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Laws, liabilities, and legislation
LAWS, LIABILITIES, AND LEGISLATION Tenet Healthcare to Pay $54 Million to Settle Federal Inquiry Tenet Healthcare Corp. said it will pay $54 million to settle government allegations that unnecessary cardiac procedures and surgeries were performed at its Redding Medical Center in Redding, Calif. Neither the company nor the hospital admit wrongdoing, but the case has been one of the most serious government investigations facing the Santa Barbara, Calif., hospital chain. A federal criminal inquiry is continuing into the conduct of two heart doctors who formerly practiced at the hospital. The settlement “represents the largest recovery in the history of the U.S. Department of Justice in a case alleging lack of medical necessity,” according to the U.S. attorney’s office in Sacramento, which represented the government. However, the company still faces roughly 100 civic malpractice lawsuits brought by former Redding hospital patients, among others. Redding Medical Center was one of Tenet’s most profitable hospitals until last winter, when the director of cardiology and the chairman of the cardiacsurgery department were accused of performing an extraordinarily high number of unnecessary procedures, including open-heart surgeries and angioplasties. The allegations were made in a 69-page affidavit prepared and publicly released by the FBI. The affidavit ignited a firestorm of outrage and protest. The outcry there came amid unrelated allegations against Tenet of improper business practices, including an aggressive pricing policy that resulted in outsize payments from Medicare for treatment of its sickest patients, known as “outliers.” Tenet subsequently shut down its cardiology department in Redding. Wall Street Journal online, Aug 7, 2003
Abbott Unit Found Guilty in Liquid-Nutrient Case CG Nutritionals, an Abbott Laboratories subsidiary, pleaded guilty in late July
to a federal felony charge of obstructing a criminal investigation of fraud in the business of selling liquid nutritional products to nursing homes. The North Chicago, Ill., company agreed to pay more than $200 million in criminal fines and payments and $400 million in a civil payment to settle the multiyear federal inquiry. In the stipulation of facts, Abbott admitted that Ross Products offered upfront payments to clients, and, in the case of Southern Medical Distributors in Swansea, Ill.—which turned out to be an undercover FBI operation—called this payment a “signing” or “conversion bonus.” Documents filed with the court said Ross salespeople told Southern Medical these amounts wouldn’t have to be reported to the government as a discount. Thus, Ross “attempted to prevent and delay Medicare from determining the actual price.” The government contends these payments were illegal inducements under federal antikickback law. Although the federal judge in the case accepted the plea itself, he surprisingly did not immediately approve the terms of the plea agreement, which included the precise amount of fines. Before agreeing to the terms, Chief Judge G. Patrick Murphy said he needed to review an investigative report by the government’s probation department. He set an Oct. 27 hearing date to rule on whether he accepts those specific terms. CG Nutritionals agreed to be on probation for 5 years as part of the plea arrangement. CG is part of Abbott’s Ross Products business, which makes liquid nutrition and the pumps and tubing to administer it. Abbott in June said it had set aside $622 million to cover the cost of resolving the criminal and civil cases with the federal government and state Medicaid officials. Under a civil settlement, the company will have to abide by a corporate-integrity agreement to reform the sales and marketing practices of its tube-fed nutrition operations. CG Nutritionals also agreed to be excluded from Medicaid and Medicare
programs—something of a technicality, however, because CG is simply an Abbott manufacturing arm and never did government work. Thus, the guilty plea allows Abbott and the vast Ross division to continue its federal contracts. Wall Street Journal, July 23, 2003
California Court Upholds ‘Malicious Prosecution’ Case California’s 4th District Court of Appeals has ruled that an insurer that maliciously reported a claimant for fraud can itself by sued for malicious prosecution. Although court documents in Freddie Curtis Mosby Jr v Liberty Mutual Insurance Co do not reveal what prompted the insurer to suspect fraud, the plaintiff sued over racial allegations (he is black, and the doctor to which he was sent for evaluation is white). The ruling means that acts outside the normal claims process are not protected under workers’ compensation’s exclusive remedy clauses, and a false accusation of fraud will not be construed as a normal process element. The insurer denies wrongdoing and has appealed the case. Business Insurance, July 28, 2003
More OxyContin Cases against Purdue Pharma Dismissed Purdue Pharma LP announced in late July that six more lawsuits against the company claiming personal injuries resulting from the use of OxyContin® (oxycodone HCL controlled-release) tablets had been dismissed in the past 30 days. The actions of federal and state courts in Florida, Mississippi, and West Virginia bring to 36 the total number of dismissed cases. Purdue Pharma has paid nothing in settlement of any dismissed case, and no OxyContin cases have resulted in judgments against the company. OxyContin is an opioid agonist and a Schedule II controlled substance with an abuse liability similar to morphine. Full prescribing information is available at www.purduepharma.com/PRESSROOM/PI/ OXYCONTIN_PI.PDF and other details at www.purduepharma.com. ❑ September/October 2003
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Abbott Unit Found Guilty in Liquid-Nutrient Case CG Nutritionals, an Abbott Laboratories subsidiary, pleaded guilty in late July
to a federal felony charge of obstructing a criminal investigation of fraud in the business of selling liquid nutritional products to nursing homes. The North Chicago, Ill., company agreed to pay more than $200 million in criminal fines and payments and $400 million in a civil payment to settle the multiyear federal inquiry. In the stipulation of facts, Abbott admitted that Ross Products offered upfront payments to clients, and, in the case of Southern Medical Distributors in Swansea, Ill.—which turned out to be an undercover FBI operation—called this payment a “signing” or “conversion bonus.” Documents filed with the court said Ross salespeople told Southern Medical these amounts wouldn’t have to be reported to the government as a discount. Thus, Ross “attempted to prevent and delay Medicare from determining the actual price.” The government contends these payments were illegal inducements under federal antikickback law. Although the federal judge in the case accepted the plea itself, he surprisingly did not immediately approve the terms of the plea agreement, which included the precise amount of fines. Before agreeing to the terms, Chief Judge G. Patrick Murphy said he needed to review an investigative report by the government’s probation department. He set an Oct. 27 hearing date to rule on whether he accepts those specific terms. CG Nutritionals agreed to be on probation for 5 years as part of the plea arrangement. CG is part of Abbott’s Ross Products business, which makes liquid nutrition and the pumps and tubing to administer it. Abbott in June said it had set aside $622 million to cover the cost of resolving the criminal and civil cases with the federal government and state Medicaid officials. Under a civil settlement, the company will have to abide by a corporate-integrity agreement to reform the sales and marketing practices of its tube-fed nutrition operations. CG Nutritionals also agreed to be excluded from Medicaid and Medicare
programs—something of a technicality, however, because CG is simply an Abbott manufacturing arm and never did government work. Thus, the guilty plea allows Abbott and the vast Ross division to continue its federal contracts. Wall Street Journal, July 23, 2003
California Court Upholds ‘Malicious Prosecution’ Case California’s 4th District Court of Appeals has ruled that an insurer that maliciously reported a claimant for fraud can itself by sued for malicious prosecution. Although court documents in Freddie Curtis Mosby Jr v Liberty Mutual Insurance Co do not reveal what prompted the insurer to suspect fraud, the plaintiff sued over racial allegations (he is black, and the doctor to which he was sent for evaluation is white). The ruling means that acts outside the normal claims process are not protected under workers’ compensation’s exclusive remedy clauses, and a false accusation of fraud will not be construed as a normal process element. The insurer denies wrongdoing and has appealed the case. Business Insurance, July 28, 2003
More OxyContin Cases against Purdue Pharma Dismissed Purdue Pharma LP announced in late July that six more lawsuits against the company claiming personal injuries resulting from the use of OxyContin® (oxycodone HCL controlled-release) tablets had been dismissed in the past 30 days. The actions of federal and state courts in Florida, Mississippi, and West Virginia bring to 36 the total number of dismissed cases. Purdue Pharma has paid nothing in settlement of any dismissed case, and no OxyContin cases have resulted in judgments against the company. OxyContin is an opioid agonist and a Schedule II controlled substance with an abuse liability similar to morphine. Full prescribing information is available at www.purduepharma.com/PRESSROOM/PI/ OXYCONTIN_PI.PDF and other details at www.purduepharma.com. ❑ September/October 2003
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