A federal grand jury in Cleveland has indicted three physicians and nine other people for allegedly running a multistate Internet painkiller pill mill, the Department of Justice announced.
Terence Sasaki, MD, 37, of Jersey City, NJ; Edward Cheslow, 50, of New York City; Dora Fernandez, MD, 35, of Ponce, PR; and their accomplices were indicted on 37 criminal counts, including drug trafficking, conspiracy, money laundering, and continuing a criminal enterprise, the Department of Justice announced.
Prosecutors allege the defendants used two companies—USMeds, LLC, in Cumming, GA, and Brennan & DePaoli, Inc., dba, Delta Health, in Jacksonville, FL—to sell hundreds of thousands of prescription painkillers—primarily hydrocodone products, such as Vicodin and Lortab, and anti-anxiety alprazolam products, such as Xanax illegally, over the Internet to customers across the country, DOJ said.
The Internet customers allegedly selected the type, strength, and quantity of the drug they wanted, and the defendants conducted a brief telephone "consultation" and approved the orders. The defendants either shipped the drugs directly to the customers, or sent them a prescription to fill at a local pharmacy not associated with the drug traffickers, DOJ said.
Customers were charged greatly inflated prices (eight to 10 times retail) when the drugs were shipped to them, and they were charged an inflated "consultation" price when the defendants wrote the paper prescriptions, DOJ said.
Other defendants were identified as: James Hazelwood, 39, of Cumming, GA, described by prosecutors as the alleged ringleader in the operation; Julie Toennies, 36, of St. Louis; Audrey Barbara Rovedo, 61, of Jacksonville, FL; Vinesh Darji, 39, of Tampa; Bruce Liddy, 53, of Lakeland, FL; Helen Kann, 50, of Atlanta; Jennifer Ryan, 32, of Cumming, GA; Diego Fiorillo, 33, of Metairie, LA; and Stephen Derks, 41, of Marietta, GA.
USMeds, LLC, is Hazelwood's company. Delta Health is owned by Rovedo, DOJ said.
Trustees at Harlingen, TX-based Valley Baptist Health System and Knapp Medical Center in Weslaco, TX, have signed a memorandum of understanding to create a new nonprofit health system for the Rio Grande Valley region of South Texas.
The deal is expected to be finalized by summer, the healthcare providers said in a joint statement.
"Residents have relied on Valley Baptist Health System and Knapp Medical Center for many years for their health and well-being," said James Eastham, president/CEO of Valley Baptist, a faith-based regional health system. "By coming together to form this new health system, we would be assuring that not-for-profit health care in this area would be preserved and strengthened. We are excited about the future and think this is great news for the Valley, our patients, and our two organizations including our employees and physicians."
"In light of the current environment surrounding healthcare and reform efforts, the new system would not only benefit patients, but also the founding organizations themselves," Eastham said. "The new organization would provide residents with broader access to services and physicians, streamline business operations, and maximize community resources by avoiding duplication of costs and leverage increased buying power for non-salary items."
The new healthcare system, subject to regulatory approval, would provide both founding organizations with the operational, clinical, and contract negotiation advantages of a larger organization while allowing each to maintain its focus on its community mission, said Jim Summersett, president/CEO of Knapp Medical Center, a nonprofit community hospital.
"As a not-for-profit entity, the new system would continue to invest in people, technology and facilities to continue to improve care and maintain the high standards of quality residents have to come to expect from us," Summersett said. "We recognize the equity that each health system has with the public in terms of its name and brand recognition. So, each would continue to use its own name and operate as not-for-profit members of the new health system."
PHC Holdings of Florida, which manages Medicare Advantage plan company Physicians Health Choice of Florida, has acquired Citrus Health Care, the company announced. Financial terms of the acquisition were not disclosed.
Tampa, FL-based Citrus Health Care primarily serves about 10,000 Medicare Advantage plan members through contracts with the CMS, and about 44,000 Medicaid plan members through contracts with the Florida Agency for Health Care Administration.
Physician-own Physicians Health Choice, based in San Antonio, TX, serves more than 30 Medicare Advantage plans with nearly 30,000 members in Florida, Texas, New Mexico, and Arkansas. PHC is a subsidiary of WellMed Medical Management, Inc., which specializes in care for seniors.
Healthcare reform will have a long-term negative credit effect on not-for-profit hospitals, even though it will reduce bad debt expenses and charity care, Moody's Investors Service said in a new report.
"The key longer-term challenge for the not-for-profit hospital sector is the reform's reliance on extracting long-term cost efficiencies from hospitals, probably resulting in diminished hospital revenues," said Moody's Vice President Mark Pascaris, author of the report, Long-term Credit Challenges of Healthcare Reform Outweigh Benefits for Not-for-Profit Hospitals. "The trend will become more pronounced over time as key provisions of the law do not become effective until 2014."
Pascaris said the reform will complicate negotiations for nonprofit hospitals with private health insurers because of the federal government's increased regulatory scrutiny of insurers. Hospitals will also face reimbursement pressures from CMS because the reform squeezes savings out of existing government healthcare programs, under the new Center for Medicare and Medicaid Innovation. The reform additionally creates a Medicare bundled payment pilot program, and other payment models that will mean further cuts to Medicare/Medicaid, Pascaris said.
"Even though many of the most efficiently operated health systems will take advantage of the new opportunities to leverage economies of scale and scope to broaden their market reach and strengthen their position, healthcare reform is a long-term net negative for the not-for-profit hospital sector because it will effectively reduce revenues to hospitals,” said Pascaris.
The reform will encourage even more consolidation of the industry, as bigger health systems leverage economies of scale and have greater access to credit.
"Many not-for-profit hospitals, especially single-site and small hospital systems, may struggle," said Pascaris. "In fairness to the new law, centralization is a market force well under way, but is one that may be exacerbated by healthcare reform."
The cost of hospital services, which grew by 1.1% in March and 8.6% in the last 12 months, almost quadruple the 2.3% increase in the overall Consumer Price Index for the same period, the Bureau of Labor Statistics announced today.
A further breakdown shows that the cost of hospital inpatient services rose 1.6% in March and 9.5% for the past 12 months, while the cost of hospital outpatient services rose 0.6% in March and 7.4% for the past year. Seasonally adjusted CPI data for all urban consumers also show that the overall cost of all medical services grew by 0.3% in March and 3.8% in the last 12 months.
The rising costs of virtually every healthcare-related index have easily outstripped overall CPI for decades. "I'm sure a lot of people have different opinions on why. In my opinion, a lot of it is demand-related," says BLS economist Steve Reed.
"Healthcare has just gotten better over time. There are more drugs that work. There are more treatments that work effectively. Despite our recent economic struggles, we have gotten richer over time," Reed says. "So, if you are becoming wealthier as a society and your healthcare sector is innovating and becoming better, naturally there is more demand for healthcare and that puts upward pressure on healthcare goods."
Adding to that upward pressure, Reed says, is a lack of financial disincentives to reduce consumer demand. "When we buy healthcare, we are not paying the whole cost of what we buy so we don't face the same incentives to limit our healthcare purchases, so that affects demand," he says. "In addition, demand for a lot of healthcare is very inelastic. If you have market power and inelastic demand generally the profit-maximizing price you charge is very high."
The CPI data also show that:
The cost of physician services fell 0.1% in March, but rose 3.2% in the last 12 months.
The cost of prescription drugs rose 0.6% in March, and 4.9% in the last 12 months.
The cost of nursing home and adult day care services rose 0.3% for the month, and 2.8% for the last 12 months.
The CPI is a measure of the average change in the prices of goods and services purchased by households. CPIs are based on prices of food, clothing, shelter, fuels, transportation fares, charges for doctors' and dentists' services, drugs, and other goods and services that people routinely buy.
Prices are collected each month in 87 urban areas across the country from about 4,000 homes and approximately 25,000 retail businesses, hospitals, and other service providers.
USRC, a privately held company based in Plano, TX, will open a tender offer for all outstanding common shares of Linthicum, MD-based DCA for $11.25 per share in cash, followed by a merger to acquire all remaining outstanding DCA shares at the same cash price, which represents a premium of 72% over Tuesday's closing stock price, the two companies said in a joint media release.
"For shareholders, the transaction provides a compelling opportunity to realize the value DCA has created," said Thomas K. Langbein, chairman of the board at DCA, which unanimously approved the deal.
Directors and executives at DCA hold approximately 23% of DCA's common stock and will tender their shares into the tender offer. USRC expects the transaction to close in May.
"USRC and DCA each have built strong regional operations and this transaction permits us to build a more efficient and stronger national operation," said Chris Brengard, chairman/CEO of USRC. "DCA, like USRC, has a commitment to building joint ventures with nephrologists."
When the deal is finalized, USRC will provide dialysis services to approximately 5,500 patients through 84 outpatient dialysis facilities in nine states, more than 12 home dialysis programs, and 24 dialysis programs within acute and specialty hospital facilities. USRC now operates 47 dialysis clinics in Texas and Arkansas.
A leading primary care physicians association is warning its members that Congress, bogged down by partisan squabbling, may not be able to delay the 21.2% cuts to Medicare reimbursements that go into effect Thursday.
"The physician payment extension has been caught up in much larger issues of unemployment insurance and the federal deficit," Kevin Burke, lead lobbyist for the American Academy of Family Physicians, said in a media release. "But while Congress is mired in its partisan battles, family physicians are faced with drastically reduced payments now and administrative nightmares in the near future."
The Senate today passed a procedural hurdle on a bill that would provide a Medicare payment extension through April 30, reversing the 21.2% reduction that took effect on April 1 under the sustainable growth rate formula.
Now, Senators will begin consideration of the bill reversing the payment reduction. If Senators don't agree to shorten the allocated debate time, however, they may not vote on final passage of the bill until after Thursday's deadline, Burke said.
The physician pay cut has been an ongoing drama on Capitol Hill. The House passed the Medicare extension bill on March 17. However, the Senate failed to act on it before a two-week spring break recess on March 26. The reimbursement cut went into effect on April 1, but CMS ordered contractors to hold payments delivered after April 1 for 10 business days, or April 14, anticipating that Congress would act on the cuts before they took effect.
Burke says the bill providing the payment patch through April 30 is expected to pass, perhaps by Friday, after which Congress will debate a bill to extend the current payment rate until Oct. 1. Both the House and the Senate have passed separate extension bills, but are negotiating how to pay for it.
If Congress doesn't approve the Medicare patch until after the April 15 deadline, physicians would see one or two days of claims processed at the reduced rate. AAFP has asked CMS if it will pay the difference between the reduced claims rate and the restored rate automatically or if physicians will have to resubmit their claims. AAFP also asked for guidance on how physicians should handle copayments they may have collected since April 1.
AAFP has additionally asked CMS if the deadline for physician nonparticipation in Medicare for 2010 has passed, AAFP said.
Whistleblower lawsuits and multimillion dollar Medicare fraud settlements involving otherwise reputable hospitals and health systems are becoming standard media fodder on the Department of Justice Web site.
As is almost always the case, the accused providers that are often paying millions of dollars to the federal government to settle whistleblower suits for self-referrals, or inflated outlier charges, or whatever the gist of the suit may be, are also claiming that the settlement is not an admission of guilt.
Most claim they are paying the fines to avoid costly and interminable litigation. "The lesson to be learned really in all of these similar cases is that the government is looking for fraud and will go after providers if they think there is a problem," says Anna Grizzle, an attorney with Nashville-based Bass, Berry & Sims, PLC.
She says there will be even more enforcement actions against healthcare providers in the coming months and years because the federal government believes it can pay for some of the health reform by cracking down on fraud.
"With the expansion of the False Claims Act and the enhanced penalties under the new health reform laws, the government has demonstrated that it is serious about tracking down healthcare fraud, and with increased funding under the health reform legislation will have the money to be able to do it," Grizzle says.
Health reform requires healthcare organizations to have compliance programs. Grizzle says these programs must proactively find problems before the government or contract auditors.
"It's much better for the organization to find it, fix it, and repay any money it shouldn't have received, rather than have the government find it. And in today's era of heightened scrutiny, healthcare organizations should assume that if there is a problem the government will find it," Grizzle says.
Strong compliance programs should include robust internal and external audits, with healthcare organizations conducting their own data mining to identify systemic problems that they can correct internally.
"A good compliance program should have a strong internal audit function, where you are looking over your own claims. It also should consider periodic external audits as well on risk areas," Grizzle says.
There are several sources for finding risk areas. HHS' Office of Inspector General issues fraud alerts about potential risk areas, and other sources include RAC audits, and detailed readings of whistleblower settlements.
A good compliance program starts with strong policies and procedures and a well-trained staff that understands appropriate billing and compliance with state and federal regulations.
"As you do your own internal audits, are you seeing a pattern of mistakes being made to indicate there is vulnerability in your systems? Through your employee hotline or other complaint reporting mechanisms, are you seeing the same complaints being made?" Grizzle says. "That could be a red flag for a potential issue you might want to explore to determine if any corrective action is necessary."
Even if a hospital is guilty of an honest mistake, Grizzle says they still have to be ready to defend against allegations that the mistake is potential healthcare fraud, and defending is expensive.
"With some of the proactive data mining and analysis, the government contractors are identifying outliers in a particular geographic area," she says. "Sometimes, there are good reasons why someone is an outlier. You can defend it. But if you are identified as a target because you seem to have a high utilization rate for a particular situation, then you have to be prepared to defend why you are an outlier."
Bell, an internist, and most recently the senior vice president of HIT Services at Masspro, replaces retiring chair Mark Leavitt, MD, who led CCHIT since its inception in 2004.
"The commission has a trusted name and processes and is already well respected for its nimbleness, creativity, transparency, and inclusiveness," Bell said in a media release. "I look forward to working with the commission's staff and volunteers to build on that foundation to meet the needs of healthcare providers and consumers in this rapidly evolving health IT environment."
Before leading Masspro, the federally-contracted quality improvement organization in Massachusetts, Bell was director of the Office of HIT Adoption and acting deputy in the Office of the National Coordinator at HHS. She was ONC's representative on CCHIT's board of commissioners from 2006 to 2008. She has also served as division director for the quality improvement group, office of standards and quality at CMS, and was medical director of Blue Cross Blue Shield of Rhode Island.
"[Dr. Bell's] background as a practicing physician, as an expert in health information technology, and in quality assurance efforts in both the public and private sectors makes her uniquely qualified to head the Certification Commission," said Frank Trembulak, COO of Geisinger Health System, and chair of the CCHIT board of trustees.
For decades, not-for-profit hospitals and health systems have used defined benefits pension plans as a recruiting tool to attract quality staff, and as a means of fulfilling their stewardship role with their employees and the communities where they live.
A new report from Standard & Poor's Rating Services, Pension Funding Woes Escalate for U.S. Not-for-Profit Hospitals and Health Systems, shows that those defined-benefits plans may come under increased financial pressure in the coming years, as hospitals adjust to softer patient volumes and lower cash reserves.
"A lot of hospitals are very concerned about it because they are starting to see the volatility that you can experience with a defined benefit plan, compared with a defined contribution plan," says S&P analyst Liz Sweeney. "They are seeing that more clearly now because of what happened in the investment markets in the last 18 months."
Unlike most other sector of the economy, Sweeney says nearly all of the 615 not-for-profit hospitals and health systems that S&P speaks with offer their employees defined benefits plans. "We only identified 40 that have defined contribution only, so the vast majority are doing defined benefit plans still," she says. "Some of those plans were frozen years ago and are essentially in run off now. But they are still out there. I've been surprised through all this recessionary pressure and what happened in the investment market that more hospitals haven't abandoned their defined benefits pensions, but most of them are sticking with it."
Nevertheless, Sweeney says many hospitals also are reassessing pension plan designs and figuring out if they should make changes. "Whether that is a one-year freeze in benefit accruals or a total freeze, or do they stop allowing new employees in the defined benefits plans?" Sweeney says. "Most of them have stuck with their plans but they are all examining it and making their individual decisions."
The recession has hammered pension funds. Funding status for defined benefits plans of not-for-profit hospitals and health systems in S&P's sample fell to a median 68.6% in fiscal 2009, from 82.9% in fiscal 2008 and 90.4% in fiscal 2007. (To find that median, S&P divides the market value of a health system's assets by the projected benefit obligation, which includes actuarial calculations about length of employee service, salaries, raises, turnover, age at retirement, etc. S&P then calculates the plan sponsor's discount rate for the liability back to the present.)
Sweeney says those valuations--based on audited financial statements from June 2009–will likely improve with the economy. "The majority of the December year-ends have not completed their audits. So we expect to see a rebound as we start to see those late 2009 audits and the fiscal 2010 audits," she says. "We do think the valuations have already rebounded. You won't see them in our numbers yet, but we think they already have to some extent. We clearly aren't back to peak level, and everybody understands that."
S&P doesn't believe fluctuations in the value of pension plans significantly impact credit ratings. "It's a long-term obligation so in a lot of cases it's a drop in the bucket," Sweeney says. "The net periodic benefit cost for these plans, our median showed, was 1.1% of total expenses for a sample of 250 hospitals."
Using that 1.1% median, if a hospital's pension costs went up 20%, that would still represent only 1.3% of total expenses, Sweeney says. That's not a big number, and it probably explains why not-for-profit hospitals and health systems are sticking with defined benefits pensions.
But, it is one more cost to worry about, and Sweeney predicts a gradual move away from defined benefits. "You will see more freezes where hospitals will say: ‘No new entrants to the plan. Anyone hired after today goes into a defined contribution plan,'" she says. "We will see hospitals looking more at their asset allocations for the plans, trying to reduce volatility."
Readers, I've got a few questions for you. What adjustments, if any, have you made to your defined benefits plans to account for the recession? How important is the defined benefits plan for recruiting and retaining quality staff? Will your hospital move away from defined benefits plans and into defined contribution plans? Why are defined benefits plans so deeply entrenched with not-for-profit hospitals when they've been phased out in most other sectors of the economy?
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