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Thousands mistakenly enrolled during state’s Medicaid expansion, feds find
California signed up an estimated 450,000 people under Medicaid expansion who may not have been eligible for coverage, according to a report by the Health & Human Services’ chief watchdog.
In a Feb. 21 report, the HHS’s inspector general estimated that California spent $738.2 million on 366,078 expansion beneficiaries who were ineligible. It spent an additional $416.5 million for 79,055 expansion enrollees who were “potentially” ineligible, auditors found.
Auditors said nearly 90% of the $1.15 billion in questionable payments involved federal money, while the rest came from the state’s Medicaid program, known as Medi-Cal. They examined a 6-month period from Oct. 1, 2014, to March 31, 2015, when Medicaid payments of $6.2 billion were made related to 1.9 million newly eligible enrollees.
There were limitations to the California review, however. The audit extrapolated from a sample of 150 beneficiaries. The authors reported a 90% confidence level in their results – whereas 95% would be more common. That meant that the number of those ineligible could have been as low as 260,000 or as high as 630,000.
“If HHS has a strong reason to believe that California is systematically making enrollment errors, it would be helpful to show that in a more robust analysis,” said Ben Ippolito, a health care economist at the American Enterprise Institute, a conservative think tank. “The federal government should ensure that states are being good stewards of federal money.”
Nonetheless, the audit highlighted weaknesses in California’s Medicaid program, the largest in the nation with 13.4 million enrollees and an annual budget topping $100 billion, counting federal and state money. Medicaid covers one in three Californians.
The inspector general found deficiencies in the state’s computer system for verifying eligibility and discovered errors by caseworkers. The Medicaid payments cited in the report covered people in the state’s fee-for-service system, managed-care plans, drug treatment programs, and those receiving mental health services.
California’s Department of Health Care Services, which runs Medi-Cal, said in a statement that it agreed with nearly all of the auditors’ recommendations and that the agency “has taken steps to address all of the findings.”
In a written response to the inspector general, California officials said several computer upgrades were made after the audit period and before publication of the report that should improve the accuracy of eligibility decisions.
Among the 150 expansion enrollees analyzed in detail, 75%, or 112, were deemed eligible for the Medicaid program in California. Auditors discovered a variety of problems with the other 38 enrollees.
During the audit period, 12 enrollees in the sample group had incomes above 138% of the federal poverty level, making them ineligible financially for public assistance, according to the report.
In other instances, beneficiaries were already enrolled in Medicare, the federal health insurance for people 65 and older or who have severe disabilities, and did not qualify for Medi-Cal. One woman indicated she didn’t want Medi-Cal but was enrolled anyway.
In 2014, the state struggled to clear a massive backlog of Medi-Cal applications, which reached about 900,000 at one point. Many people complained about being mistakenly rejected for coverage or that their applications were lost in the state or county computer systems.
California was one of 31 states to expand Medicaid under the 2010 Affordable Care Act. The health law established a higher federal reimbursement for these newly eligible patients, primarily low-income adults without children. After expansion started in 2014, the HHS inspector general’s office began reviewing whether states were determining eligibility correctly and spending taxpayer dollars appropriately.
In a similar audit released in January, the inspector general estimated that New York spent $26.2 million in federal Medicaid money on 47,271 expansion enrollees who were ineligible for coverage. (The sample size there was 130 enrollees.) Overall, New York had far fewer expansion enrollees and related spending, compared with California.
Audits of other states’ records are planned
“It is inevitable that in a big rollout of new eligibility for any public program there are going to be glitches in implementation,” said Kathy Hempstead, a health-policy expert and senior adviser at the Robert Wood Johnson Foundation. “The inspector general wants to make sure that states are being sufficiently careful.”
Nationwide, Medicaid, the state-federal health insurance program designed for the poor, is the country’s largest health insurance program, covering 74 million Americans. In the past year, Republican efforts to reduce Medicaid funding and enrollment have sparked intense political debates and loud protests over the size and scope of the public program.
The federal government footed the entire cost of Medicaid expansion during the first three years, instead of taking the usual approach of splitting the costs with states. Now, states are picking up more of the bill. Their share of the costs will grow to 10 percent by 2020.
The California audit didn’t request a specific repayment from the state, but the findings were sent to the Centers for Medicare & Medicaid Services for review. CMS officials didn’t return a request for comment.
Donald White, a spokesman for the inspector general’s office, said the agency stood by the report’s findings and declined to comment further.
This story was produced by Kaiser Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation. Kaiser Health News is a nonprofit news service covering health issues. It is an editorially independent program of the Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
California signed up an estimated 450,000 people under Medicaid expansion who may not have been eligible for coverage, according to a report by the Health & Human Services’ chief watchdog.
In a Feb. 21 report, the HHS’s inspector general estimated that California spent $738.2 million on 366,078 expansion beneficiaries who were ineligible. It spent an additional $416.5 million for 79,055 expansion enrollees who were “potentially” ineligible, auditors found.
Auditors said nearly 90% of the $1.15 billion in questionable payments involved federal money, while the rest came from the state’s Medicaid program, known as Medi-Cal. They examined a 6-month period from Oct. 1, 2014, to March 31, 2015, when Medicaid payments of $6.2 billion were made related to 1.9 million newly eligible enrollees.
There were limitations to the California review, however. The audit extrapolated from a sample of 150 beneficiaries. The authors reported a 90% confidence level in their results – whereas 95% would be more common. That meant that the number of those ineligible could have been as low as 260,000 or as high as 630,000.
“If HHS has a strong reason to believe that California is systematically making enrollment errors, it would be helpful to show that in a more robust analysis,” said Ben Ippolito, a health care economist at the American Enterprise Institute, a conservative think tank. “The federal government should ensure that states are being good stewards of federal money.”
Nonetheless, the audit highlighted weaknesses in California’s Medicaid program, the largest in the nation with 13.4 million enrollees and an annual budget topping $100 billion, counting federal and state money. Medicaid covers one in three Californians.
The inspector general found deficiencies in the state’s computer system for verifying eligibility and discovered errors by caseworkers. The Medicaid payments cited in the report covered people in the state’s fee-for-service system, managed-care plans, drug treatment programs, and those receiving mental health services.
California’s Department of Health Care Services, which runs Medi-Cal, said in a statement that it agreed with nearly all of the auditors’ recommendations and that the agency “has taken steps to address all of the findings.”
In a written response to the inspector general, California officials said several computer upgrades were made after the audit period and before publication of the report that should improve the accuracy of eligibility decisions.
Among the 150 expansion enrollees analyzed in detail, 75%, or 112, were deemed eligible for the Medicaid program in California. Auditors discovered a variety of problems with the other 38 enrollees.
During the audit period, 12 enrollees in the sample group had incomes above 138% of the federal poverty level, making them ineligible financially for public assistance, according to the report.
In other instances, beneficiaries were already enrolled in Medicare, the federal health insurance for people 65 and older or who have severe disabilities, and did not qualify for Medi-Cal. One woman indicated she didn’t want Medi-Cal but was enrolled anyway.
In 2014, the state struggled to clear a massive backlog of Medi-Cal applications, which reached about 900,000 at one point. Many people complained about being mistakenly rejected for coverage or that their applications were lost in the state or county computer systems.
California was one of 31 states to expand Medicaid under the 2010 Affordable Care Act. The health law established a higher federal reimbursement for these newly eligible patients, primarily low-income adults without children. After expansion started in 2014, the HHS inspector general’s office began reviewing whether states were determining eligibility correctly and spending taxpayer dollars appropriately.
In a similar audit released in January, the inspector general estimated that New York spent $26.2 million in federal Medicaid money on 47,271 expansion enrollees who were ineligible for coverage. (The sample size there was 130 enrollees.) Overall, New York had far fewer expansion enrollees and related spending, compared with California.
Audits of other states’ records are planned
“It is inevitable that in a big rollout of new eligibility for any public program there are going to be glitches in implementation,” said Kathy Hempstead, a health-policy expert and senior adviser at the Robert Wood Johnson Foundation. “The inspector general wants to make sure that states are being sufficiently careful.”
Nationwide, Medicaid, the state-federal health insurance program designed for the poor, is the country’s largest health insurance program, covering 74 million Americans. In the past year, Republican efforts to reduce Medicaid funding and enrollment have sparked intense political debates and loud protests over the size and scope of the public program.
The federal government footed the entire cost of Medicaid expansion during the first three years, instead of taking the usual approach of splitting the costs with states. Now, states are picking up more of the bill. Their share of the costs will grow to 10 percent by 2020.
The California audit didn’t request a specific repayment from the state, but the findings were sent to the Centers for Medicare & Medicaid Services for review. CMS officials didn’t return a request for comment.
Donald White, a spokesman for the inspector general’s office, said the agency stood by the report’s findings and declined to comment further.
This story was produced by Kaiser Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation. Kaiser Health News is a nonprofit news service covering health issues. It is an editorially independent program of the Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
California signed up an estimated 450,000 people under Medicaid expansion who may not have been eligible for coverage, according to a report by the Health & Human Services’ chief watchdog.
In a Feb. 21 report, the HHS’s inspector general estimated that California spent $738.2 million on 366,078 expansion beneficiaries who were ineligible. It spent an additional $416.5 million for 79,055 expansion enrollees who were “potentially” ineligible, auditors found.
Auditors said nearly 90% of the $1.15 billion in questionable payments involved federal money, while the rest came from the state’s Medicaid program, known as Medi-Cal. They examined a 6-month period from Oct. 1, 2014, to March 31, 2015, when Medicaid payments of $6.2 billion were made related to 1.9 million newly eligible enrollees.
There were limitations to the California review, however. The audit extrapolated from a sample of 150 beneficiaries. The authors reported a 90% confidence level in their results – whereas 95% would be more common. That meant that the number of those ineligible could have been as low as 260,000 or as high as 630,000.
“If HHS has a strong reason to believe that California is systematically making enrollment errors, it would be helpful to show that in a more robust analysis,” said Ben Ippolito, a health care economist at the American Enterprise Institute, a conservative think tank. “The federal government should ensure that states are being good stewards of federal money.”
Nonetheless, the audit highlighted weaknesses in California’s Medicaid program, the largest in the nation with 13.4 million enrollees and an annual budget topping $100 billion, counting federal and state money. Medicaid covers one in three Californians.
The inspector general found deficiencies in the state’s computer system for verifying eligibility and discovered errors by caseworkers. The Medicaid payments cited in the report covered people in the state’s fee-for-service system, managed-care plans, drug treatment programs, and those receiving mental health services.
California’s Department of Health Care Services, which runs Medi-Cal, said in a statement that it agreed with nearly all of the auditors’ recommendations and that the agency “has taken steps to address all of the findings.”
In a written response to the inspector general, California officials said several computer upgrades were made after the audit period and before publication of the report that should improve the accuracy of eligibility decisions.
Among the 150 expansion enrollees analyzed in detail, 75%, or 112, were deemed eligible for the Medicaid program in California. Auditors discovered a variety of problems with the other 38 enrollees.
During the audit period, 12 enrollees in the sample group had incomes above 138% of the federal poverty level, making them ineligible financially for public assistance, according to the report.
In other instances, beneficiaries were already enrolled in Medicare, the federal health insurance for people 65 and older or who have severe disabilities, and did not qualify for Medi-Cal. One woman indicated she didn’t want Medi-Cal but was enrolled anyway.
In 2014, the state struggled to clear a massive backlog of Medi-Cal applications, which reached about 900,000 at one point. Many people complained about being mistakenly rejected for coverage or that their applications were lost in the state or county computer systems.
California was one of 31 states to expand Medicaid under the 2010 Affordable Care Act. The health law established a higher federal reimbursement for these newly eligible patients, primarily low-income adults without children. After expansion started in 2014, the HHS inspector general’s office began reviewing whether states were determining eligibility correctly and spending taxpayer dollars appropriately.
In a similar audit released in January, the inspector general estimated that New York spent $26.2 million in federal Medicaid money on 47,271 expansion enrollees who were ineligible for coverage. (The sample size there was 130 enrollees.) Overall, New York had far fewer expansion enrollees and related spending, compared with California.
Audits of other states’ records are planned
“It is inevitable that in a big rollout of new eligibility for any public program there are going to be glitches in implementation,” said Kathy Hempstead, a health-policy expert and senior adviser at the Robert Wood Johnson Foundation. “The inspector general wants to make sure that states are being sufficiently careful.”
Nationwide, Medicaid, the state-federal health insurance program designed for the poor, is the country’s largest health insurance program, covering 74 million Americans. In the past year, Republican efforts to reduce Medicaid funding and enrollment have sparked intense political debates and loud protests over the size and scope of the public program.
The federal government footed the entire cost of Medicaid expansion during the first three years, instead of taking the usual approach of splitting the costs with states. Now, states are picking up more of the bill. Their share of the costs will grow to 10 percent by 2020.
The California audit didn’t request a specific repayment from the state, but the findings were sent to the Centers for Medicare & Medicaid Services for review. CMS officials didn’t return a request for comment.
Donald White, a spokesman for the inspector general’s office, said the agency stood by the report’s findings and declined to comment further.
This story was produced by Kaiser Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation. Kaiser Health News is a nonprofit news service covering health issues. It is an editorially independent program of the Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
One GOP plan says states that like their Obamacare can keep it
Some states could keep their federally funded insurance exchange with consumer protections intact under a proposal unveiled Monday by two Republican U.S. senators.
Sen. Bill Cassidy (R-La.) and Sen. Susan Collins (R-Maine) said their proposed legislation would allow states that embraced the Affordable Care Act to keep operating under many of the current federal rules.
Another option is for states to pursue a less-regulated alternative to Obamacare under the Patient Freedom Act. Or they could reject federal dollars completely in favor of a new state solution for health coverage.
“We give states the option,” Sen. Cassidy said at press conference Jan. 23.
Some health law supporters say the Cassidy-Collins proposal, one of several in the GOP-controlled Congress, could represent a lifeline for states such as California that have invested heavily in expanding coverage under the ACA.
But many Democrats at the state and national level criticized the plan as potentially harmful to millions of Americans who rely on the health law because it does not promise sufficient funding and consumer protections.
“It provides a somewhat illusory option to stay in the ACA without the guarantee of federal assistance necessary to allow states to maintain the level of coverage they are currently providing,” California Insurance Commissioner Dave Jones, an elected Democrat, said in an interview.
California fully implemented the health law by expanding Medicaid coverage to millions of low-income people and creating its own insurance exchange, which ultimately covered 1.3 million enrollees. Supporters have held the state up as proof that the health law can work as intended – and as a counterpoint to Republican contentions that Obamacare is collapsing nationally.
Sen. Cassidy said his legislation promotes the Republican doctrine of states’ rights while avoiding the one-size-fits-all approach from Washington.
Sen. Collins echoed that sentiment, saying she favors letting states that had success with the health law maintain the status quo. She described it as “reimplementation of the ACA” in those states.
“If a state chooses to remain covered by the ACA, exchange policies will continue to be eligible for cost-sharing subsidies and advance premium tax credits,” she said in a Senate floor speech Jan. 23. “The insurance market will still be subject to ACA requirements, and the individual mandate and employer mandate will also remain in place in that state.”
Sen. Cassidy and Sen. Collins acknowledged that details of their bill haven’t been worked out, nor is it clear how it will mesh with other proposals. Competing plans in Congress don’t envision these state options, and it’s unclear what approach President Donald Trump and his nascent administration will take in crafting a replacement plan.
Still, some industry experts and analysts say the Cassidy-Collins proposal is intriguing.
“The advantage to a state like California is we could protect what we have accomplished already,” said Howard Kahn, former chief executive of L.A. Care Health Plan, an insurer on the Covered California exchange. The large managed care plan serves patients in Medi-Cal, the state’s Medicaid program.
“Cassidy’s proposal could work for California better than other alternatives in the short term. The question is whether they maintain federal funding for the longer term,” Mr. Kahn said. “My feeling is you do have to engage with the rational Republicans who are trying to find something that doesn’t tear it all apart.”
Federal funding is a key issue for states. In a summary of the bill posted by Sen. Collins, it said states choosing to retain Obamacare or pick the Republican alternative could receive “funding equal to 95% of federal premium tax credits and cost-sharing subsidies, as well as the federal match for Medicaid expansion.”
Dylan H. Roby, of the department of health services administration at the University of Maryland School of Public Health, College Park, said “California would still have to absorb a 5% cut, at least, in the premium tax credits and cost-sharing subsidies.”
Republicans will need 60 votes in the U.S. Senate to pass a full replacement for the ACA. Sen. Cassidy said his compromise approach is designed to win over some Democrats and reach that 60-vote majority.
In her speech on the Senate floor, Sen. Collins said children could still stay on their parents’ health plans until they are 26 years old. There would be no discrimination against preexisting conditions and no caps on annual or lifetime coverage, she said.
Other key features of the legislation include a provision allowing states to automatically enroll eligible people in health plans unless they opt out. The plan also promotes health savings accounts and price transparency requiring hospitals and other providers to disclose costs so consumers can shop around for the best price.
This story was produced by Kaiser Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.
Some states could keep their federally funded insurance exchange with consumer protections intact under a proposal unveiled Monday by two Republican U.S. senators.
Sen. Bill Cassidy (R-La.) and Sen. Susan Collins (R-Maine) said their proposed legislation would allow states that embraced the Affordable Care Act to keep operating under many of the current federal rules.
Another option is for states to pursue a less-regulated alternative to Obamacare under the Patient Freedom Act. Or they could reject federal dollars completely in favor of a new state solution for health coverage.
“We give states the option,” Sen. Cassidy said at press conference Jan. 23.
Some health law supporters say the Cassidy-Collins proposal, one of several in the GOP-controlled Congress, could represent a lifeline for states such as California that have invested heavily in expanding coverage under the ACA.
But many Democrats at the state and national level criticized the plan as potentially harmful to millions of Americans who rely on the health law because it does not promise sufficient funding and consumer protections.
“It provides a somewhat illusory option to stay in the ACA without the guarantee of federal assistance necessary to allow states to maintain the level of coverage they are currently providing,” California Insurance Commissioner Dave Jones, an elected Democrat, said in an interview.
California fully implemented the health law by expanding Medicaid coverage to millions of low-income people and creating its own insurance exchange, which ultimately covered 1.3 million enrollees. Supporters have held the state up as proof that the health law can work as intended – and as a counterpoint to Republican contentions that Obamacare is collapsing nationally.
Sen. Cassidy said his legislation promotes the Republican doctrine of states’ rights while avoiding the one-size-fits-all approach from Washington.
Sen. Collins echoed that sentiment, saying she favors letting states that had success with the health law maintain the status quo. She described it as “reimplementation of the ACA” in those states.
“If a state chooses to remain covered by the ACA, exchange policies will continue to be eligible for cost-sharing subsidies and advance premium tax credits,” she said in a Senate floor speech Jan. 23. “The insurance market will still be subject to ACA requirements, and the individual mandate and employer mandate will also remain in place in that state.”
Sen. Cassidy and Sen. Collins acknowledged that details of their bill haven’t been worked out, nor is it clear how it will mesh with other proposals. Competing plans in Congress don’t envision these state options, and it’s unclear what approach President Donald Trump and his nascent administration will take in crafting a replacement plan.
Still, some industry experts and analysts say the Cassidy-Collins proposal is intriguing.
“The advantage to a state like California is we could protect what we have accomplished already,” said Howard Kahn, former chief executive of L.A. Care Health Plan, an insurer on the Covered California exchange. The large managed care plan serves patients in Medi-Cal, the state’s Medicaid program.
“Cassidy’s proposal could work for California better than other alternatives in the short term. The question is whether they maintain federal funding for the longer term,” Mr. Kahn said. “My feeling is you do have to engage with the rational Republicans who are trying to find something that doesn’t tear it all apart.”
Federal funding is a key issue for states. In a summary of the bill posted by Sen. Collins, it said states choosing to retain Obamacare or pick the Republican alternative could receive “funding equal to 95% of federal premium tax credits and cost-sharing subsidies, as well as the federal match for Medicaid expansion.”
Dylan H. Roby, of the department of health services administration at the University of Maryland School of Public Health, College Park, said “California would still have to absorb a 5% cut, at least, in the premium tax credits and cost-sharing subsidies.”
Republicans will need 60 votes in the U.S. Senate to pass a full replacement for the ACA. Sen. Cassidy said his compromise approach is designed to win over some Democrats and reach that 60-vote majority.
In her speech on the Senate floor, Sen. Collins said children could still stay on their parents’ health plans until they are 26 years old. There would be no discrimination against preexisting conditions and no caps on annual or lifetime coverage, she said.
Other key features of the legislation include a provision allowing states to automatically enroll eligible people in health plans unless they opt out. The plan also promotes health savings accounts and price transparency requiring hospitals and other providers to disclose costs so consumers can shop around for the best price.
This story was produced by Kaiser Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.
Some states could keep their federally funded insurance exchange with consumer protections intact under a proposal unveiled Monday by two Republican U.S. senators.
Sen. Bill Cassidy (R-La.) and Sen. Susan Collins (R-Maine) said their proposed legislation would allow states that embraced the Affordable Care Act to keep operating under many of the current federal rules.
Another option is for states to pursue a less-regulated alternative to Obamacare under the Patient Freedom Act. Or they could reject federal dollars completely in favor of a new state solution for health coverage.
“We give states the option,” Sen. Cassidy said at press conference Jan. 23.
Some health law supporters say the Cassidy-Collins proposal, one of several in the GOP-controlled Congress, could represent a lifeline for states such as California that have invested heavily in expanding coverage under the ACA.
But many Democrats at the state and national level criticized the plan as potentially harmful to millions of Americans who rely on the health law because it does not promise sufficient funding and consumer protections.
“It provides a somewhat illusory option to stay in the ACA without the guarantee of federal assistance necessary to allow states to maintain the level of coverage they are currently providing,” California Insurance Commissioner Dave Jones, an elected Democrat, said in an interview.
California fully implemented the health law by expanding Medicaid coverage to millions of low-income people and creating its own insurance exchange, which ultimately covered 1.3 million enrollees. Supporters have held the state up as proof that the health law can work as intended – and as a counterpoint to Republican contentions that Obamacare is collapsing nationally.
Sen. Cassidy said his legislation promotes the Republican doctrine of states’ rights while avoiding the one-size-fits-all approach from Washington.
Sen. Collins echoed that sentiment, saying she favors letting states that had success with the health law maintain the status quo. She described it as “reimplementation of the ACA” in those states.
“If a state chooses to remain covered by the ACA, exchange policies will continue to be eligible for cost-sharing subsidies and advance premium tax credits,” she said in a Senate floor speech Jan. 23. “The insurance market will still be subject to ACA requirements, and the individual mandate and employer mandate will also remain in place in that state.”
Sen. Cassidy and Sen. Collins acknowledged that details of their bill haven’t been worked out, nor is it clear how it will mesh with other proposals. Competing plans in Congress don’t envision these state options, and it’s unclear what approach President Donald Trump and his nascent administration will take in crafting a replacement plan.
Still, some industry experts and analysts say the Cassidy-Collins proposal is intriguing.
“The advantage to a state like California is we could protect what we have accomplished already,” said Howard Kahn, former chief executive of L.A. Care Health Plan, an insurer on the Covered California exchange. The large managed care plan serves patients in Medi-Cal, the state’s Medicaid program.
“Cassidy’s proposal could work for California better than other alternatives in the short term. The question is whether they maintain federal funding for the longer term,” Mr. Kahn said. “My feeling is you do have to engage with the rational Republicans who are trying to find something that doesn’t tear it all apart.”
Federal funding is a key issue for states. In a summary of the bill posted by Sen. Collins, it said states choosing to retain Obamacare or pick the Republican alternative could receive “funding equal to 95% of federal premium tax credits and cost-sharing subsidies, as well as the federal match for Medicaid expansion.”
Dylan H. Roby, of the department of health services administration at the University of Maryland School of Public Health, College Park, said “California would still have to absorb a 5% cut, at least, in the premium tax credits and cost-sharing subsidies.”
Republicans will need 60 votes in the U.S. Senate to pass a full replacement for the ACA. Sen. Cassidy said his compromise approach is designed to win over some Democrats and reach that 60-vote majority.
In her speech on the Senate floor, Sen. Collins said children could still stay on their parents’ health plans until they are 26 years old. There would be no discrimination against preexisting conditions and no caps on annual or lifetime coverage, she said.
Other key features of the legislation include a provision allowing states to automatically enroll eligible people in health plans unless they opt out. The plan also promotes health savings accounts and price transparency requiring hospitals and other providers to disclose costs so consumers can shop around for the best price.
This story was produced by Kaiser Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.
Device maker Olympus hiked prices for scopes as superbug infections spread
Soon after doctors at UCLA’s Ronald Reagan Medical Center traced deadly infections to tainted medical scopes last year, they pressed the device maker to lend them replacements.
But Olympus Corp. refused. Instead, the Tokyo company offered to sell UCLA 35 new scopes for $1.2 million – a 28% increase in price from what it charged the university just months earlier, according to university emails obtained from a public-records request.
Olympus sales manager Vincent Hernandez told UCLA that the company’s previous discounts no longer applied. “Supplies are already low, where demand is high with all academic institutions expanding their inventories,” Mr. Hernandez wrote to the medical center.
The emails show how Olympus continued to push sales even as the devices it previously sold to UCLA and other medical institutions were linked to illnesses and deaths.
The messages also mark a sharp departure from what had been a close, mutually beneficial relationship between the giant device manufacturer and one of the country’s most prestigious academic medical centers.
Once the outbreak was confirmed in late January 2015, UCLA urgently needed replacement scopes to safely perform gastrointestinal procedures, in which the duodenoscopes were snaked down a patient’s throat.
In response to the outbreaks and government warnings last year, many medical centers rushed to adopt new cleaning measures. That left them with fewer of the reusable scopes on hand, so they felt compelled to buy more.
Ultimately, three UCLA patients died and five more were sickened from October 2014 to January 2015 by drug-resistant bacteria trapped inside the Olympus scopes. Only in January of this year did the company agree to recall its duodenoscopes and repair them over the coming months to cut the risk of bacteria passing to the next patient.
Previously, the emails show, UCLA and Olympus collaborated closely: At least one top doctor at UCLA asked for money from the company to hold a medical conference. The company’s employees were allowed to observe medical procedures.
On Jan. 7, 2015, 3 weeks before the outbreak at UCLA was confirmed, Dr. Raman Muthusamy, the director of endoscopy at UCLA, asked Olympus to contribute more money for an upcoming medical conference at a Beverly Hills hotel: “Quick question: Who do I speak to about sponsorship from Olympus to the Mellinkoff symposium,” Dr. Muthusamy wrote to Mr. Hernandez and another Olympus employee. “Last year, Olympus gave $18,000 – this year only $10K. Given our increasing collaborations thought it should at least stay the same.”
Later, on Jan. 23, 2015, Olympus salesman Richard Ramirez sent an email thanking a UCLA doctor for allowing him and another company representative “to sit in on a few of your cases yesterday.”
At the doctor’s request, Mr. Ramirez provided some “special contracted pricing information” on scope-related accessories.
The outbreak was confirmed Jan. 28, and the solicitousness appeared to end on both sides. Rebuffed in their request for replacement scopes, UCLA officials struggled to grasp Olympus’ sharp increase in price.
“Last February [2014] when we were acquiring the 7 new TJF‐Q180V scopes we have today, the price was $26,200.98 and our new quote is $33,470.15 [per] scope which is an increase of 28 percent,” Randi Hissom, a business operations director at UCLA Health System, wrote to Mr. Hernandez in a Feb. 10, 2015, email.
Mr. Hernandez advised her that the university could earn a discount if it ordered more scopes. He also warned that “with the number of scopes being requested, it is possible that we could go on a back order.”
On Feb. 23, 4 days after the Food and Drug Administration issued a safety alert about the scopes to all U.S. hospitals, Mr. Hernandez chastised two UCLA doctors for failing to purchase the amount of equipment specified in their contract with Olympus.
The company’s salespeople “continued to run into a wall with acquiring orders … I would like to arrange a meeting with you soon to further review and discuss the compliance of the contract,” Mr. Hernandez wrote in a Feb. 23, 2015, email.
The sudden demand for gastrointestinal scopes triggered an unexpected windfall for Olympus, the leading supplier in the United States and worldwide.
Olympus executives boasted in February about the company’s “record-breaking” performance, driven by a 13% increase in scope sales for the 9 months that ended Dec. 31. The company’s profit soared 34% to $352 million for the same period.
Rep. Ted Lieu (D-Calif.) said the emails with UCLA show that Olympus sought to profit from a crisis that it created. In a letter to the company last year, he asked Olympus to donate scopes to hospitals or forgo profits from the sale of additional devices.
“What Olympus did was outrageous,” Rep. Lieu said in a recent interview. “They jacked up the prices and made even more money off their defective scopes and then bragged about it. Have they no shame?”
Olympus spokesman Mark Miller said the emails with UCLA “represent standard business discussions within Olympus and between company personnel and customers.”
He attributed Olympus’ recent financial gains to the overall strength of the business.
“Olympus launched several new products for medical and surgical specialties during the last 12 months that were all well-received by the market and contribute to our results,” he said.
UCLA’s Dr. Muthusamy didn’t respond to a request for comment. Nor did Olympus salesmen Mr. Hernandez and Mr. Ramirez.
UCLA continues to use Olympus equipment. But after the company’s response to the outbreak it eventually turned to a rival manufacturer, Pentax Medical, for more scopes.
“Ronald Reagan UCLA Medical Center ordered additional scopes from Pentax in order to ensure that we had sufficient scopes to perform the necessary procedures for our patients,” said Enrique Rivero, a university spokesman. “Pentax was able to quickly provide a sufficient quantity of scopes in a timely manner, allowing us to clear our backlog of patients.”
Mr. Rivero said Dr. Muthusamy’s request for more symposium support, and Olympus’ $10,000 donation to the March 2015 gastroenterology conference, were in keeping with university policy.
Olympus recently ran afoul of federal law in regard to its sales practices companywide. This month, the device manufacturer agreed to pay a record $646-million settlement to end federal government investigations into illegal kickbacks and bribery in the United States and Latin America.
The company had courted prominent doctors and hospitals for years with millions of dollars of free equipment, cash payments, trips, and entertainment such as winery tours and balloon rides in violation of U.S. law, according to federal prosecutors. No specific institutions or hospitals were named in the federal criminal complaint filed March 1, and the practices were not confined to scopes.
“Olympus leadership acknowledges the company’s responsibility for the past conduct, which does not represent the values of Olympus or its employees,” Nacho Abia, chief executive of the Olympus Corp. of the Americas unit in Center Valley, Pa., said in a statement this month after the settlement.
Meanwhile, the deterioration in the company’s relationship with UCLA continues. Several UCLA patients or their families have sued Olympus over the infections there. Olympus responded to one of the first wrongful death cases by blaming UCLA for the outbreak.
In a Feb. 1 filing in Los Angeles federal court, Olympus said UCLA failed to clean its scopes according to the company’s protocols and to obtain available training from Olympus.
In interviews, UCLA doctors have said Olympus employees didn’t raise those concerns when they visited the hospital after the outbreak was discovered. The FDA has said infections occurred even when hospitals followed the manufacturer’s instructions.
UCLA and Olympus said they won’t comment on the pending litigation.
A recent Senate investigation linked Olympus to 19 superbug outbreaks in the U.S. and Europe from 2012 to 2015, including at UCLA and Cedars-Sinai Medical Center. The report also criticized the company for failing to alert U.S. regulators and hospitals sooner about the risk of infection from its scope design.
Federal prosecutors are investigating Olympus and two other device manufacturers – Pentax and Fujifilm – over their role in the outbreaks.
This article was originally published by Kaiser Health News, a national health policy news service that is part of the nonpartisan Henry J. Kaiser Family Foundation. Melody Petersen is a staff writer at the Los Angeles Times. Her email address is [email protected].
Soon after doctors at UCLA’s Ronald Reagan Medical Center traced deadly infections to tainted medical scopes last year, they pressed the device maker to lend them replacements.
But Olympus Corp. refused. Instead, the Tokyo company offered to sell UCLA 35 new scopes for $1.2 million – a 28% increase in price from what it charged the university just months earlier, according to university emails obtained from a public-records request.
Olympus sales manager Vincent Hernandez told UCLA that the company’s previous discounts no longer applied. “Supplies are already low, where demand is high with all academic institutions expanding their inventories,” Mr. Hernandez wrote to the medical center.
The emails show how Olympus continued to push sales even as the devices it previously sold to UCLA and other medical institutions were linked to illnesses and deaths.
The messages also mark a sharp departure from what had been a close, mutually beneficial relationship between the giant device manufacturer and one of the country’s most prestigious academic medical centers.
Once the outbreak was confirmed in late January 2015, UCLA urgently needed replacement scopes to safely perform gastrointestinal procedures, in which the duodenoscopes were snaked down a patient’s throat.
In response to the outbreaks and government warnings last year, many medical centers rushed to adopt new cleaning measures. That left them with fewer of the reusable scopes on hand, so they felt compelled to buy more.
Ultimately, three UCLA patients died and five more were sickened from October 2014 to January 2015 by drug-resistant bacteria trapped inside the Olympus scopes. Only in January of this year did the company agree to recall its duodenoscopes and repair them over the coming months to cut the risk of bacteria passing to the next patient.
Previously, the emails show, UCLA and Olympus collaborated closely: At least one top doctor at UCLA asked for money from the company to hold a medical conference. The company’s employees were allowed to observe medical procedures.
On Jan. 7, 2015, 3 weeks before the outbreak at UCLA was confirmed, Dr. Raman Muthusamy, the director of endoscopy at UCLA, asked Olympus to contribute more money for an upcoming medical conference at a Beverly Hills hotel: “Quick question: Who do I speak to about sponsorship from Olympus to the Mellinkoff symposium,” Dr. Muthusamy wrote to Mr. Hernandez and another Olympus employee. “Last year, Olympus gave $18,000 – this year only $10K. Given our increasing collaborations thought it should at least stay the same.”
Later, on Jan. 23, 2015, Olympus salesman Richard Ramirez sent an email thanking a UCLA doctor for allowing him and another company representative “to sit in on a few of your cases yesterday.”
At the doctor’s request, Mr. Ramirez provided some “special contracted pricing information” on scope-related accessories.
The outbreak was confirmed Jan. 28, and the solicitousness appeared to end on both sides. Rebuffed in their request for replacement scopes, UCLA officials struggled to grasp Olympus’ sharp increase in price.
“Last February [2014] when we were acquiring the 7 new TJF‐Q180V scopes we have today, the price was $26,200.98 and our new quote is $33,470.15 [per] scope which is an increase of 28 percent,” Randi Hissom, a business operations director at UCLA Health System, wrote to Mr. Hernandez in a Feb. 10, 2015, email.
Mr. Hernandez advised her that the university could earn a discount if it ordered more scopes. He also warned that “with the number of scopes being requested, it is possible that we could go on a back order.”
On Feb. 23, 4 days after the Food and Drug Administration issued a safety alert about the scopes to all U.S. hospitals, Mr. Hernandez chastised two UCLA doctors for failing to purchase the amount of equipment specified in their contract with Olympus.
The company’s salespeople “continued to run into a wall with acquiring orders … I would like to arrange a meeting with you soon to further review and discuss the compliance of the contract,” Mr. Hernandez wrote in a Feb. 23, 2015, email.
The sudden demand for gastrointestinal scopes triggered an unexpected windfall for Olympus, the leading supplier in the United States and worldwide.
Olympus executives boasted in February about the company’s “record-breaking” performance, driven by a 13% increase in scope sales for the 9 months that ended Dec. 31. The company’s profit soared 34% to $352 million for the same period.
Rep. Ted Lieu (D-Calif.) said the emails with UCLA show that Olympus sought to profit from a crisis that it created. In a letter to the company last year, he asked Olympus to donate scopes to hospitals or forgo profits from the sale of additional devices.
“What Olympus did was outrageous,” Rep. Lieu said in a recent interview. “They jacked up the prices and made even more money off their defective scopes and then bragged about it. Have they no shame?”
Olympus spokesman Mark Miller said the emails with UCLA “represent standard business discussions within Olympus and between company personnel and customers.”
He attributed Olympus’ recent financial gains to the overall strength of the business.
“Olympus launched several new products for medical and surgical specialties during the last 12 months that were all well-received by the market and contribute to our results,” he said.
UCLA’s Dr. Muthusamy didn’t respond to a request for comment. Nor did Olympus salesmen Mr. Hernandez and Mr. Ramirez.
UCLA continues to use Olympus equipment. But after the company’s response to the outbreak it eventually turned to a rival manufacturer, Pentax Medical, for more scopes.
“Ronald Reagan UCLA Medical Center ordered additional scopes from Pentax in order to ensure that we had sufficient scopes to perform the necessary procedures for our patients,” said Enrique Rivero, a university spokesman. “Pentax was able to quickly provide a sufficient quantity of scopes in a timely manner, allowing us to clear our backlog of patients.”
Mr. Rivero said Dr. Muthusamy’s request for more symposium support, and Olympus’ $10,000 donation to the March 2015 gastroenterology conference, were in keeping with university policy.
Olympus recently ran afoul of federal law in regard to its sales practices companywide. This month, the device manufacturer agreed to pay a record $646-million settlement to end federal government investigations into illegal kickbacks and bribery in the United States and Latin America.
The company had courted prominent doctors and hospitals for years with millions of dollars of free equipment, cash payments, trips, and entertainment such as winery tours and balloon rides in violation of U.S. law, according to federal prosecutors. No specific institutions or hospitals were named in the federal criminal complaint filed March 1, and the practices were not confined to scopes.
“Olympus leadership acknowledges the company’s responsibility for the past conduct, which does not represent the values of Olympus or its employees,” Nacho Abia, chief executive of the Olympus Corp. of the Americas unit in Center Valley, Pa., said in a statement this month after the settlement.
Meanwhile, the deterioration in the company’s relationship with UCLA continues. Several UCLA patients or their families have sued Olympus over the infections there. Olympus responded to one of the first wrongful death cases by blaming UCLA for the outbreak.
In a Feb. 1 filing in Los Angeles federal court, Olympus said UCLA failed to clean its scopes according to the company’s protocols and to obtain available training from Olympus.
In interviews, UCLA doctors have said Olympus employees didn’t raise those concerns when they visited the hospital after the outbreak was discovered. The FDA has said infections occurred even when hospitals followed the manufacturer’s instructions.
UCLA and Olympus said they won’t comment on the pending litigation.
A recent Senate investigation linked Olympus to 19 superbug outbreaks in the U.S. and Europe from 2012 to 2015, including at UCLA and Cedars-Sinai Medical Center. The report also criticized the company for failing to alert U.S. regulators and hospitals sooner about the risk of infection from its scope design.
Federal prosecutors are investigating Olympus and two other device manufacturers – Pentax and Fujifilm – over their role in the outbreaks.
This article was originally published by Kaiser Health News, a national health policy news service that is part of the nonpartisan Henry J. Kaiser Family Foundation. Melody Petersen is a staff writer at the Los Angeles Times. Her email address is [email protected].
Soon after doctors at UCLA’s Ronald Reagan Medical Center traced deadly infections to tainted medical scopes last year, they pressed the device maker to lend them replacements.
But Olympus Corp. refused. Instead, the Tokyo company offered to sell UCLA 35 new scopes for $1.2 million – a 28% increase in price from what it charged the university just months earlier, according to university emails obtained from a public-records request.
Olympus sales manager Vincent Hernandez told UCLA that the company’s previous discounts no longer applied. “Supplies are already low, where demand is high with all academic institutions expanding their inventories,” Mr. Hernandez wrote to the medical center.
The emails show how Olympus continued to push sales even as the devices it previously sold to UCLA and other medical institutions were linked to illnesses and deaths.
The messages also mark a sharp departure from what had been a close, mutually beneficial relationship between the giant device manufacturer and one of the country’s most prestigious academic medical centers.
Once the outbreak was confirmed in late January 2015, UCLA urgently needed replacement scopes to safely perform gastrointestinal procedures, in which the duodenoscopes were snaked down a patient’s throat.
In response to the outbreaks and government warnings last year, many medical centers rushed to adopt new cleaning measures. That left them with fewer of the reusable scopes on hand, so they felt compelled to buy more.
Ultimately, three UCLA patients died and five more were sickened from October 2014 to January 2015 by drug-resistant bacteria trapped inside the Olympus scopes. Only in January of this year did the company agree to recall its duodenoscopes and repair them over the coming months to cut the risk of bacteria passing to the next patient.
Previously, the emails show, UCLA and Olympus collaborated closely: At least one top doctor at UCLA asked for money from the company to hold a medical conference. The company’s employees were allowed to observe medical procedures.
On Jan. 7, 2015, 3 weeks before the outbreak at UCLA was confirmed, Dr. Raman Muthusamy, the director of endoscopy at UCLA, asked Olympus to contribute more money for an upcoming medical conference at a Beverly Hills hotel: “Quick question: Who do I speak to about sponsorship from Olympus to the Mellinkoff symposium,” Dr. Muthusamy wrote to Mr. Hernandez and another Olympus employee. “Last year, Olympus gave $18,000 – this year only $10K. Given our increasing collaborations thought it should at least stay the same.”
Later, on Jan. 23, 2015, Olympus salesman Richard Ramirez sent an email thanking a UCLA doctor for allowing him and another company representative “to sit in on a few of your cases yesterday.”
At the doctor’s request, Mr. Ramirez provided some “special contracted pricing information” on scope-related accessories.
The outbreak was confirmed Jan. 28, and the solicitousness appeared to end on both sides. Rebuffed in their request for replacement scopes, UCLA officials struggled to grasp Olympus’ sharp increase in price.
“Last February [2014] when we were acquiring the 7 new TJF‐Q180V scopes we have today, the price was $26,200.98 and our new quote is $33,470.15 [per] scope which is an increase of 28 percent,” Randi Hissom, a business operations director at UCLA Health System, wrote to Mr. Hernandez in a Feb. 10, 2015, email.
Mr. Hernandez advised her that the university could earn a discount if it ordered more scopes. He also warned that “with the number of scopes being requested, it is possible that we could go on a back order.”
On Feb. 23, 4 days after the Food and Drug Administration issued a safety alert about the scopes to all U.S. hospitals, Mr. Hernandez chastised two UCLA doctors for failing to purchase the amount of equipment specified in their contract with Olympus.
The company’s salespeople “continued to run into a wall with acquiring orders … I would like to arrange a meeting with you soon to further review and discuss the compliance of the contract,” Mr. Hernandez wrote in a Feb. 23, 2015, email.
The sudden demand for gastrointestinal scopes triggered an unexpected windfall for Olympus, the leading supplier in the United States and worldwide.
Olympus executives boasted in February about the company’s “record-breaking” performance, driven by a 13% increase in scope sales for the 9 months that ended Dec. 31. The company’s profit soared 34% to $352 million for the same period.
Rep. Ted Lieu (D-Calif.) said the emails with UCLA show that Olympus sought to profit from a crisis that it created. In a letter to the company last year, he asked Olympus to donate scopes to hospitals or forgo profits from the sale of additional devices.
“What Olympus did was outrageous,” Rep. Lieu said in a recent interview. “They jacked up the prices and made even more money off their defective scopes and then bragged about it. Have they no shame?”
Olympus spokesman Mark Miller said the emails with UCLA “represent standard business discussions within Olympus and between company personnel and customers.”
He attributed Olympus’ recent financial gains to the overall strength of the business.
“Olympus launched several new products for medical and surgical specialties during the last 12 months that were all well-received by the market and contribute to our results,” he said.
UCLA’s Dr. Muthusamy didn’t respond to a request for comment. Nor did Olympus salesmen Mr. Hernandez and Mr. Ramirez.
UCLA continues to use Olympus equipment. But after the company’s response to the outbreak it eventually turned to a rival manufacturer, Pentax Medical, for more scopes.
“Ronald Reagan UCLA Medical Center ordered additional scopes from Pentax in order to ensure that we had sufficient scopes to perform the necessary procedures for our patients,” said Enrique Rivero, a university spokesman. “Pentax was able to quickly provide a sufficient quantity of scopes in a timely manner, allowing us to clear our backlog of patients.”
Mr. Rivero said Dr. Muthusamy’s request for more symposium support, and Olympus’ $10,000 donation to the March 2015 gastroenterology conference, were in keeping with university policy.
Olympus recently ran afoul of federal law in regard to its sales practices companywide. This month, the device manufacturer agreed to pay a record $646-million settlement to end federal government investigations into illegal kickbacks and bribery in the United States and Latin America.
The company had courted prominent doctors and hospitals for years with millions of dollars of free equipment, cash payments, trips, and entertainment such as winery tours and balloon rides in violation of U.S. law, according to federal prosecutors. No specific institutions or hospitals were named in the federal criminal complaint filed March 1, and the practices were not confined to scopes.
“Olympus leadership acknowledges the company’s responsibility for the past conduct, which does not represent the values of Olympus or its employees,” Nacho Abia, chief executive of the Olympus Corp. of the Americas unit in Center Valley, Pa., said in a statement this month after the settlement.
Meanwhile, the deterioration in the company’s relationship with UCLA continues. Several UCLA patients or their families have sued Olympus over the infections there. Olympus responded to one of the first wrongful death cases by blaming UCLA for the outbreak.
In a Feb. 1 filing in Los Angeles federal court, Olympus said UCLA failed to clean its scopes according to the company’s protocols and to obtain available training from Olympus.
In interviews, UCLA doctors have said Olympus employees didn’t raise those concerns when they visited the hospital after the outbreak was discovered. The FDA has said infections occurred even when hospitals followed the manufacturer’s instructions.
UCLA and Olympus said they won’t comment on the pending litigation.
A recent Senate investigation linked Olympus to 19 superbug outbreaks in the U.S. and Europe from 2012 to 2015, including at UCLA and Cedars-Sinai Medical Center. The report also criticized the company for failing to alert U.S. regulators and hospitals sooner about the risk of infection from its scope design.
Federal prosecutors are investigating Olympus and two other device manufacturers – Pentax and Fujifilm – over their role in the outbreaks.
This article was originally published by Kaiser Health News, a national health policy news service that is part of the nonpartisan Henry J. Kaiser Family Foundation. Melody Petersen is a staff writer at the Los Angeles Times. Her email address is [email protected].
Leading scope manufacturer to pay hefty settlement for alleged kickbacks, bribery
Embattled scope maker Olympus Corp., already under federal investigation for its role in superbug outbreaks, has agreed to pay $646 million to resolve criminal and civil probes into illegal kickbacks and bribes to doctors and hospitals.
Federal prosecutors said Tuesday that the company’s settlement is the largest ever for violations of the U.S. anti-kickback law. A portion of the company’s payout, $22.8 million, will resolve foreign bribery allegations in Latin America.
U.S. investigators said the company’s “greed-fueled kickback scheme” from 2006 to 2011 used grants, consulting deals, trips to Japan, lavish gifts, and free equipment to induce influential doctors to order more Olympus devices at prominent hospitals and keep out competitors.
After a key doctor for a Midwest hospital system took a week-long trip to Japan and received a company grant, an Olympus vice president wrote an internal email in 2006 that said, “We have received all of the orders expected and have kept (a competitor) completely out of the (Midwestern hospital) system. Hooray!”
The federal complaint against Olympus mentioned similar scenarios at a prominent California institution and a New York medical center, but the exact names were redacted.
The violations produced about $600 million in sales and $230 million in gross profits for Olympus, federal officials said.
Federal prosecutors credited the help of a former compliance officer at Olympus, John Slowik, who filed a whistle-blower case against the company under seal in 2010.
Olympus agreed to a corporate-integrity agreement and the appointment of an independent monitor.
“Olympus leadership acknowledges the company’s responsibility for the past conduct, which does not represent the values of Olympus or its employees,” Nacho Abia, chief executive of the Olympus Corp. of the Americas unit in Center Valley, Pa., said in a statement. “Olympus is committed to complying with all laws and regulations and to adhering to our own rigorous code of conduct.”
Olympus has come under fire for failing to alert U.S. regulators and hospitals sooner about the risks of infection from its duodenoscopes, a gastrointestinal scope that has proven difficult to clean of dangerous bacteria because of its intricate design.
A Senate investigation released in January identified 19 scope-related outbreaks at U.S. medical centers during 2012-2015 that sickened nearly 200 patients with drug-resistant infections.
Olympus announced in January it would recall its duodenoscopes nationwide and make repairs to improve patient safety. The company controls 85% of the U.S. market for gastrointestinal scopes.
Last year, the Tokyo company disclosed it had received a subpoena from federal prosecutors in March 2015 seeking “information relating to duodenoscopes that Olympus manufactures and sells.”
This article was originally published by Kaiser Health News, a national health policy news service that is part of the nonpartisan Henry J. Kaiser Family Foundation.
Embattled scope maker Olympus Corp., already under federal investigation for its role in superbug outbreaks, has agreed to pay $646 million to resolve criminal and civil probes into illegal kickbacks and bribes to doctors and hospitals.
Federal prosecutors said Tuesday that the company’s settlement is the largest ever for violations of the U.S. anti-kickback law. A portion of the company’s payout, $22.8 million, will resolve foreign bribery allegations in Latin America.
U.S. investigators said the company’s “greed-fueled kickback scheme” from 2006 to 2011 used grants, consulting deals, trips to Japan, lavish gifts, and free equipment to induce influential doctors to order more Olympus devices at prominent hospitals and keep out competitors.
After a key doctor for a Midwest hospital system took a week-long trip to Japan and received a company grant, an Olympus vice president wrote an internal email in 2006 that said, “We have received all of the orders expected and have kept (a competitor) completely out of the (Midwestern hospital) system. Hooray!”
The federal complaint against Olympus mentioned similar scenarios at a prominent California institution and a New York medical center, but the exact names were redacted.
The violations produced about $600 million in sales and $230 million in gross profits for Olympus, federal officials said.
Federal prosecutors credited the help of a former compliance officer at Olympus, John Slowik, who filed a whistle-blower case against the company under seal in 2010.
Olympus agreed to a corporate-integrity agreement and the appointment of an independent monitor.
“Olympus leadership acknowledges the company’s responsibility for the past conduct, which does not represent the values of Olympus or its employees,” Nacho Abia, chief executive of the Olympus Corp. of the Americas unit in Center Valley, Pa., said in a statement. “Olympus is committed to complying with all laws and regulations and to adhering to our own rigorous code of conduct.”
Olympus has come under fire for failing to alert U.S. regulators and hospitals sooner about the risks of infection from its duodenoscopes, a gastrointestinal scope that has proven difficult to clean of dangerous bacteria because of its intricate design.
A Senate investigation released in January identified 19 scope-related outbreaks at U.S. medical centers during 2012-2015 that sickened nearly 200 patients with drug-resistant infections.
Olympus announced in January it would recall its duodenoscopes nationwide and make repairs to improve patient safety. The company controls 85% of the U.S. market for gastrointestinal scopes.
Last year, the Tokyo company disclosed it had received a subpoena from federal prosecutors in March 2015 seeking “information relating to duodenoscopes that Olympus manufactures and sells.”
This article was originally published by Kaiser Health News, a national health policy news service that is part of the nonpartisan Henry J. Kaiser Family Foundation.
Embattled scope maker Olympus Corp., already under federal investigation for its role in superbug outbreaks, has agreed to pay $646 million to resolve criminal and civil probes into illegal kickbacks and bribes to doctors and hospitals.
Federal prosecutors said Tuesday that the company’s settlement is the largest ever for violations of the U.S. anti-kickback law. A portion of the company’s payout, $22.8 million, will resolve foreign bribery allegations in Latin America.
U.S. investigators said the company’s “greed-fueled kickback scheme” from 2006 to 2011 used grants, consulting deals, trips to Japan, lavish gifts, and free equipment to induce influential doctors to order more Olympus devices at prominent hospitals and keep out competitors.
After a key doctor for a Midwest hospital system took a week-long trip to Japan and received a company grant, an Olympus vice president wrote an internal email in 2006 that said, “We have received all of the orders expected and have kept (a competitor) completely out of the (Midwestern hospital) system. Hooray!”
The federal complaint against Olympus mentioned similar scenarios at a prominent California institution and a New York medical center, but the exact names were redacted.
The violations produced about $600 million in sales and $230 million in gross profits for Olympus, federal officials said.
Federal prosecutors credited the help of a former compliance officer at Olympus, John Slowik, who filed a whistle-blower case against the company under seal in 2010.
Olympus agreed to a corporate-integrity agreement and the appointment of an independent monitor.
“Olympus leadership acknowledges the company’s responsibility for the past conduct, which does not represent the values of Olympus or its employees,” Nacho Abia, chief executive of the Olympus Corp. of the Americas unit in Center Valley, Pa., said in a statement. “Olympus is committed to complying with all laws and regulations and to adhering to our own rigorous code of conduct.”
Olympus has come under fire for failing to alert U.S. regulators and hospitals sooner about the risks of infection from its duodenoscopes, a gastrointestinal scope that has proven difficult to clean of dangerous bacteria because of its intricate design.
A Senate investigation released in January identified 19 scope-related outbreaks at U.S. medical centers during 2012-2015 that sickened nearly 200 patients with drug-resistant infections.
Olympus announced in January it would recall its duodenoscopes nationwide and make repairs to improve patient safety. The company controls 85% of the U.S. market for gastrointestinal scopes.
Last year, the Tokyo company disclosed it had received a subpoena from federal prosecutors in March 2015 seeking “information relating to duodenoscopes that Olympus manufactures and sells.”
This article was originally published by Kaiser Health News, a national health policy news service that is part of the nonpartisan Henry J. Kaiser Family Foundation.