Accountable Strategies blog

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

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? 


2 Responses to “Health care fraud and whistleblowers”

  1. Mr.Wise said

    I know the GPO Novation well. This year they will do 33.1 billion in contracting. Nothing is being done about fraud because many people in power are getting benifits. Too much money for the big guys while hurting the aveage American. Until people speak out and do not allow it things will stay the same.

  2. Dan said

    The more documents of alleged crimes, the better, that clearly do not allow room for any other interpretation.

    Anything in writing is a good thing.

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