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Risk from within

When compliance officers blow the whistle

Government officials and industry best practices have long been pushing hospitals and health systems to establish internal compliance departments as a way to defray legal risks and police themselves.

But recent federal lawsuits raise the question of whether people hired to look for problems may actually introduce their own risks—namely, that auditors or compliance officials could bring lawsuits alleging improprieties that they uncovered as part of their job.

Denver Health Medical Center agreed to pay $6.3 million this month to settle a False Claims Act lawsuit filed by its former auditor, JoAnne Curren. And Health Management Associates in Naples, Fla., is battling allegations in a wrongful-firing lawsuit from former compliance director Paul Meyer airing fraud allegations that the system says were protected by nondisclosure contracts and attorney-client privilege.

Last July, the 8th U.S. Circuit Court of Appeals upheld a decision to dismiss a lawsuit filed by Julie Mahony, a vice president of nursing whose responsibilities included compliance at her employer, home-health agency Universal Pediatric Services, West Des Moines, Iowa. Mahony claimed she was fired for pre-emptively blowing the whistle on a Medicaid billing scheme that would have been illegal under the False Claims Act.

“It's very challenging because we are seeing an increasing number of compliance officers becoming whistle-blowers, and they certainly have access to the information to do it,” said Arent Fox partner Linda Baumann, the immediate past chairwoman of the American Bar Association's Health Law Section.

Despite the timing of the cases, compliance officials say instances of internal reviewers trying to blow the whistle on their own employers are rare, considering that the healthcare industry employs more than 7,500 of them.

“For every compliance officer who decides to do what that former compliance officer in Florida did, there are 1,000 who are finding and fixing problems on a regular basis,” said Roy Snell, CEO of the Minneapolis-based Health Care Compliance Association. “It would be ironic for society to become frustrated with compliance officers when their track record is overwhelmingly positive.”

Snell said the compliance association teaches members to focus on resolving problems within the administrative hierarchy, even if that means taking extra time and bringing in outside information to convince a CEO that a problem exists. “What we teach is to not give up. We try and teach a lot of techniques to resolve the difference of opinion in whether or not something is a problem.”

For observers looking for precedents, the Denver Health and HMA cases present several similarities and some important differences.

The lawsuits involve similar allegations of improper conduct on the part of the systems. Curren and Meyer alleged their former employers manipulated how patients were classified as hospital inpatients as a way to boost reimbursements, since outpatients and people in observation status bring in lower rates from Medicare.

Denver Health officials declined to comment for this story. Their settlement agreement stipulates that it is not an admission of wrongdoing. A statement from the system noted that Denver Health had identified the issue as part of its internal audits and was already taking remedial action when the government expressed interest.

HMA officials, meanwhile, acknowledged in their legal answer to the lawsuit that Meyer did bring such allegations to them, but denied any wrongdoing and said the former compliance official had mischaracterized the contents of an Aug. 19, 2010 memo in which he outlined his concerns.

Another commonality in the Denver and HMA lawsuits is that both of the hospital critics were former government officials.

Curren's complaint says she worked as a financial examiner in the Colorado Division of Insurance from 1996 until 2005, when she joined Denver Health. In Florida, Meyer worked for the FBI for nearly 30 years, retiring in 2006 as the supervisor of the bureau's healthcare fraud unit in Miami in 2006. That year, Meyer started working in HMA's compliance department, becoming its director in 2010.

The two cases also have a major distinction. The Denver case was a qui tam action filed under the federal False Claims Act, and the whistle-blower, Curren, shared in the $6.3 million settlement that resolves the system's liability for the allegedly fraudulent conduct.

The HMA case, however, is filed under Florida's Private Sector whistle-blower Act, and is seeking only actual and punitive damages for what he calls his wrongful termination. That means it is not a case in which the government could intervene as a plaintiff, and Meyers' damages would be calculated based on harm to him, not losses to the government, Meyers' attorney, Eric Isicoff, confirmed.

Meyer said he was fired Sept. 6, 2011, after threatening to inform government officials about revelations he uncovered during audits of three Florida hospitals, telling management in an e-mail, “It is my intent that the right thing is done in this investigation.”

Attorneys for HMA tell a different story, alleging in a counter-lawsuit against Meyer that he was actually fired for failing to return original records that the system needed to comply with two subpoenas from HHS' office of inspector general.

Susan Toepfer, outside counsel on the case for the company, said Meyer was not fired for bringing allegations to light, but rather for insubordination related to not returning the records. In the countersuit against Meyer, the health system claimed its former compliance official also violated a nondisclosure agreement that he signed when he joined the compliance department.

Meyer responded in court records that his constitutional right to inform the government of violations of federal law supersedes tort and contract rights.

Toepfer, a shareholder in Stearns Weaver Miller Weissler Alhadeff & Sitterson, said that defense won't fly in court. “Paul Meyer was in a position where he had extensive access to confidential and privileged information, and the contract that we are suing him under required him to use that information for the benefit of his job.”

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