'Tis the season for deferred prosecution agreements for health care organizations. As reported by the Wall Street Journal:

WellCare Health Plans Inc. agreed to pay $80 million to settle a Florida Medicaid fraud investigation that has embroiled the company since the fall of 2007, previously prompting a management shake-up and restatement of more than three years of the company's earnings.

The settlement resolves federal and state criminal probes into allegations that WellCare defrauded Florida benefits programs for low-income adults and children of about $40 million by improperly inflating what it spent on care.

WellCare, based in Tampa, Fla., administers medical benefits for about 2.5 million enrollees in government-sponsored plans in several states.

Under a deferred prosecution agreement, the U.S. Attorney's Office for the Middle District of Florida in Tampa filed a fraud conspiracy charge against the company but said it wouldn't prosecute the case if WellCare meets all of the deal's terms.

U.S. Attorney A. Brian Albritton said in a news conference Tuesday that his office could have pursued a conviction but that it likely would have put the insurer out of business, hurting customers, innocent employees and shareholders. In penalizing the company, 'we have, at the same time, tried to avoid crushing it,' he said.

Under the terms, WellCare must forfeit $40 million and pay another $40 million in restitution to Florida's Medicaid and 'Healthy Kids' plans. WellCare also has agreed 'to accept and acknowledge full responsibility for the conduct that led to the government's investigations,' according to the deferred prosecution agreement. The company declined to elaborate.

In addition, the company also must retain an independent monitor to review its business operations, cooperate with the government's ongoing investigations and implement new procedures within 60 days to prevent future abuse or faulty reports to state health care programs.

This was not the first bit of trouble WellCare got itself into. We posted here about how the state of Connecticut stopped WellCare from running a plan for poor children after the company refused to reveal what it was paying physicians, and why it was failing to pay for particular services.

So, as we have found from blogging on Health Care Renewal for a while, organizations that are found to be committing one sort of mischief often are also found to be committing another sort.

We also see some other familiar patterns. While human beings authorized or committed the acts that got the organization in trouble, rarely do these people seem to suffer any negative consequences. At most, the organization may pay a seemingly large fine. This, however, may come out of dividends or the stock price, dispersing the cost to stock-holders, or out of salaries across the board. Thus, those who got the organization into trouble are unlikely to feel pain from it. Perhaps because of reverence for all organizations related to health care, and fear that the bankruptcy of any health care organization, even a health care insurance company, will leave patients in the lurch, prosecutors do not seem inclined to actually prosecute such organizations. The net effect, though, seems to be that dishonest executives of health care organizations can continue to act with impunity.

Until bad leadership of health care organizations leads to negative consequences for those practicing it, health care leadership can be expected to continuously degrade.

By the way, one member of the WellCare board of directors is Regina Herzlinger, a well known and prolific health policy expert, and holds the Nancy R. McPherson Professor of Business Administration Chair of the Harvard Business School. As far as I know, Prof Herzlinger is one of the many health policy experts who avoids discussing the sorts of problems with the accountability, integrity, and transparency of health care leadership which is grist for the mill here at Health Care Renewal. Yet under the stewardship of such an august expert, WellCare had to "accept and acknowledge full responsibility for ... conduct" that included fraud. Perhaps, Prof Herzlinger, like many other main stream health policy experts, should learn to acknowledge that health care leadership may be unaccountable, opaque, dishonest, and sometimes flagrantly corrupt. Furthermore, Prof Herzlinger, like many other well-paid board members of health care organization, should pay a bit more attention to the mischief being committed by those who answer to her.

Everyone loves a parade, and so the parade of legal settlements by prominent health care organizations continues. The latest to march into view is Wright Medical Group, as reported by Bloomberg:

Wright Medical Technology Inc. agreed to pay $7.9 million to resolve U.S. criminal and civil investigations into whether it paid kickbacks to induce doctors to use its hip and knee devices.

Prosecutors in Newark, New Jersey, today charged Wright with conspiring to violate a federal anti-kickback statue through consulting contracts with orthopedic surgeons. The U.S. agreed to drop the case in 12 months if a monitor agrees that Wright has reformed the way it hires consultants.

Wright, based in Arlington, Tennessee, also agreed to a $7.9 million civil settlement with the Justice Department and inspector general of the Health and Human Services Department to resolve fraudulent-marketing claims. The company entered into a five-year corporate integrity agreement.

Here we go again. A company is accused of giving kickbacks, aka bribes, to individual doctors, in this case orthopedic surgeons, to get them to use the company's products. Such payments clearly violate medical ethics (especially doctors' obligations to put the interests of patients ahead of their personal financial interests), leading to decision making not in the best interests of the patients. However, the penalty to the company itself is minuscule, only a fraction of the company's revenue, according to Google Finance, in 2009, just under $500 million. As we have noted endlessly before, financial penalties to corporations are diffused among all shareholders and employees, and possibly customers and patients.

Do we really expect that this penalty will change anything, or deter future bad behavior by this or any other company?

But our government continues to treat the corporate employees who authorize, direct, or implement bad behavior like this as essentially above the law. In this case, like in many others we have discussed previously, no one who authorized, directed or implemented the bad behavior will have to pay any sort of penalty or suffer any sort of negative consequences. Does anyone in their right mind believe that Wright Medical really is

pleased to announce these agreements and look[ing] forward to working with the independent monitor as we continue our commitment to the highest standards of ethical and legal conduct

That was a quote from Wright Medical CEO Gary D Henley. He may be pleased to announce the agreements, since they really amount to such a tiny pinprick of a penalty. After all, Mr Henley will be able to to continue to use Wright Medical's revenues, virtually unaffected by this penalty, to justify his compensation (per the 2009 proxy statement, $2,036,517 in 2009, and his continuing accumulation of wealth, e.g., 436,601 shares of stock, currently valued at $13.86/ share according to Google Financial.)

I leave an assessment of what the company's previous commitment to "the highest standard of ethical and legal conduct" was to our dear readers.

We will not have true health care reform until we end the unholy alliance between big government and big health care organizations, that is, health care corporatism. Then, maybe, we can make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Back in early 2007, we noted that several large drug companies were under investigation for possible involvement in the Iraq oil-for-food sanctions scandal. More than two years later, a US Department of Justice press release from last week includes the following:

Novo Nordisk A/S (Novo), a Danish corporation based in Bagsvaerd, Denmark, has agreed to pay a $9 million penalty for illegal kickbacks paid to the former Iraqi government. Novo agreed to pay the fine as part of a deferred prosecution agreement with the Department. The matter is part of the Justice Department’s ongoing investigation into the U.N. Oil-for-Food program.

A criminal information was filed today against Novo in U.S. District Court for the District of Columbia charging Novo with one count of conspiracy to commit wire fraud and to violate the books and records provisions of the Foreign Corrupt Practices Act (FCPA). Novo, an international manufacturer of insulin, medicines and other pharmaceutical supplies, has acknowledged responsibility for improper payments made by its agents to the former Iraqi government in order to obtain contracts with the Iraqi ministry of health to provide insulin and other medicines. The agreement requires the company and its subsidiaries to cooperate fully with the Justice Department’s ongoing Oil-for-Food investigation.

According to the agreement and the information filed today, between 2001 and 2003, Novo paid approximately $1.4 million to the former Iraqi government by inflating the price of contracts by 10 percent before submitting the contracts to the United Nations for approval and concealed from the United Nations the fact that the price contained a kickback to the former Iraqi government. Novo also admitted it inaccurately recorded the kickback payments as 'commissions' in its books and records.

In recognition of Novo’s thorough review of the illicit payments and its implementation of enhanced compliance policies and procedures, the Department has agreed to defer prosecution of criminal charges against Novo for a period of three years.

Also,

In a related matter, Novo reached a settlement today with the U.S. Securities and Exchange Commission (SEC) on a complaint and agreed to pay $3,025,066 in civil penalties and $6,005,079 in disgorgement of profits, including pre-judgment interest, in connection with contracts for which it paid kickbacks to the former Iraqi government.

Note that so far I can only find coverage of this story in this brief piece from Reuters.

So here we go again. Yet another big health care corporation, in this case, an international pharmaceutical company, admits to criminal conduct, and agrees to operate under a deferred prosecution agreement, while also paying additional millions in a civil settlement. In this case, the amounts of money paid were not particularly large, but the nature of the conduct involved, involving paying to play with a particularly notorious dictator, was striking.

Like most cases involving settlements for unethical behavior, or even deferred prosecutions or convictions for criminal behavior, this one has attracted almost no attention. Have such stories become like "dog bite man" stories, so commonplace that they deserve no notice from a public that has become cynical?

As we have said before, while human beings authorized or committed the acts that got the organization in trouble, rarely do these people seem to suffer any negative consequences. At most, the organization may pay a fine. In this case, the fine was, in corporate terms, tiny. However, even a large fine, however, may come out of dividends or the stock price, dispersing the cost to stock-holders, or out of salaries across the board. Thus, those who got the organization into trouble are unlikely to feel pain from it. Perhaps because of reverence for all organizations related to health care, and fear that the bankruptcy of any health care organization, even a health care insurance company, will leave patients in the lurch, prosecutors do not seem inclined to actually prosecute such organizations. The net effect, though, seems to be that dishonest executives of health care organizations can continue to act with impunity.Until bad leadership of health care organizations leads to negative consequences for those practicing it, health care leadership can be expected to continuously degrade.

Hat Tip to the White Collar Crime Prof Blog.