Posted on May 23, 2003

Famed HMO Whistleblower and Patients' Rights Ethicist Threatened with Jail


Famed HMO Whistleblower and Patients’ Rights Ethicist Threatened with Jail For Protecting Humana Insurance Insider

MAY 23, 2003, LOUISVILLE, KENTUCKY— Dr. Linda Peeno, famed HMO whistleblower, and subject of the film Damaged Care (Showtime), was under court order this week to make known the source of her knowledge about the cost of a sculpture purchased by Humana, Inc., one of the nation’s largest publicly traded health insurers. By revealing her source under duress to meet the Thursday, May 22 deadline, she avoided contempt and imprisonment for up to six months. Although the cost of the sculpture is not relevant in the legal case in which Peeno is currently an expert, a lawyer who has worked for Humana used the power of the court to acquire information about Peeno’s knowledge of the accurate cost of a piece of sculpture. Humana is not even a party to the case.

As portrayed in Damaged Care, Peeno believed the sculpture cost about a half million dollars. After the movie aired, a Humana employee informed her that the actual cost was nearly four million dollars. Peeno’s source was Clarence Jones — the brother of Humana founder and Board Chair, David Jones. After Clarence Jones revealed the cost of the sculpture in a phone call, Peeno found a document in her mail box the next morning detailing costs of some Humana art, including the sculpture in question.

In 1987, Peeno was employed by Humana as a physician advisor, a doctor responsible for approving and denying care for Humana patients. Peeno denied coverage for a heart transplant, then suffered a crisis of conscience which was magnified by seeing the installation of sculptor Giacometti’s “Tall Figure Number Two” in the rotunda of Humana’s corporate headquarters. Humana justified the denial of the heart transplant with claims that the “savings” would be reallocated into the provision of more health care for others, a position belied by the existence of the sculpture costing what she believed to be the equivalent of the “savings” from the patient’s necessary transplant. In 2002, Peeno learned that the sculpture actually cost the equivalent of eight heart transplants, or more than $3.8 million dollars.

Peeno, a physician and ethicist, had been retained for a legal case, EMP Medical Services, Inc v. Vista Healthplan, Inc. to provide expert testimony regarding the reasonableness of the termination of a contract for claims of patient harm. The law firm of Waldman, Feluren & Trigoboff, representing Vista Healthplan (whose CEO is a former Humana executive) had represented Humana in two previous cases in which Peeno provided expertise. In one case, Chipps v. Humana, featured in part in Damaged Care, Humana suffered a $78 million dollar punitive damage award. Now, Glenn Waldman and Humana have high-jacked an unrelated case as a means to force Peeno to reveal the source of her knowledge about the cost, as well produce a document which they know to confirm the cost of the sculpture.

Just a sculpture? The excessive cost of the Humana sculpture represents the extravagant, unnecessary expenditures, and fraud, consistently demonstrated throughout managed care. Some of the nation’s largest health insurance companies and hospital chains are charged, fined and penalized, repeatedly for ongoing criminal activity.

Criminality in Corporate Health Care

HealthSouth, the giant for-profit operator of rehabilitation hospitals and clinics, overstated its earnings by at least $1.4 billion from 1999 to mid-2002, and inflated the value of its assets by $800 million. Between 1999 and 2001, HealthSouth reported profits of $1.22 billion — 100 times what the SEC says was the correct amount ($12 million). Another $180 million in fraudulent profits were reported in the beginning of 2002. The firm is accused of heavily inflating profits almost back to the chain’s public launch in 1986. HealthSouth operates 209 surgery centers, 1,427 outpatient and 118 inpatient rehabilitation centers, 136 diagnostic centers, and four medical centers. The FBI raided the company’s headquarters in Birmingham on March 19. The company is also being investigated for Medicare fraud

HCA, the nation’s largest for-profit hospital chain, and Senator Bill Frist’s family-owned business, settled its Medicare fraud charges with the government for a total of $1.7 billion in criminal and civil penalties, by far the largest amount ever secured by federal prosecutors. HCA has also agreed to plead guilty to 14 felonies. These settlements end a seven-year investigation by the U.S. Justice Department of Columbia-HCA for intentionally overcharging Medicare by inflating the seriousness of diagnoses; keeping a second set of (inflated) Medicare cost reports; conspiring with the wound-care firm Curative Health Services (which operates out of HCA hospitals) to bill Medicare for management fees and marketing expenses not eligible for reimbursement; submitting claims for home care not eligible for reimbursement; “bundling” unnecessary laboratory tests not eligible for reimbursement; and kickbacks for physician referrals

Cigna will pay up to $200 million in back claims to over 600,000 physicians to settle a class-action lawsuit brought against the firm in Illinois federal court. Cigna used a software program called “Claimcheck” that reduced or eliminated payments for legitimate services. A separate class-action lawsuit is underway in Miami federal court against Cigna and seven other HMO’s for allegedly rejecting claims for necessary treatments as part of a racketeering conspiracy. Cigna will also pay $24.5 million to settle allegations of Medicare fraud at a hospital it owns (Lovelace Hospital) in New Mexico. The settlement is the largest that the Justice Department has ever reached against a single hospital.

For-profit hospital chain Tenet, formerly National Medical Enterprises (NME), is the subject of four separate federal investigations. The Justice Department is suing the Santa Barbara-based firm for up to $500 million in damages for filing false Medicare claims between 1992 and 1998, and investigating inflated “outlier” payments the firm collected from Medicare. The FBI is investigating charges of unnecessary heart surgery at one or more Tenet hospitals. The SEC is looking into the sudden drop in the company’s stock price and charges of insider trading. The Justice Department has demanded information on 19 of Tenet’s 114 hospitals, including 15 in California. Last year, Tenet agreed to pay $17 million for incorrect laboratory billing in a similar Justice Department probe. In February of this year, Tenet paid $4.15 million to settle allegations that five Florida hospitals overbilled Medicare in the mid-1990’s. These fines are on top a $9.75 million settlement for Medicare fraud at a hospital in Culver City California, and another $29 million for improper billing for home health services associated with Florida’s Palmetto General Hospital.

Wellpoint has agreed to pay $9.25 million to settle charges that its Blue Cross subsidiary in California defrauded Medicare. The company falsified audit information so that the government would believe that it audited more Medicare claims and cost reports in than it actually did.

Aetna, one of the nation’s largest health insurers, has agreed to settle a class action brought by physicians and to overhaul business practices that doctors say have shortchanged patient care. Aetna will pay $170 million, which includes a $100 million payment to the doctors in the class action suit.