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Cases show need for corporate accountability in health fraud

Corporations are happy to be treated as people under the law, as we know from recent court decisions. They can own property. They can seek redress in Congress and the courts. They can make huge political contributions.

But when it comes to being penalized for cheating the government, corporations quickly abandon their personhood and go back to being abstract blobs.

"I don't know about you, but if I hired a contractor to work on my house and he charged me a ton of extra money for work he didn't do, I wouldn't use that contractor again," Minnesota Sen. Al Franken said in Congress a few months ago. "And I would make sure my friends knew not to use them either. It seems like the same should be true of government contractors."

But it's not. Hardly any large companies found to be engaged in procurement fraud get banned even temporarily from doing business with the federal government, my colleague Meredith Cohn reported in Sunday's newspaper.

So it is that Columbia-based Maxim Healthcare can continue to do business with Medicaid and the Veterans Administration despite the evidence, disclosed in a federal settlement last week, that Maxim stole more than $60 million from the programs. It paid $150 million in penalties, but was not debarred.

St. Joseph Medical Center in Towson billed government and private insurers for the implantation of nearly 600 coronary-artery stents that the hospital has told patients were probably unnecessary. St. Joseph paid the government $22 million to settle the stent case and allegations that it bribed doctors to refer cardiovascular business. But it continues as a Medicare contractor in fine standing.

Then there is the lesser-known case of Peninsula Regional Medical Center in Salisbury, which agreed to pay the government $2.8 million last month to settle allegations relating to the implantation of as many as 200 unneeded stents there.

A federal jury has convicted PRMC cardiologist John R. McLean of fraud and related charges in connection with the unnecessary hardware. He hasn't been sentenced yet.

The PRMC case is especially disturbing because federal officials allege that the hospital knew of the unnecessary stents but did nothing about them. At least St. Joseph seems to have acted quickly once a patient complained that stent doctor Mark Midei might have been overdoing it. (The Maryland Board of Physicians revoked Midei's medical license in July. He has not been charged criminally and he denies wrongdoing.)

But in Salisbury there was a "failure of senior medical staff at PRMC to follow up on evidence presented to them through the complaints of staff in the cardiac catheterization laboratory about the medically unnecessary nature of the procedures that Dr. McLean was performing," U.S. Attorney Rod Rosenstein alleges in a prepared statement.

I pressed PRMC about this because, if true, it implies organizational complicity in the harming of its own patients. (PRMC did not admit liability but agreed to settle the allegations to avoid the hassle of litigation, according to the deal it signed with the Feds.)

"Senior hospital management was never made aware of the allegations against Dr. McLean," PRMC spokesman Roger Follebout said via email.

The 2009 retirement of Alan Newberry, who was PRMC's CEO while McLean and the hospital were making money on needless stents, "was a planned retirement and leadership transition that bore no relationship to these events," Follebout said.

What about Thomas Lawrence, PRMC's longtime vice president for medical affairs? Was he among the "senior medical staff" who allegedly ignored warnings about McLean?

"The vice president for medical affairs is a member of hospital administration, and as such is not a member of the senior medical staff at PRMC," Follebout said.

Well, who were the senior medical staff members? "It appears the federal government makes a collective statement about senior medical staff at PRMC and does not identify any specific member in its settlement statement," Follebout said. "We are not going to conjecture."

This does not exactly fulfill the "Transparency" part of PRMC's avowed corporate values. Nor does it give confidence that there was enough organizational accountability for what happened.

It's true that PRMC, like Maxim and St. Joseph, signed a "corporate integrity agreement" designed to prevent future abuses. But one of the best ways to stop wrongdoing is deterrence. If corporations — both for-profit and nonprofit — know they'll only get wrist-slapped for lucrative overbilling, they're more likely to give it a try.

I'm not calling for the Arthur Andersen corporate death penalty for contract fraud. Medicare and other contracting agencies must balance the needs of patients against the need to hold organizations accountable when they make debarment decisions. Banning Medicare patients from using certain hospitals could cause great inconvenience.

But if corporations breaking the rules continue to be treated so much more leniently than people breaking the rules, the shenanigans are likely to continue.

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