She’s now a whistleblower, and she fears that may dim her employment prospects in Ohio.
It was a fear of risking her future as a nurse that in late 2006 led Herzog, of West Carrollton, and Laura Rupert, 42, now of Florida, to file a federal lawsuit alleging CareSource defrauded the state Medicaid program by failing to conduct health assessments of large numbers of special-needs children between 2001 and 2006. Herzog said she feared the steps she was told to take in her CareSource job as a telephonic queue nurse could lead to a black mark on her name with the state Board of Nursing.
“Don’t get me wrong, we felt really bad that they (children) weren’t getting the services they needed, but as nurses we could have been brought up on charges and we could have been taken before the Board of Nursing and we could have had our nursing licenses taken completely,” Herzog said.
“They could have reprimanded us. They could have made it to where we could never work with Medicaid patients again.”
CareSource agreed to a $26 million settlement of that lawsuit but admitted no wrongdoing. Through a prepared statement, Pamela Morris, CareSource’s president and CEO, vehemently defended the Medicaid managed care nonprofit, saying it acted with the utmost integrity in its dealings with the state. She declined a personal or on-the-record phone interview with the Dayton Daily News.
CareSource also claimed there was no evidence to support the lawsuit’s allegations based on an internal review and what it called an independent audit. It declined to share those documents with the newspaper.
“Despite this settlement, CareSource will remain strong and continue fulfilling its mission via our unique, not-for-profit model that allocates the largest proportion of every Medicaid dollar directly to health care services for our members,” CareSource said in a statement. “In fact, more than 90 percent of all Medicaid funds we receive on behalf of our members pay for their health and medical care.
CareSource receives per-member, per-month payments for each client it serves. It and other Medicaid contractors have incentives to provide baseline health assessments to special-needs children and other clients, said Kelly McGivern, president and CEO of the Ohio Association of Health Plans. It’s far cheaper to identify and address clients’ health care needs upfront than ignore them and risk paying for more expensive care for clients dealing with more serious and advanced conditions later on, she said.
“Most important, our members during the time in question received the care they needed,” Morris said in a statement.
‘We didn’t even think about money’
Herzog said she and Rupert didn’t quit their jobs at CareSource to become whistleblowers.
She said she literally became ill with worry upon learning information the two women were allegedly told to falsify was being submitted to the Ohio Department of Job and Family Services, which administers the state’s Medicaid program.
“Laura, we’re going to jail and losing our nursing license,” she recalls saying. “She started crying. I started crying.”
Both women, single mothers, quit their jobs in July 2005 without having new jobs lined up. “Laura and I didn’t know what to do,” Herzog said.
A couple weeks after they quit, the family member of a former co-worker advised them they should seek legal counsel to ensure they didn’t get into trouble.
That led to contact with Brian Kenney of Kenney & McCafferty in Philadelphia, who put the women in touch with Morgan Verkamp LLC of Cincinnati as co-counsel. Both firms represented the women in the federal case, filed in November 2006, partnering with the U.S. Department of Justice and the state attorney general’s office.
While offering a blanket denial of the allegations, CareSource declined to answer specific questions about them, including:
• Whether CareSource executives knew if Herzog and Rupert had approached CareSource managers with their concerns; and
• What evidence CareSource had to show that children deemed to have special health care needs were receiving the assessments paid for by the state Medicaid program.
“The case all along has been about the fact they didn’t perform assessments on these needy children that they were supposed to perform,” Assistant U.S. Attorney Andrew Malek said.
CareSource noted the Ohio Department of Job and Family Services stopped requiring reporting around screenings and assessments in 2003, before Herzog and Rupert began working there.
In the settlement CareSource agreed to pay $26 million plus interest. In addition, the company must abide by a “corporate integrity agreement” with the U.S. Department of Health and Human Services for five years. The law firms representing the whistleblowers also are still seeking to recoup more than $1.2 million in fees from CareSource in court, said their Cincinnati-based attorney, Frederick “Rick” Morgan, Jr.
While Herzog’s and Rupert’s share of the settlement is $3.1 million, 40 percent of that sum will go to the two law firms representing them. And they must pay taxes on the remainder. Morgan estimates each woman will actually pocket $384,000 over a four-year period.
“We didn’t even think about any money,” Herzog said. “We were more concerned about our livelihood.”
Efforts to toughen state law fall short
The federal government’s prosecution of fraud has been trending upward in recent years. For fiscal years 2006 to 2010, federal fraud settlements and judgments totaled $12.1 billion, according to Department of Justice data. That’s up from $7.4 billion for the years 2001 to 2005, and $4.4 billion for 1996 to 2000.
Most of that fraud has been in health and human services, with Department of Defense fraud a distant second. While enforcement has increased, so has the size of the Medicaid program, notes Fred Alverson, spokesman for the U.S. Attorney’s office for Ohio’s southern district.
Malek denied the Department of Justice has been overzealous in its enforcement in recent years. “For a defendant to say, ‘We’re being made an example of,’ is disingenuous,” he said.
Financial incentives are important to compel whistleblowers to come forward, according to Malek. But those incentives do not exist in Ohio’s law, and efforts to change the law have been unsuccessful.
In October 2007, state Rep. Jim Hughes, R-Columbus, introduced House Bill 355, which would have strengthened Ohio’s False Claims Act.
Hughes said he proposed the bill to clamp down on fraud and abuse. But opponents felt the bill would invite too much government oversight and said it was duplicative, said Hughes, now a state senator. It languished in the House and never passed.
At the time, Hughes said, Ohio was just beginning to feel the recession’s effects and wasn’t staring at a potential $8 billion budget shortfall, as it is now.
“I think this is something we need to be looking at,” Hughes said. “We need to make sure taxpayer dollars are used efficiently.”
Morgan said that in addition to lacking an incentive for whistleblowers, Ohio’s law doesn’t protect them against retaliation or let the attorney general subpoena documents and conduct examinations under oath. The Ohio attorney general’s health care fraud section confirmed Morgan’s assessment.
According to the advocacy group Taxpayers Against Fraud, 27 states and the District of Columbia have False Claims Acts with whistleblower incentives.
The federal government has rewarded states that adopt tougher anti-fraud laws by giving them a larger share of the settlements in False Claims Act cases, said Patrick Burns, a spokesman for Taxpayers Against Fraud, a nonprofit funded by whistleblower attorneys. Texas is one of the states that have been aggressive in cracking down on fraud, but Ohio has not, Burns said.
If it adopted a state law that mirrored the federal statute, Ohio could have recovered an additional $5.6 million just from the 20 largest restitution cases involving the state’s Medicaid fraud control unit from 2008 to 2010, Burns estimates.
“It’s long overdue in the state of Ohio,” he said.
Contact this reporter at (937) 225-7457 or bsutherly@DaytonDailyNews.com.
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