Following ongoing safety concerns of infections spread to patients through medical scopes at hospitals around the U.S., Toyko-based Olympus Medical Systems Corp. and one of its former executives pleaded guilty in New Jersey on Monday to failing to file required adverse events reports.
According to an announcement from the Justice Department, the Japanese company not only failed to warn proper authorities about a design flaw in the duodenoscopes— or gastrointestinal scopes— linked to the spread of a superbug infection in hospitals, but continued to sell them.
Olympus generated about $40 million in revenue and approximately $33 million in total gross profit on the duodenoscopes in the U.S.
Olympus has been ordered to pay $85 million as part of a plea agreement. Olympus also agreed to Justice Department stipulations that it to enact “extensive” compliance reforms. Executive Hisao Yabe, 62, of Japan, is scheduled to be sentenced in March and faces a maximum potential penalty of a year in prison and a $100,000 fine.
“Olympus and Yabe failed to file important FDA reports regarding adverse events,” said Rachael Honig, attorney for the United States in the District of New Jersey. “It is especially troubling that they remained quiet when they received additional information from an independent expert questioning the safety of Olympus’ device. Patient safety must always be a paramount concern for medical device companies, and these defendants simply failed to treat that concern with the gravity it deserves. Today’s resolution is a reminder that this office will act whenever patient safety is put at risk by a quest for profits.”
The case dates back to 2012 when an investigator hired by Olympus Corp.—which controls 85% of the U.S. market for gastrointestinal scopes—warned the device maker in 2012 about a design flaw in the equipment that trapped bacteria and could spread from patient to patient. They said the manufacturer ignored the investigator’s recommendation to conduct a worldwide investigation and possibly recall its equipment.
Olympus alerted European hospitals about the possibility of contamination, but it didn’t issue a warning to U.S. hospitals, its biggest market, that the scopes were linked to deadly infections in the Netherlands. The manufacturer instead blamed the hospitals for not properly cleaning the devices and didn’t tell the organizations that other U.S. hospitals reported similar problems. Each case was treated as an isolated incident.
Over the next three years, dozens of patients were sickened by the scopes in Pittsburgh, Seattle and Los Angeles, and at least 21 people died.
Federal law requires medical device manufacturers to file adverse event reports when they become aware of information that reasonably suggests one of their devices may have caused or contributed to a death or serious injury.
Olympus admitted it failed to file adverse event reports to the Food and Drug Administration in 2012 and 2013 relating to the spread of three separate infections in European hospitals, including the facility in the Netherlands and two facilities in France, connected to one of its devices. Yabe was Olympus top regulatory official at the time.
Athenahealth is asking federal regulators to create a fraud exemption that would allow doctors to pay “fair market value” for patient data, creating a business case for interoperability.
Such an approach would establish “a true functioning market for the exchange of health information,” Greg Carey, director of government and regulatory affairs at Athenahealth, wrote in a letter (PDF) to Inspector General Daniel Levinson. Carey said the payments would be “nominal.”
Responding to a request for information issued by the HHS Office of Inspector General in August seeking suggestions on how to reform the Anti-Kickback Statute and Stark Law, Carey argued that outdated fraud laws didn’t account for the value of data exchange. While other industries like finance pay for data, healthcare companies like Athenahealth are forced to shoulder the costs of secure, efficient data transfer that supports value-based care.
“It is our experience that information exchange occurs best when there is a business case and problem to solve,” Carey wrote. “We believe that new safe harbors to Stark and Anti-Kickback statute to allow for the fair market value payment for the exchange of health data will spur interoperability forward and allow the market to further realize the benefits of health IT on lowering costs and improving patient outcomes.”
Meanwhile, Cerner called on (PDF) OIG to broaden carve-outs for providers to donate EHRs and related healthcare technology that address population health management and care coordination. The company recommended that the OIG add explicit provisions to the EHR Safe Harbor to allow any risk-bearing entity in an advanced alternative payment model to donate EHRs to post-acute care providers, nursing facilities, long-term care hospitals and rehabilitation facilities.
Cybersecurity carve-out needed
Similarly, two IT groups advocated for an Anti-Kickback carve-out that would allow health systems to share cybersecurity tools with smaller providers.
Rather than modifying the existing EHR safe harbor, the College of Healthcare Information Management Executives requested (PDF) a separate exemption that would include program development, software and hardware, expertise in the wake of a cyberattack and staff time.
Cybersecurity experts have frequently pointed to this exemption as a way to get resources to smaller providers prone to attacks.
The Healthcare Sector Coordinating Council (HSCC) also threw its support behind a cybersecurity safe harbor, noting that a stronger cybersecurity posture across the industry would help facilitate the shift from volume to value by facilitating protected data exchange.
“The security of the healthcare system is only as strong as its weakest link, so it would benefit the entire healthcare industry to support the provision of cybersecurity resources outside of large health systems,” wrote (PDF) Greg Garcia, executive director for cybersecurity at HSCC. “Doing so would help to protect a community’s larger systems, as well as the affiliated small and medium-sized practices.”
The Department of Justice announced its largest healthcare fraud takedown ever, charging 601 people for falsely billing Medicare, Medicaid and the U.S. military’s TRICARE program to the tune of more than $2 billion.
The massive enforcement initiative — which spanned 58 federal districts — swept up 165 doctors, nurses and other licensed health professionals, including 76 doctors accused of prescribing and distributing opioids and other prescription painkillers.
Since last July, HHS has barred 2,700 people from participating in federal healthcare programs, including 587 providers charged with opioid diversion and abuse.
Ashlee McFarlane, former federal prosecutor and partner at Gerger Khalil Hennessy, told Healthcare Dive via email that the takedown shows DOJ “is committing significant resources to criminally prosecuting anyone who prescribes drugs or distributes opioid prescriptions outside the normal course of medical practice. … Federal authorities are sending a message about opioid drug abuse in our nation and using the hammer of criminal prosecution to combat it.”
Indeed, 162 of the 165 medical professionals nabbed in the sting were charged with opioid-related crimes. The takedown serves as a cautionary tale for providers that avoiding any suggestion of over-prescribing and diversion isn’t just good for patients’ health — it can save them costly fines, loss of government reimbursement and even jail time.
The investigations included 84 opioid cases involving more than 13 million illegal doses of opioids, according to DOJ.
Among those caught in the crackdown were 124 defendants in DOJ’s South Florida district for false claims totaling more than $337 million. One sober living facility illegally recruited patients, paid kickbacks and conducted fraudulent urine testing, billing the government more than $106 million for alleged substance abuse treatments.
In a Michigan case, a doctor paid kickbacks to two home health agency owners, resulting in more than $12 million in false insurance claims. The widespread operations were led by DOJ’s Health Care Fraud Unit in conjunction with the Medicare Fraud Strike Force, a collaboration of DOJ’s criminal division, U.S. attorney’s offices, the Federal Bureau of Investigation and HHS’ Office of Inspector General.
“These are despicable crimes,” Attorney General Jeff Sessions said in a statement. “That’s why this Department of Justice has taken historic new steps to go after fraudsters, including hiring more prosecutors and leveraging the power of data analytics.”
In fiscal year 2017, the federal government won or negotiated more than $2.4 billion in healthcare fraud judgments and settlements.
In all, the government reclaimed $2.6 billion last year, including $1.4 billion for the Medicare Trust Funds and $406.7 million in federal Medicaid money. DOJ opened 967 criminal healthcare fraud investigations and filed 439 cases involving 720 defendants. Of those, 639 were convicted.
A Missouri state audit uncovered a $90 million fraud scheme at a rural hospital in the small town of Unionville, according to a new report.
Missouri State Auditor Nicole Galloway found (PDF) that a private company hired to take over the 25-bed Putnam County Memorial Hospital when it hit a financial skid used it as a shell company to make fraudulent medical claims.
In the 10-month period covered by the audit, which ended in May, the hospital received more than $90 million in payouts for lab work and treatments that occurred at other facilities across the country, according to the report. Payments for outside laboratories were instead funneled through the hospital.
In a statement, Galloway blasted the hospital’s board, saying its members failed to review management contracts and relinquished oversight power.
“The decisions made by hospital management and the board are astounding in their irresponsibility and have the potential to negatively impact the hospital and the residents of Putnam County for years to come,” she said.
Representatives of Hospital Partners Inc., which runs the hospital, however, say that the payments are legal and help offset some of the costs it has incurred as a rural hospital. The auditor’s conclusion is a “gross mischaracterization,” according to a statement the company emailed to FierceHealthcare.
“The assignment of non-patient lab specimens has been standard practice for rural and critical access hospitals for many years,” said Mark Thomas, an attorney specializing in healthcare compliance. “The purpose of the rural/critical access exceptions is to give rural healthcare facilities a fighting chance to survive and serve their local communities.”
Thomas said the company will be reviewing the auditor’s report in full, and that it has reached out to the state attorney general to clarify its contents.
Galloway turned her findings over to local, state and federal authorities. A Putnam County prosecutor told KCUR that his office is investigating the case, while a spokeswoman for the state attorney general confirmed he is reviewing the audit report.
In addition to the insurance payouts, the audit found that Putnam County Memorial Hospital also foots the bill for 33 employees at the labs receiving the improper payments and paid $10 million in unexplained “lab management fees.”
Galloway is conducting audits at rural facilities across the state to assess their financial and operating best practices. Many rural hospitals are cash-strapped and at risk for closure; the goal of Galloway’s reports is to bolster facilities that are crucial to smaller communities.
Because the Putnam County hospital received a failing grade, it will receive a follow-up review.
Fighting healthcare fraud is a priority for the Department of Justice under the leadership of Attorney General Jeff Sessions, a department official said at a conference.
The American Bar Association hosted its annual Institute on Health Care Fraud in Fort Lauderdale, Florida, this week. Acting Assistant Attorney General Kenneth A. Blanco of the DOJ’s criminal division told the audience that Sessions has expressed to him personally his commitment to taking on healthcare fraud.
“The investigation and prosecution of healthcare fraud will continue; the department will be vigorous in its pursuit of those who violate the law in this area,” Blanco said.
Blanco highlighted two major areas for fraud prevention that the DOJ will be focusing on: opioid-related cases and Medicare Part D fraud. The DOJ’s Health Care Fraud Unit has posted Medicare Fraud Strike Forces in nine regions it determined to be “epicenters” of fraud. These groups deploy a cross-agency approach to fraud investigation and enforcement. Blanco said these teams deploy intensive data-mining tactics on investigations.
“We have the opportunity to halt schemes as they develop,” Blanco said. “This cutting-edge method has truly revolutionized how we investigate and prosecute health care fraud.”
The Trump administration also signaled a strong commitment to taking on fraud in its budget proposals, which, despite significant cuts to the Department of Health and Human Services and medical research programs, added $70 million to the Health Care Fraud and Abuse Control program (HCFAC).
Just this week, the DOJ arrested four people in an insider trading scheme based on data from the Centers for Medicare & Medicaid Services.
In July 2013, Sacred Heart Hospital closed amid accusations that both doctors and executives had been involved with unnecessary procedures and other fraud. Now, prosecutors have won a 10th conviction related to those charges, this time convicting Dr. Venkateswara Kuchipudi.
He is the fifth doctor associated with Sacred Heart convicted of defrauding Medicare and Medicaid, the Chicago Tribune explained. Specifically, prosecutors alleged that Kuchipudi was known to hospital administrators as the “king of nursing homes”, the report said, because he excelled at directing elderly patients there, even if there were better hospitals closer to where those patients lived.
Moreover, the Tribune said, Kuchipudi’s actions allowed patients with certain mental health issues to gain admission to the hospital without evaluations from emergency room doctors, therefore leading to higher Medicare billings.
The Chicago Sun-times noted that Sacred Heart’s former owner and CEO, Edward Novak, and its CFO, Roy Payaw, were among the previous convictions. The report added that Kuchipudi’s sentencing is scheduled for June 2, where he could be sentenced to five years in prison and a $250,000 fine for each of 10 counts.