Golden Parachute for OmniCare CEO

The Wall Street journal had an interesting article about Omnicare's legal troubles.  Mr. Gemunder's was CEO of Covington, Ky.-based Omnicare, the nation's largest dispenser of pharmaceuticals to nursing homes serving 1.4 million beds in 47 states.  Obviously, Omnicare gets its profits from Medicare, Medicaid and health insurance.

Mr. Gemunder had been in charge since 1981, but recently retired with a large lump-sum pension payout.  He's getting a $91 million pension payout, plus severance, vesting of restricted stock  that bring his final payday to at least $130 million. And that's on top of the $14 million he bagged last year.

And what did the shareholders get for their money? Omnicare shares took a tumble last week after the company reported a shocking drop in the number of prescriptions it fills.

And what did the taxpayers and customers get? Omnicare has litigation costs amid evidence of kickback and billing schemes.  For example, in November 2009, Omnicare announced it would pay $98 million to settle a civil case brought by the Justice Department that it paid kickbacks to nursing homes and took kickbacks from pharmaceutical companies, including Johnson & Johnson. Omnicare also agreed to pay $49.5 million in 2006 to settle Medicare fraud claims. And last month, new details emerged in a continuing kickback lawsuit in Illinois.

 

A Libertarian's Misplaced Attack on the Constitution

Once again Ken Connor has wrote an incredible article on the true conservative's viewpoint of tort reform.  Mr. Connor wrote the below article in response to John Stossell's ridiculous propaganda on the justice system.  

“I consider [trial by jury] as the only anchor ever yet imagined by man, by which a government can be held to the principles of its constitution.” Thomas Jefferson

American conservatives are generally associated with a “strict constructionist” view of the U.S. Constitution. They believe America’s founding legal document should be interpreted in accordance with the original intent of the Framers when the document was ratified by the original States. They believe that the principles embodied by our Constitution are reflective of a nation rooted in the virtues of human dignity and individual liberty. These principles include the freedom to speak, write, congregate and worship freely, the right to own property, the right to bear arms in defense of person and property, and the right to conduct business legally and ethically in a free market economy. In short, conservatives subscribe to the idea that the Constitution exists to protect and preserve Americans’ rights to protect their lives, exercise their liberty, and pursue their happiness.

Somehow along the way, however, many conservatives have lost an appreciation for one of the most fundamental rights of America’s political heritage – a right believed to be so important to preserving ordered liberty in the fledgling republic that was included in the Bill of Rights, the first ten amendments to the U.S. Constitution. This much maligned right is set forth in the Seventh Amendment, which states that “In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.”

Of course, the concept of “innocent until proven guilty” is not an unfamiliar principle in the American political lexicon, nor is the idea that a person accused of a crime has a right to stand trial before a jury of his or her peers. Few Americans, regardless of their political affiliation, would dispute the justice of this principle. The Seventh Amendment, however, is not referring to criminal suits, but civil ones. All too often, however, the only kind of attention this constitutional right gets from conservatives is via attempts to erode it through so-called tort reform.

The term “tort” means a private or civil wrong, with the added implication that the wrongdoer is required to compensate an innocent party for damages suffered as a result of the wrongdoing. At its root, the word “tort” denotes something that is twisted and needs to be put straight. Critics of the tort system say the system itself has become twisted and is in need of straightening out. They point to “frivolous” lawsuits and “unreasonable” verdicts as evidence of the need for reform. They argue that aggressive trial lawyers and runaway juries are driving up the cost of doing business for everyone.

Just this week, John Stossel discussed “the trouble with lawyers” on his libertarian-leaning program on the Fox Business Network. While legitimate complaints can be made about “ambulance chasing” by unscrupulous lawyers, Mr. Stossel, a self-described champion of constitutional principles, seems all too ready to toss the proverbial baby out with the bathwater. In making his case against trial lawyers, Mr. Stossel ignores some of the reasons why America’s tort system is a critical ingredient in America’s constitutional framework.

These principles are as essential to American society today as they were in the time of our nation’s founding:

The tort system affirms basic human dignity and the sanctity of human life. By requiring a wrongdoer to compensate an injured person for the damage caused by a wrongful act, the worth, value, and dignity of every member of society is affirmed. We demonstrate that we take human dignity seriously when, as a society, we guard against encroachments (deliberate or unintentional) by anyone on the dignity or humanity of another. No wrongdoer should be permitted to injure or kill another person with impunity. To hold otherwise undermines society’s view of the importance of human dignity and the sanctity of human life.

The tort system promotes responsibility by holding wrongdoers accountable for their actions. Personal accountability is the key to responsible human behavior. We cannot expect people to act in a responsible manner unless we hold them accountable for the consequences of their actions. If we remove accountability for wrongdoing, we encourage people to engage in irresponsible and antisocial behavior. The people who will suffer the most from such behavior will be the weakest and most vulnerable members of our society (i.e., the elderly, the handicapped, and the infirm).

The tort system promotes local control. Through the jury system, people at the local level decide what is reasonable behavior within their own communities. Ordinary citizens, applying a common sense standard of reasonable care, making decisions about acceptable and unacceptable conduct within their community – that is the essence of local government. And, as a result of those decisions, suppliers of goods and services within the marketplace will often modify their own behaviors (i.e., improve health care standards, place guards on dangerous products, protect against discharge of toxic pollutants) without the necessity of yet another costly and intrusive governmental bureaucracy.

The tort system provides for just compensation from wrongdoers and relieves the rest of society of unfair burdens. Fundamental fairness dictates that one who suffers a loss at the hands of a wrongdoer be compensated for the wrong he has suffered. If our system of justice fails to provide just compensation, the victim, or his family, will be inclined to seek personal revenge or retribution. This promotes a spirit of vigilantism and contributes further to the breakdown of social order. Additionally, if the wrongdoer is not required to bear the loss occasioned by his wrongdoing (i.e. medical bills, lost wages, etc.) those losses will have to be borne by the rest of society. When society has to pick up the tab for the losses caused by a wrongdoer, the result is the involuntary redistribution of wealth among persons who are innocent of any wrongdoing. This is just another form of “welfare” which rewards irresponsible behavior and punishes innocent parties.

In the companion article to his segment on lawyers, Mr. Stossel opens with the accusation that “tort lawyers lie”:

“They say their product liability suits are good for us. But their lawsuits rarely make our lives better. They make lawyers and a few of their clients better off – but for the majority of us, they make life much worse. . . . Even when the lawyers do help their clients, they hurt everyone else because fear of their lawsuits takes away many good things: Swimming pools, playgrounds and gymnastics programs close because liability insurance is so expensive.”

Setting aside for a moment the irony of a libertarian appealing to the “common good” as an argument against a constitutionally-protected right, Stossel is guilty of either willful ignorance or the very duplicity of which he accuses lawyers—or both. Products liability lawsuits have led to huge advances in safety in the airline, auto, and drug industries, to name just a few. Remember Ford Motor Company’s exploding Pinto gas tanks and Firestone Tire Company’s exploding radial tires? Have we forgotten the devastation wrought by unsafe drugs like Thalidomide and Vioxx and products like the Dalkon Shield? Guess where the impetus for seat belts, airbags and anti-rollover technology came from? Advances in safety in all these areas were the result of lawsuits filed by trial lawyers on behalf of victims who were killed or injured by the negligence of manufacturers. These companies knowingly marketed dangerous products, endangering the health and safety of their customers, until their negligence and malfeasance were exposed and they were forced to render an account through the tort system. Many of the regulations Americans rely on today to keep their families safe and healthy are a result of suits brought against companies that – had they not been forced to implement changes – would have been happy to take chances with their customers lives rather than make costly quality and safety improvements. Any parent whose child has died because of an faulty pool drain or a defective car seat can attest to the fact that product liability suits can and do make a difference in the lives of many.

Of course, it will be readily admitted by this attorney that yes, tort lawyers can, and sometimes do, lie. Unscrupulous attorneys have been known to pursue frivolous claims in hopes of making a fast buck. When that happens, the lawyers and their clients should be sanctioned and made to pay. The American legal system, as all manmade social institutions, is imperfect and sometimes abused. But we should not do away with the constitutional right to trial by jury because of the malfeasance of some lawyers any more than we should do away with the free market due to the recent malfeasance of some on Wall Street. Mr. Stossel, more than anyone, should agree with that.

What this really boils down to, then, is a question of principle. With regard to other questions constitutional, conservatives (and libertarians, for that matter) argue that an exception should not be allowed to undo the rule. We shouldn’t revoke the 2nd amendment just because some individuals commit crimes with guns. We shouldn’t axe the 1st amendment just because some choose to exercise their free speech in a hateful manner. And we shouldn’t do away with the 7th amendment just because some tort lawyers and their clients make frivolous claims in court.

Can we do better? Of course, and there are responsible ways to pursue “reform” in the courts without resorting to ad hominem attacks on lawyers or stripping the American people of their constitutionally protected rights. There is a much bigger principle at stake; one that has been under attack, and one that must be defended honestly and thoughtfully. It’s too bad that Mr. Stossel couldn’t bring himself to do that.
 

Ken Connor is an attorney and co-author of “Sinful Silence: When Christians Neglect Their Civic Duty”  He is also Chairman of the Center for a Just Society.

The Myth of Jackpot Justice

Bureau of Justice Statistics issued a Special Report on the number, type, and resolution of civil trials in the United States.  Some very interesting data is contained in the report.

Major findings from the 2005 Civil Justice Survey of State Courts include—
• A jury decided almost 70% of the approximately 26,950 general civil trials disposed of in 2005.
• About 60% of the general civil trials included in the survey involved a tort claim and about a third involved contractual issues.  Most of the tort cases involved motor vehicle accidents.
• Plaintiffs won in almost 60% of trials overall.
• The median damage award for plaintiffs who won monetary damages in general civil trials was $28,000.
• Punitive damages were awarded to only 5% of plaintiff winners in general civil trials in 2005.
• In the nation’s 75 most populous counties, the number of general civil cases disposed of by jury or bench trial declined by about 50% from 1992 to 2005.

Almost two-thirds (62%) of all plaintiff award winners were awarded $50,000 or less. A small percentage (about 4%) of all plaintiff award winners were awarded $1 million or more.

There were only 2,449 trials involving medical malpractice which amounts to 9.1%.  This is interesting since we know there are 100,000 deaths caused every year from medical malpractice.

Rick Scott for Governor?

Interesting article about candidate for governor Rick Scott, the former CEO of Columbia/HCA, who resigned in scandal in 1997 amidst government investigators' charges of a Medicare fraud scheme.  The company admitted to “systematically overcharging the government by claiming marketing costs as reimbursable, by striking illegal deals with home care agencies, and by filing false data about how hospital space was being used.”  The company’s facilities also increased Medicare billings by exaggerating the seriousness of the illnesses treated in its hospitals, and “granting doctors partnerships in company hospitals as a kickback for the doctors referring patients to HCA.”  Clearly he was also involved in Medicare fraud by inflating cost reports.

Scott in 1987, bought a couple of hospitals with the help of financier Richard Rainwater and, took over HCA and built the nation’s largest for-profit hospital chain. In 1997, Scott’s empire unraveled and he was forced to resign from the company. In 2001, he founded Solantic Corp., which operates a chain of urgent-care centers.  Columbia/HCA only had to pay back $1.74 billion in fines and Rick Scott walked away with severance pay of $10 million, a 5-year consulting contract, and stock then valued at $300 million.

Fast forward to March 2009. Scott founded Conservatives for Patients Rights with $5 million of his own money “to promote free market healthcare reform.” The group opposed any reform of the health care industry.  Scott’s campaign doesn't understand the new legislation and refers to it  as a “government takeover of healthcare.”  Except Medicaid and Medicare and Veteran Administration are government programs and the baby boomers are getting older.

 

Assisted Living Centers also doing well

Assisted Living Concepts Inc. (ALC), which operates a for profit chain of assisted living centers, reported significantly higher profit margins despite a drop in occupancy in its first quarter.  The company operates 211 assisted living centers in 20 states.  See full report here.  Revenue increased 1.4% to $57.9 million from $57.1 million.

The company reported net income of $3.6 million, or 31 cents a share, compared with a loss of $11.8 million, or 98 cents, a year ago. The year-ago quarter includes a non-cash write-off of $14.7 million in goodwill, an accounting entry that reflects the amount above book value paid for an acquisition. Excluding the write-off, the company earned $2.9 million in first quarter 2009.

An increase in private pay residents, who pay much higher rates than the Medicaid program, rate increase and lower labor and kitchen expenses contributed to the higher profits. It sounds like they stopped properly feeding the residents and provided less staff or less qualified employees.


 

Profits Soar in Nursing Home Industry

Many corporations provide insufficient staffing, training, and substandard care to pad their books and make outrageous profits.  Kindred Healthcare, Inc. recently announced its operating results for the first quarter ended March 31, 2010.

First Quarter Highlights:
Consolidated revenues rose 2% to $1.1 billion
⎯ Each operating division reported revenue growth compared to last year
• Reported diluted earnings per share totaled $0.38, including $0.06 of certain charges
⎯ Excluding the charges, first quarter earnings were at the high end of the Company’s guidance
range of $0.35 to $0.45 per diluted share
• Hospital volumes continued to improve
Reported admissions grew 3% from last year
⎯ Same-facility aggregate admissions grew 3%; same-facility commercial admissions grew 12%
⎯ Volume growth in the quarter was partially offset by softer Medicare and commercial pricing
• Nursing and rehabilitation center admissions grew 5% in the first quarter compared to last year
Reimbursement rates were generally in line with expectations
• Peoplefirst Rehabilitation continued to demonstrate consistent operating results
⎯ Division signed 28 net additional unaffiliated contracts compared to a loss of three contracts in the first quarter last year

See report here.   But the nursing home industry will insist they can't make any money because of alleged cuts in Medicaid and Medicare reimbursements, and, of course, on "frivolous" lawsuits.  Ridiculous.

I hope all of our loved ones are safe on this Mother's Day.
 

 

Another Great Article from Ken Connor

Ken Connor wrote a great article about the inherent injustice of tort reform on the Center for a Just Society.  Below is the full aricle:

On April 5, 2010, the community of Montcoal, West Virginia was devastated when an explosion at the Upper Big Branch mine took the lives of 29 men. For the families impacted by this disaster, coping with the unexpected loss of loved ones is only the beginning of what is sure to be a long and arduous quest for justice. Not only does the tragedy of Upper Big Branch demonstrate the inadequacy of regulations alone to protect vulnerable workers and their families, it highlights the vital importance of our nation's civil justice system as a means of compensating victims and punishing those whose reckless conduct harms others.

As news of the explosion at Upper Big Branch unfolded, it wasn't long before details of the mine's troubling history began to surface. According to the New York Times, "the mine had been cited for hundreds of violations over the last year, including many serious ones."

Why then, did the mine continue to operate? The early evidence suggests that the owner was gaming the system to protect its bottom line, putting profits ahead of the safety of its workers.

In order to avoid steep fines and delay the need for compliance, the Massey Energy Company fostered bureaucratic gridlock by contesting most of the Upper Big Branch mine's safety violations. While regulatory officials at the Mine Safety and Health Administration (MSHA) waded through stacks of appeal documents, hamstrung by weaknesses in the 1977 Mine Safety Act, the mine continued to operate unimpeded. What's more, the mining industry (as with many other regulated industries) has long had a revolving door between the regulators and the regulated. The ranks of the regulators are often filled with folks who come out of the mining industry. Likewise, the industry provides opportunities for advancement for regulators who decide to leave government service. This calls into question the zeal with which some regulators carry out their duties. Does a regulator really want to get tough on the company that might provide him with his next job?

Of course, regulatory regimes do nothing to compensate the victims or their families for the damages they suffer in such catastrophes. The fines that errant corporations pay for violating government regulations go to government, not the victims of those violations. But justice requires that there be a means to ensure that wrongdoers are made to compensate for the harm they inflict on those who suffer as a result of their wrongdoing, and this is where the much maligned civil justice system – better known as the tort system – comes in.

The term "tort" refers to a private or civil wrong. Derived from the medieval Latin word tortum ("wrong"), the root of the word goes back to the ancient Latin verb torquere, which means to twist (compare our modern use of the word "torque"). The tort system is designed to "straighten out" the injustices suffered by the innocent at the hands of wrongdoers by requiring compensation for the harms they have suffered.

But the reach of Big Business extends even to the judicial system, and there is a dangerous move afoot to immunize corporate malefactors from full accountability to their victims. Under the rubric of so-called tort reform, corporate brigands like Massey Energy use their clout in the political arena (derived from generous campaign contributions) to secure the passage of laws that artificially "cap" the amount of damages innocent victims can recover. Caps as low as $250,000 are routinely advocated for "non-economic" damages like pain, suffering, disability, and disfigurement, regardless of how much the victims have suffered. Tort reform means that bureaucrats and special interests far from the scene determine the amount of damages an injured party can recover, rather than a jury drawn from the community where the wrongdoing occurred.

Not content to limit the compensatory damages available to victims of corporate wrongdoing, business interests also seek to limit the recovery of punitive damages as well. Punitive damages are awardable in cases where a wrongdoer engages in intentional or reckless misconduct. Historically, such damages are levied as punishment, with the purpose of deterring similar misconduct by others. In taking into account the amounts to be awarded, juries are permitted to consider such things as the reprehensibility of the misconduct, the vulnerability of the victim, the profit resulting from the misconduct, the financial condition of the wrongdoer, and the extent to which the wrongdoer tried to conceal the wrongdoing. Juries may only punish – they are not permitted to bankrupt – the perpetrators of such misconduct.

But wrongdoers don't like to be held accountable, so business interests – through lobby groups like the U.S. Chamber of Commerce – have launched a full scale assault on the civil justice system, seeking to emasculate the rights of innocent victims and their ability to hold wrongdoers fully accountable. In addition to advocating caps on damages, they try to shorten statutes of limitations, secure immunity from liability, and place other legal hurdles in the path of the victims.

Sadly, this campaign has had great success. And without robust legal mechanisms in place to send a message that it's cheaper to do business the right way than it is to cut corners, businesses like Massey Energy will continue to do things the wrong way, and the innocent and unwitting will continue to suffer the consequences. If tort reform continues to be successful, it is inevitable that more and more communities across America will find themselves, much like the families of Montcoal, West Virginia, at the center of a senseless industrial tragedy.
 

OmniCare's profits soar

Despite paying a $98 million settlement for kickback schemes, Omnicare managed to pull in 4th qtr profits over $80 million. Omnicare is the nation's largest nursing home pharmacy.  See article here.   The financial results for its fourth quarter, reporting nearly tripled profits compared to the previous year after settling fraud allegations with the U.S. Justice Department as recently as last November.  See report here.

Omnicare paid a $98 million settlement in 2009 to end a Justice Department investigation that  the company engaged in kickback schemes with two Atlanta nursing homes involving pharmacy service contracts.

I guess fraud, kickbacks, and paying lobbyists is profitable.

 

Georgia Caps Ruled Unconstitutional

The Atlanta Journal Constitution reported the unanimous Georgia Supreme Court decision striking down arbitrary caps on jury awards in medical malpractice cases, part of the state's 2005 tort reform law.  The state high court determined that a $350,000 cap on noneconomic damages, which includes compensation for a plaintiff's pain and suffering, violates the right to a jury trial as guaranteed under the Georgia Constitution.

The 2005 law's cap on damage awards "clearly nullifies the jury's findings of fact regarding damages and thereby undermines the jury's basic function," Chief Justice Carol Hunstein wrote for the court. She added, "The very existence of the caps, in any amount, is violative of the right to trial by jury."

The ruling upheld a $1.265 million jury award to Betty Nestlehutt after an operation in 2006 resulted in Nestlehutt's face covered with gaping wounds that required prolonged, excruciating treatments to keep them from becoming infected. The wounds left her permanently disfigured.

About two dozen states have enacted caps on damage awards in medical malpractice cases. Last month, the Illinois Supreme Court declared unconstitutional a $500,000 cap against doctors and a $1 million cap against hospitals. Georgia's tort reform law limited awards to $350,000 against doctors and capped total awards at $1.05 million in cases involving multiple health-care providers and medical facilities.

 

Is this Justice?

The Ohio Supreme Court has enacted a monumental change that impacts doctors and patients, shifting malpractice judgments from doctors’ insurers to the taxpayers.  More info at WCPO.  The decision limits recovery, ignores the right to a jury trial, and promotes injustice and inadequate compensation. The ruling means your private doctor can make a serious medical mistake - take off the wrong leg, operate on the wrong side of your brain - and you can never sue him in a jury trial.   No other state has ruled the same way. 

The Theobald ruling was named after Keith Theobald. Theobald was a healthy, fit husband and father of two young children, when an elderly driver clipped his pickup truck as he was driving to work 11 years ago. The impact flipped the truck across all lanes of the highway into a field, crashing in a stand of trees. Rescue workers found Theobald hanging upside down in a tree. He was paralyzed from his chest down.

Theobald and his wife, Jacqueline, took the news in stride. “I remember pre-operatively we said, ‘You can still do basketball with Jake (his then 5-year-old son) and watch TV and share things with the kids. We’ll get a van and we’ll adapt it.’” Keith Theobald agreed. He felt he could still work and live a full life. “I could do about anything. The wheelchair doesn’t hold you back.”

Theobald could see and use his arms after the accident. He was alert and ready the next day when doctors at University Hospital suggested surgery might improve his back injury.

Instead, he woke up in a different world. Not only was he still paralyzed, but now he also was blind and had lost the use of his armsMedical records prove a series of mistakes during surgery led to oxygen deprivation and injuries worse than the accident had caused.

Trapped in darkness and unable to move on his own, Theobald will need round-the-clock care the rest of his life. He sued the doctors who did the surgery, only to get this devastating shock: The doctors weren't liable. They had immunity from all malpractice claims because they had students in the room with them.

In the Theobald case, the Ohio Supreme Court ruled that doctors who sign with a state university like the University of Cincinnati to let medical students learn from them, even if that just mean one student walking in the room for a second, now are considered state employees. As such, they get immunity if anything goes wrong on the job, even in their private practices.

Jacqueline Theobald says, “The state didn’t come in and take care of Keith. The university didn’t come take care of him. This doctor took care of him. We’re suing the doctor.”

But the Ohio Supreme Court said they couldn’t sue the doctor because some students were allegedly in the operating room, the doctors were teaching per their State of Ohio U.C contracts. Therefore those doctors were not liable for any mistakes. Instead, the Supreme Court ruled that the Theobalds belonged in the Court of Claims, a separate court set up in 1980 to handle suits against the state, usually against public state employees like highway workers, never before used to protect private doctors in their private practices.

The Court of Claims has no juries. Single judges, hired by the state, issue rulings for or against the state. The top award is $250,000, no matter the severity of the damages. Most importantly, the taxpayers foot the bill, not doctors’ malpractice insurers who must pay when suits are filed in county courts of common pleas.

Of course, Keith Theobald never knew to ask if a student would be watching his operation, and if so what the impact might be. But if you think doctors from now on will have to tell patients and get consent to have students in the room, you’d be wrong. The Supreme Court ruled the law doesn’t demand disclosure. No one has to inform patients they could lose their rights to sue the doctors without ever knowing it.

Keith Theobald hasn’t lost hope for a medical miracle. But in the end, he never did get a chance at even the Court of Claims the Ohio Supreme Court said he should access. That’s because the same state attorneys for U.C. who argued that’s the court where the Theobalds belonged, now argued it was too late. The statute of limitations had passed. No recovery, not even $250,000, for Keith Theobald’s lifetime injuries.

 

Poliakoff & Associates, P.A., is one of South Carolina’s most respected and distinguished law firms. The Poliakoff firm began nearly 60 years ago by three attorney brothers: Matthew, J. Manning, and Bernard. With a history of believing the justice system...More...