Health Care Fraud & Abuse Gets First Person Account

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Health Care Fraud & Abuse Gets First Person Account

Students in the Health Care Fraud and Abuse seminar led by whistleblower attorney Bob Thomas were treated to a fascinating retrospective from a successful whistleblower, Elin Baklid-Kunz, the former employee of Halifax Hospital, which recently settled False Claims Act accusations against it for $85 million. Ms. Kunz and her attorney Marlan Wilbanks spoke to the students by telephone connection, and answered a variety of excellent questions from the students.


Having covered the most important areas of health care fraud law (the False Claims Act, the Anti-Kickback Act, the off-label/misbranding/adulteration prohibitions of the Food Drug & Cosmetic Act, and the Stark Laws) earlier in the semester, the students are being exposed in the final four weeks of the seminar to the thoughts of different participants in this dynamic field. Last week, they visited Cambridge biotech Ironwood Pharmaceuticals to hear from its chief compliance officer. Yesterday they heard from a whistleblower and her attorney (concerning a case they had studied previously in the course with respect to the Stark law). In the following two weeks, they will be hearing from two former Assistant U.S. Attorneys, who will be addressing the prosecutorial and defense perspectives.


In preparation for the class on “the whistleblower perspective,” the class read a number of articles about people who had gone through the experience, as well as a study of the collective experiences of all whistleblowers, published in the New England Journal of Medicine in December 2010. That study corroborated what most whistleblower lawyers will tell you: that the process is difficult and long, that the whistleblower must be prepared for personal and professional isolation, and that only those whose motivations are primarily principle-based (as opposed to purely monetary) will have the stomach to ride out the unpredictable turns of a False Claims Act case.


Which brings us back to Elin Baklid-Kunz. Ms. Kunz worked in finance at the Halifax Hospital in Florida. She noticed that neurosurgeons and oncologists at the hospital were being accused of conducting unnecessary medical procedures and that their compensation packages were heavily weighted towards a bonus based on number of patient referrals brought in, a highly circumspect arrangement under the Stark law. Her attempts to ascertain the legitimacy of these arrangements were not well-received, particularly by the doctors themselves, some of whom were earning close to $2 million per year. An in-house attorney at Halifax seemed to substantiate her claim, however, drafting a legal memo concluding that the Hospital was in fact violating the Stark law and that the physician bonuses could be legally challenged by the government. Discovery would later reveal that the hospital sought a second opinion (from the firm that ultimately tried unsuccessfully to defend it in court), which said that the arrangement did not violate Stark. The judge presiding over the case ruled that the hospital improperly withheld the first legal memo from the government in discovery, under the “crime-fraud exception” to the attorney-client privilege, making the opinion discoverable and presumptively admissible at trial. Needless to say, the hospital had little wiggle room at that point, and eventually cuts its losses by settling the case for $85 million (plus the tens of millions it paid its law firm, the same law firm that had issued the questionable second opinion).


Ms. Kunz reflected on the ultimate take-away from the case and her experience. She noted that when the settlement was announced internally at the company, there was great applause because the amount of the settlement was much lower than expected. None of the company management has been forced to resign or face litigation or indictment; indeed, several have been promoted and been given raises and kept their lucrative pension plans. Most disappointing, she said, is that the culture of the hospital seems not to have changed, based on what she hears from her former colleagues.


One particularly interesting side note to all of this. Ms. Kunz, who is originally from Norway, reported that her Norwegian friends, who learned of the case through media reports in that country, were astounded by two things in particular: 1) that there was such a huge discrepancy in compensation for certain types of doctors over others, related to how much business they brought in, which was quite different from how doctors are paid in Norway and elsewhere in Europe, and 2) that a whistleblower who turned out to be right would be subject to retaliation. In Norway, she was told, the emphasis would be on fixing the problem, and thus the whistleblower would be appreciated for having alerted the company to what needed to be fixed.


Equity and integrity. Not unreasonable principles from which to ground a medical practice.