Whistleblower lawsuits are a growing risk
Healthcare leaders have to worry about complying with plenty of industry-specific requirements and the potential cost when a whistleblower reports malfeasance. Another risk, however, comes from the broader world of corporate fraud.
To fight corporate fraud, the federal government recently has focused on providing incentives to employee whistleblowers who identify and report allegations of fraud and other wrongdoing. The Securities and Exchange Commission (SEC) Whistleblower Program, which launched in August 2011, offers payouts of at least $100,000 to anyone that provides original information that leads to SEC financial sanctions.
Hospitals and health systems can fall prey to this incentive program, says Barbara E. Hoey, JD, a shareholder with the law firm of Littler Mendelson in New York City. Fraudulent billing and many other compliance issues can lead to false portrayals of a company's financial standing, which can in turn lead to SEC violations, she says.
With the ongoing efforts by the Department of Health and Human Services (HHS) to root out healthcare fraud, the addition of the SEC program means that healthcare providers are at more risk than ever from whistleblowers, she says.
"We keep hearing that there is a lot of fraud in the system, and they're going to go after the fraud. That's one way they're going to finance universal healthcare, by making the system more efficient," Hoey says. "One very popular way to go after fraud is to encourage whistleblowing, because if you get someone from inside the organization to blow the whistle, that is probably your best source of information."
In one of the largest whistleblower settlements in U.S. history, pharmaceutical giant GlaxoSmithKline PLC agreed in December 2011 to pay the U.S. government $3 billion to settle charges that the company defrauded Medicaid and illegally marketed the diabetes drug Avandia, as well as the anti-depressants Paxil and Wellbutrin. The settlement is largest yet in federal cases against pharmaceutical companies. The previous record was $2.3 billion, paid by Pfizer in 2009.
The number of whistleblowers involved in the case is not yet known, but if the case follows the pattern of previous whistleblower payouts, the GlaxoSmithKline insiders who reported the problem might split about 16% of the $3 billion fine $500 million as their reward. The Justice Department reports that whistleblowers were paid $2.39 billion from 1987 to 2009, or 16% of the $15.19 billion collected.
In a separate case, a single whistleblower who exposed serious contamination problems at one of GlaxoSmithKline's pharmaceutical manufacturing operations was awarded $96 million in November 2011, which is thought to be the largest amount ever handed to a U.S. whistleblower. It was awarded when the company agreed to pay the U.S. government $750 million to settle the claims, after an eight-year court fight.
Whistleblowers might not stop once they get their share of the government recovery. In many cases, the next step for the whistleblower is to sue the employer for retaliation. "Once you become a whistleblower, the employer cannot take action against you for what you have reported," Hoey says. "That means you have to be extremely careful about disciplining them. All of this together makes whistleblowers very attractive to plaintiffs' attorneys, potentially lucrative, and highly disruptive to a hospital."
To make things even worse, the provider's stockholders could sue, as was the case with Health Management Associates in Naples, FL, recently. Shareholders filed a class action in federal court claiming stock prices plummeted after it was revealed the hospital group had used Medicare fraud to inflate prices and hidden a wrongful-termination whistleblower suit by an employee who uncovered the alleged fraud.
Even the risk manager is not immune to the siren song of whistleblower rewards. Hoey says one of the most challenging cases of her career was defending a hospital that was sued by its risk manager after she blew the whistle on alleged fraud.
In light of the whistleblower risk, Hoey says is important for risk managers to position themselves as approachable and trustworthy. The goal is to get employees to come to you with their concerns rather than reporting them to an outside agency, she says. They must trust that if they bring a problem to you, you will understand it and act on their concerns, she says.
Hoey cautions that the negative publicity from a whistleblower case can be more damaging than the monetary costs, especially if the allegations involve poor patient care.
"If you don't have the trust of your doctors and nurses as the head of risk management, you're not going to be effective in your role," Hoey says. "You have to find a balance so that you're not attacking anyone involved in a bad outcome, yet you are known as someone who will act appropriately when concerns are raised."
Source
Barbara E. Hoey, JD, Shareholder, Littler Mendelson, New York City. Telephone: (212) 497-8488. Email: [email protected].
Healthcare leaders have to worry about complying with plenty of industry-specific requirements and the potential cost when a whistleblower reports malfeasance. Another risk, however, comes from the broader world of corporate fraud.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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