WASHINGTON — It's getting personal now. In a shift still evolving, federal enforcers are targeting individual executives in health care fraud cases that used to be aimed at impersonal corporations.
The new tactic is raising the anxiety level — and risks — for corporate honchos at drug companies, medical device manufacturers, nursing home chains and other major health care enterprises that deal with Medicare and Medicaid.
Previously, if a company got caught, its lawyers in many cases would be able to negotiate a financial settlement. The company would write the government a check for a number followed by lots of zeroes and promise not to break the rules again. Often the cost would just get passed on to customers.
Now, on top of fines paid by a company, senior executives can face criminal charges, even if they weren't involved in the scheme but could have stopped it had they known. They can also be banned from doing business with government health programs, a career-ending consequence.
Federal officials say they got fed up with repeated violations and decided to start using enforcement tools that were already on the books but had been allowed to languish. By some estimates, health care fraud costs taxpayers $60 billion a year, galling when Medicare faces insolvency.
"When you look at the history of health care enforcement, we've seen a number of Fortune 500 companies that have been caught not once, not twice, but sometimes three times violating the trust of the American people, submitting false claims, paying kickbacks to doctors, marketing drugs which have not been tested for safety and efficacy," said Lewis Morris, chief counsel for the inspector general of the Department of Health and Human Services.
Lawyers who represent drug companies say the change has definitely caused a stir, but the end result is far from certain.
"People are alarmed," said Brien O'Connor, a partner in the Boston office of Ropes & Gray. "They want to know what facts and circumstances would cause the Justice Department to indict someone who hadn't even known about the misconduct. They are doing all they can to achieve compliance."
Others say high-powered corporate targets won't go meekly.
"If the government does continue to press its campaign against individuals, we will see the limits of the government's theories tested," said Paul Kalb, head of the health care group at the Sidley Austin law firm in Washington. He added, "There is a very important open question as to whether individuals can be held criminally culpable or lose their jobs simply by virtue of their status."