Amerigroup Settles

Another addition to the cavalcade of settlements, from the Virginian-Pilot,

Amerigroup Corp., which faced $334 million of damage awards and court-imposed penalties from a Medicaid fraud suit in Chicago, said Tuesday that it will pay the U.S. government and state of Illinois $225 million to settle the civil case.

As part of an agreement struck with federal and state agencies, the Virginia Beach-based health insurer said it also will pay $9 million in legal fees, but it will not admit any wrongdoing.

However, Amerigroup said it also will enter into a corporate-integrity agreement with the inspector general of the Department of Health and Human Services, the federal agency that provides part of the funding for state Medicaid programs.

The suit's plaintiffs - a former Amerigroup employee, the state of Illinois and the federal government - said in federal court in Chicago that Amerigroup and its Chicago-area health care plan defrauded state and federal agencies by discouraging pregnant women and individuals with special needs from enrolling.

During a trial in October 2006, the jury found in favor of the plaintiffs and awarded damages of $48 million. That was tripled to $144 million because the suit had been filed under state and federal 'whistle blower' statutes, which required that any damages be trebled. The judge also imposed $190 million of fraud-related penalties on the company.

We first posted about the jury's finding against Amerigroup here. At that time it was reported that "jurors saw a videotape in which one executive said he always sought out 'the healthies' when signing up patients for the HMO. Jurors also saw a number of e-mails in which company officials spoke positively about limiting the number of pregnant women enrolled."

A health insurer who tried to only insure "the healthies" defeats the purpose, doesn't it?

This case adds to the impression that many leaders of health care organizations put short-term financial gains ahead of honesty and patient welfare. Furthermore, what negative incentives for such practices currently exist do not seem to deter them. After all, a fine or settlement paid years later can just be written off as a cost of doing business. Furthermore, although such a payment may have a (minimal) effect on the company's bottom line, it has no real effect on the people whose decisions and actions lead to the problem.

A physician who does something unethical can lose his or her license and practice. An executive of a health care company who does something unethical usually suffers no penalty. In my humble opinion, one solution would be to require state licenses for executives of insurance companies and managed care organizations, as well as other health care organizations whose actions affect the public health and safety (e.g., pharmaceutical, biotechnology and device companies; hospitals, hospital systems, and academic medical centers; medical schools; etc). Such licenses could be challenged, and could be lost, given due process, for findings of unethical conduct. That might provide sufficient negative incentives to reduce the epidemic of unethical behavior by health care organizational leaders.