher-ups about sales practices she came to believe were draining millions of dollars out of public programs such as Medicare through overcharges and other unauthorized uses.  Her subsequent suit alleges systematic fraud across a network of companies and more than 7,000 health care institutions.

Fitzgerald worked for a company called Novation, which helps hospitals, rehabilitation centers, home health agencies and doctors’ offices negotiate prices for medical supplies.  Novation is the nation’s largest group purchasing organizations for hospitals, buying more than $25 billion in supplies and services each year.

Fitzgerald’s case points up the need for new legislation, including the Private Sector Whistleblower Protection Streamlining Act of 2007 (H.R. 4047), and a second bill that would close loopholes under the False Claims Act (S. 2041).  It’s one of many pieces of whistleblower-protection legislation that appear to be going nowhere in Congress, according to the National Whistleblower Legal Defense & Education Fund.  

Fitzgerald’s suit was filed under the False Claims Act, which allows private citizens to sue on behalf of the federal government, if they believe fraud has occurred, and share in the financial recovery.

 A spokesperson for Novation alleges that Fitzgerald:

 …is rehashing old rumors and suspicions.  These allegations have been examined in depth by a variety of different authorities, and no one has proven any of them to be true.

In other words, calm down everybody, there’s no such thing as health care fraud.

But the existence of health care fraud is not a rumor or suspicion.  Malcolm Sparrow of the Kennedy School of Government argues that fraud may well be a “hidden factor” in the growth of Medicaid, Medicare, and health care spending in general.  The problem is that government and the medical establishment, in particular, are largely uninterested even in measuring it, he maintains. 

The Times article last week provided a good account of how health care fraud is allegedly committed in the medical supply industry.  The artice reported that in 1998, a few months into her job at Novation, Fitzgerald and her boss attended a meeting with a Johnson & Johnson sales team seeking an exclusive three-year  contract to sell $130 million worth of IV equipment to Novation’s clients.  The bids for the contract had already been received, and Fitzgerald contends it was her understanding that she was not supposed to meet individually with any of the vying bidders.  During the meeting, the Johnson & Johnson team allegedly sought inside information on how they could get the contract. 

Fitzgerald says she brought the meeting to a halt and later notified her company’s legal department and the company president about the situation and got little satisfaction.  The same dynamic happened with other companies.  After she asked her supervisor to be taken off a contract in which a bidder had said he would “take care of her,” she was fired for nonperformance of duties.

When companies submitted bids to Novation, there were frequently offers thrown in for things such as shares of stock and sometimes even cash, Fitzgerald alleges.  These “rewards” and rebates would get passed through to hospitals, which would then pass through the charges to Medicare, she contends.

A recent survey by PricewaterhouseCoopers shows that whistleblowers are one of the most effective means of exposing these practices.  Yet, health care fraud and the protection of whistleblowers, in particular, don’t seem to be on the radar screen.  Why? 


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Dubnick’s Age of Accountability

Posted by David Kassel on November 16, 2007

 Melvin J. Dubnick argues in the October 2007 issue of PA Times that “we live in the Age of Accountability.”  Dubnick, a political science professor at the University of New Hampshire, who is well known for his writing and research on accountability issues, argues that through greater accountability, we believe:

our streets will be cleaner and safer, our children better educated, our health care more cost effective, our social services more efficient, our city services less costly, and even our highway traffic more tolerable and less dangerous.”

 Yet, there is something wrong in all this, Dubnick contends, adding:   

 What I find interesting and most disturbing in all this is that we have come to the Age of Accountability relying so much on blind commitment to untested assumptions…Our decision to rely on powerful beliefs rather than knowledge is all the more frustrating because it is endangering the very foundations of modern governance that we are intent on improving.

What are these untested assumptions and powerful beliefs?

Well, first of all, Dubnick maintains there is a good form of accountability and a bad form of it; and he argues that the bad form is becoming more and more pervasive in political, administrative, and corporate spheres. 

Dubnick describes the good form of accountability as “an embedded and internalized commitment to account giving.”  He calls this the “accountability of governance,” and says it is to be found:

…in the way a third grade teacher relates to his students, or the obligation a firefighter feels to those who might be trapped in a burning building.  It is internalized to the extent that the account giver regards the commitment to accountability to come from within and not be a reaction to some outside pressure.

The bad form of accountability is “imposed on those same relationships rather than embedded in them.”  Dubnick calls this the “accountability of managerialism,” and it:

…tells that third grade teacher that his relationship with his students must be defined in terms of higher test scores.  It assesses the firefighters’ performance on the basis of measureables such as emergency response times.  And in both instances the account giver does not take personal owership of those standards—they are never internalized, but remain associated with the outside source.

The harm done by the accountability of managerialism is that it transforms ethical behavior to “restraints and compliance with articulated codes and rules.”  In addition:

Performance, which once encompassed competencies and craftsmanship, is now reduced to measurable outcomes.

One thing I like about Dubnick’s argument is that it is critical of a number of long-held schools of thought such as the “reinventing government” movement, which has helped inundate us with performance measurement.  Yet, he also appears to criticize the traditionalists for their reliance on compliance with codes and rules.

It’s true, we measure too many things nowdays, and seem to know the value of nothing.  Teaching to the test has become one of the hallmarks of our contemporary education system, and it is not necessarily producing more educated or more well-rounded students.

At the same time, I’m not quite sure where Dubnick is going with his argument.  While it’s true that an internal, ethical commitment to one’s students or to people trapped in a burning building is a great thing to have, clearly not everyone has it.  Some form of externally imposed accountability does appear to be necessary to make our societal institutions work.

 In fact, in Dubnick’s 1987 paper—Accountability in the Public Sector: Lessons from the Challenger Tragedy, which he co-wrote with Barbara Romzek, he posited four forms of accountability—bureaucratic, legal, professional, and political.  In that paper, Dubnick and Romzek didn’t argue that any of those forms were inherently good or bad, only that some were more appropriate for certain sets of circumstances than others.

Dubnick concludes his PA Times article with a plea for “developing a better theoretical understanding of accountability and its role in governance and administration.”  That understanding, he says, should come from practitioners as well as academics.

Sound advice, because I think most practitioners will be the first to tell you that government is only as good as the people doing the governing.  There are no magic bullets or perfect reforms that merit throwing out all past practices.  As Dubnick notes:

…under current protocols for assessing the various accountability-based reform efforts, we are locked into a game of self-fulfilling false prohesies.



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The cost of “reinventing” government

Posted by David Kassel on November 13, 2007

Since at least the start of the Clinton administration, the mantra has been: let’s downsize and bash “reinvent” government by eliminating unnecessary bureaucracy and red tape.

But two front-page articles on Sunday in The New York Times detail the enormous costs and ultimate failure of this approach.

Death of a Spy Satellite Program  describes a “troubled partnership” between the government and Boeing, which led to the derailment of an ambitious program for a new generation of American spy satellites.  Billions of dollars have been wasted on this program that continued to founder on after it had been deemed unbuildable by company engineers.

The second story, which led the paper, describes the lax controls and government oversight of military contractors distributing Pentagon-supplied weapons to police and national guard troops in Iraq.  Billions of dollars in arms have been “handed over to shoestring commands,” which have failed to account for the whereabouts of a significant portion of them.

The spy satellite story notes that “the entire acquisition sytem for space-based imagery technologies is in danger of breaking down,” leaving the U.S. more vulnerable to foreign threats such as terrorist training camps and nuclear weapons sites.  And our inability to keep track of the weapons we ship to Iraq may well be playing a role in our inability to bring stability to that country. 

Sadly, these types of stories are becoming increasingly typical of the way our downsized government now operates.  And yet, the mantra continues—government bureaucracy is at fault because it hamstrings the private sector with too much oversight and too many rules.  In fact, as The Times pieces point out, the problem is the opposite.  Not only doesn’t government adequately oversee contracts with the private sector these days, but it has ceded much of that oversight to the private sector.  The result has been chaos.

Take the spy satellite situation.  The National Reconaissance Office, which was in charge of the satellite project, gave Boeing, which had no previous experience in satellite technology, responsibility for monitoring its own work under the contract, according to The Times.  The article described the situation as a:

…new policy, cousin to the Clinton administration’s effort to downsize government, of transferring control of big military projects to contractors, on the theory that they could best manage engineering work and control costs.

This was the same philosophy that undermined the Big Dig project in Boston, in which Bechtel/Parsons Brinckerhoff, the lead contractor, was also effectively given the responsibility of monitoring its own design work.  We’ve seen how well both of those arrangements worked to control costs and bring the projects to completion on time.

The Times article doesn’t shed much light on the bidding process for the satellite program, other than to note that the other “invited” bidder was Lockheed, the government’s longtime satellite builder.   It appears from the article that the government left it up to the invited bidders to design their own systems and then chose the one that claimed to be the cheapest and appeared to be the more “technologically innovative.”

The problem with this kind of open-ended bidding process is that the government appears to have had little idea of the type of satellite system it wanted and did not provide the bidders with a common design or specifications on which to bid.  It’s another example of government ceding its authority and paying the price later in awarding a contract for an unbuildable system.

In the story on the arms shipments, The Times notes that rules requiring such things as signoffs and recording serial numbers before weapons could be shipped out of armories were not followed.  One reason for this was a sense of urgency felt by some military officials to supply the Iraqi security forces quickly with weapons and to “cut through what they saw as a cumbersome military bureaucracy.”

It may be time for our political leaders to consider the huge price they have paid for bashing government even as they have emasculated it through continuous downsizing.  It would be nice to hear the presidential candidates address this issue as well.

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How can we restore our constitutional checks and balances?

Posted by David Kassel on November 7, 2007

Jack Goldsmith, a former director of the critically important Office of Legal Counsel in the Justice Department, had a stormy relationship with the White House, issuing opinions contrary to the White House position on matters including torture and electronic surveillance. 

 In The New Republic, Neal Katyal, former National Security Advisor at the Justice Department, reviews Goldsmith’s new book, The Terror Presidency: Law and Judgment Inside the Bush Administration, in which Goldsmith describes his growing disillusionment with an administration that has run roughshod over the Constitution. 

As might be expected, Goldsmith didn’t last long in his post.  That’s not to say he was a closet liberal in a conservative administration—he co-wrote an article arguing that President Bush’s 2001 order establishing military tribunals to try suspected terrorists was perfectly legal. 

Yet, Goldsmith grew increasingly disturbed with the White House view that the president “has a virtually unlimited and unsupervised ability to override laws of Congress that interfere with his duties as commander in chief,” as Katyal describes it.

Katyal maintains that after 9/11, the White House adopted a radical, “aggrandized” view of the respectable “unitary executive theory,” which holds only that Congress and the Judiciary cannot interfere with internal executive branch matters, such as the firing of executive branch officials.

Somehow, the unitary executive theory morphed in the hands of Vice President Cheney, his now chief of staff David Addington, Berkeley law professor John Yoo and some others into the position that the president could legally ignore a variety of federal laws, including laws prohibiting torture and electronic evesdropping on Americans without a special court order.  Hence, Bush’s multitude of signing statements, asserting, among other things, that he could bypass a statutory ban on torture and that he would ignore laws passed by Congress forbidding warrantless domestic spying.

Katyal points out correctly that when it comes to the imposition of constitutional checks on Bush’s executive branch actions, Congress and the courts have largely abdicated their duty, particularly in the war on terror.  But here is where I lose him a bit.  He concludes  that American government needs to be “re-oriented” in order to bring the “separation of powers” into the executive branch itself.  Huh? What?

Using the OLC to illustrate his idea, Katyal notes that the OLC currently has two conflicting roles—that of advisor to the president and adjudicator of legal issues in the administration.   This has effectively prevented the office from acting as a neutral decision-maker, and explains the short tenure Goldsmith had at OLC before he was replaced by a more compliant head of the office. 

Katyal’s solution is to transfer the OLC’s adjudication function to a separate official, who would resolve interagency disputes and straddle presidential terms.  He explains that this approach is an attempt to introduce internal checks within the executive branch, rather than “hoping that it (the separation of powers) will rematerialize in Congress and the courts.”

The problem I have with this approach is that it assumes that any president, let alone George Bush, would accept a situation in which the executive branch would be bound by the opinions of an internal lawyer, who was somehow independent of the president’s political influence.   In suggesting this approach, Katyal seems to assume that there is a way to decide legal issues free of politics.  I’m not a lawyer, but I don’t think that can be done.   Politics will always be part of the decision-making in the executive, including the legal decision-making. 

It’s true that the Bush administration has taken politics and its lesser bedfellow, ideology, to new heights of arrogance and possible illegality.   Yet, Katyal seems to be giving up on Congress, in particular, as a constitutional check on that executive overreaching.  The idea seems “hopelessly outdated,” he says, referring to Madison’s writing in The Federalist that “ambition must be made to counteract ambition.”  That is giving up on a lot—in particular, the premise on which Our Founders devised our government, as Katyal himself describes it.

I still harbor the hope that Congresss will ultimately do its job of checking the powers of the executive.  If not, I believe the public will vote for yet another change in the leadership of that branch of government.  As The New Republic put it in the same issue, if Congress doesn’t assert itself soon, the Democrats may not have a majority there to squander for very long.

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Was government missing from this discussion of public-private partnerships?

Posted by David Kassel on November 2, 2007

Public-private partnerships tend to be “complex and messy” arrangements that are difficult to manage.

But when they work, they can create a “convergence of public and private value” that can help society address increasingly difficult public policy problems.

That was the message that emerged from a discussion of three recent PPP cases at a seminar led by Alan Trager this week at the Kennedy School of Government, where he is an adjunct lecturer. 

The only problem I had with the cases that were discussed is that government appeared to have played only a nominal role in them.  It seems that it’s when government invests heavily in a PPP that the most serious problems can arise, and those problems usually seem to dog taxpayers.

The first case was about the drugmaker, Eli Lilly, which has organized a global PPP to fight multi-drug resistant tuberculosis, a serious and spreading problem in developing countries around the world.  The partners include the World Health Organization, the Centers for Disease Control, Purdue University, Brigham and Woman’s Hospital and numerous others.  Eli Lilly donated $453 million in products and $58 million in cash to the venture.

This partnership, in which Eli Lilly set a goal of treating 30,000 people a year with two effective TB drugs, has been moderately successful, Trager said, in merging public and private value.  Lilly invested a huge amount of its own resources in the project and, as a result, has benefitted through the strengthening of its brand throughout the world.  Public value has been created as well through the treatment of thousands of people who would not normally have been helped by their own governments or by drug companies in their own countries.

This case, though, seems more of a private-public partnership than a public-private one, if one can make that distinction.  Most of the financial investment appears to have come from Eli Lilly and not from the public entities.

The second case was also conspicuous for its lack of governmental involvement.  It involved the production of environmentally friendly hybrid electric trucks under a partnership involving FedEx Express, the Eaton Corporation, and the Environmental Defense Fund.  This project did not succeeed as well as the Eli Lilly partnership did in merging public and private value, Trager noted.  The government declined to get involved in financing or promoting the FedEx project to other companies.  But more perhaps importantly, FedEx itself declined to invest heavily in the project because of the high cost of the hybrid vehicles.  FedEx limited itself to purchasing just 93 of them.  This decision was made even though the fuel savings in the hybrid vehicles would have paid for the additional cost in just a few years.

The third case involved the development of Bryant Park in New York City.  This park, located in the city’s financial district, used to be run down and dangerous.  Through involvement of the Rockefeller Brothers Fund and the creation of a Business Improvement District, which taxed real estate owners in the park’s vicinity, the park was transformed, not only into a vibrant meeting spot for the public, but a desirable location for the new headquarters of Bank of America.  In this case, private and public value were merged seamlessly.

In a question-and-answer session, Trager acknowledged the cases he selected differ from the complex contractual arrangements between government and the private sector that are also often marketed as “public-private partnerships.”  In those arrangements, public jurisdictions, such as municipalities, have frequently found themselves enmeshed in business deals involving such things as wastewater treatment and prison construction.  These deals are often characterized by long-term contracts that have tended to place most of the projects’ financial risks on the public jurisdictions and consequently taxpayers.

I hope that in future courses and discussions on PPPs, The Kennedy School and other academic institutions will shine the spotlight on the full spectrum of PPPs, and focus closely on the problems that occur at the intersection of the public, private, and nonprofit sectors when taxpayer money is more at stake.

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