Home Health & Hospice Week

Beef up your compliance plan to withstand fraud charges. Four years of government scrutiny is finally behind PolyMedica Corp.

The Woburn, MA-based parent of Liberty Medical has announced a $35 million settlement with the Department of Justice and HHS Office of Inspector General over its "Medicare practices." The settlement also includes a corporate integrity agreement, PolyMedica says.

Additionally, the company expects the U.S. Attorney's Office for the Southern District of Florida won't bring charges against PolyMedica. The company admits no wrongdoing as part of the settlement.

The feds have been investigating Liberty for Medicare overbilling since 2000, and in August 2001 more than 80 Federal Bureau of Investigation agents raided Liberty's Port St. Lucie, FL office and two managers' homes (see Eli's HCW, Vol. X, No. 33, p. 261).

As a result of the settlement, PolyMedica took a $30 million charge in the quarter ended Sept. 30. It reported a loss of $7.1 million on revenues of $111.5 million for the quarter, compared to a $12.1 million profit on $105.2 million in revenues for the same quarter last year. Hurricane damages contributed to the loss as well.

The $35 million settlement isn't ideal, but the company with more than $400 million in annual revenues can take it in stride, analysts say. The ongoing damage of a government investigation has made the most impact on the company.

"This organization took a hit a long time before this settlement was announced," says attorney Neil Caesar with the Health Law Center in Greenville, SC. Rumors, innuendo and uncertainty are the real punishment in a government investigation, he says.

The lingering investigation has kept prospective partners from doing business with Liberty, execs have told the Palm Beach Post. "When you'd talk to these companies before, the first thing they'd say is, 'How's the investigation going?'" Peter McKenzie, Liberty's chief operating officer, told the newspaper.

Suppliers should take this reputational risk into account when deciding how much effort to put into compliance efforts, Caesar recommends. Compliance programs should be geared toward "making scrutiny quickly go away" instead of triumphing in court, he suggests.

Your compliance program should convince investigators "you're not worth the effort, not worth digging into," Caesar tells Eli.

PolyMedica says it "now has in place a comprehensive compliance program that we believe could serve as a standard for the industry."

The company is pursuing contracts with managed care companies and expects to grow significantly next year, it says.