Reducing Fraud, Waste and Abuse by Prosecuting Health Care Executives

May 13, 2011
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Many politicians claim that there is much fraud waste and abuse in the Medicare system. Would prosecuting executives accused of wrong-doing decrease the amount of fraud in the system? Some policymakers think so.

Many politicians claim that there is much fraud waste and abuse in the Medicare system. Would prosecuting executives accused of wrong-doing decrease the amount of fraud in the system? Some policymakers think so.

The recent actions of the health department go further. The Office of Inspector General (OIG) has long barred people convicted of certain offences from doing business with Medicare and Medicaid, along with doctors and nurses who lose their licences. But in October the OIG announced that it would increasingly bar executives in charge of firms that have been convicted of wrongdoing, even if they personally did nothing wrong.

Lewis Morris, the OIG’s chief counsel, insists that the office must be aggressive. In March he told Congress that corporate settlements do too little to deter fraud—cash fines, he claimed, have become a mere “cost of doing business”.

Determining executive culpability for fraudulent acts is difficult. If the executive directs his employees to commit fraud, then of course he is fraudulent. If there is a rogue individual who commits fraud, however, the executive likely should not be held liable. On the other hand, if the executive does not encourage fraud, but his management style to maximize profits may have indirectly encouraged his workers to commit fraud, does that make him liable? In OIG’s world, however, the executive may be considered fraudulent in all these cases.