NYT tells Cynthia Fitzgerald's Whistleblower Story

Cynthia Fitzgerald's dream job with Novation (an Irving, TX company that negotiates medical supply contracts for its 7,000 member hospitals) turned into a nightmare.

In 1998, a few months into the job, she became aware of improper sales practices and erroneous accounting that were draining millions of dollars out of public programs like Medicare through overcharges or unauthorized uses. She confronted her bosses, because she believed that if she told the people who could put a stop to it, it would stop. It didn't. Instead, Ms. Fitzgerald was fired. She decided to blow the whistle, and she's blowing it loud and clear.

Johnson & Johnson and Merck are two of the companies she included in her 2003 suit filed in federal court in Dallas. State and federal authorities in Texas are investigating Ms. Fitzgerald's allegations. The companies named in the suit claim that they didn't knowingly do anything illegal.

A 2005 audit by Daniel R. Livinson, the inspector general of the federal Department of Health and Human Services appear to bear out what Ms. Fitzgerald is saying. After studying the finances of three unnamed purchasing consortiums in response to repeated questions from Congress, federal agencies and the news media about their business practices, Mr. Levinson reported that their member hospitals “did not fully account” for such flows of money. In just five years, the discrepancies ran into the hundreds of millions of dollars.

Novation claims that any "underreporting was unintentional" and whined about the complexity of hospital cost reporting.

After Novation fired her, she was contractually forbidden from disclosing information about the company or filing lawsuits against it for three years, she says. Once that period lapsed, she gradually became aware she was eligible to file a suit under the False Claims Act. That led her to Phillips & Cohen, a law firm involved in whistle-blower cases.

The False Claims Act is a federal law that allows private individuals to sue on behalf of the United States if they believe that they have inside knowledge of a fraud. Their lawsuits stay under court seal at first, to give federal and state investigators time to look into the accusations quietly and to decide whether to join the case. If the government recovers money, the whistle-blower gets 15 to 30 percent of the amount.

Of the 20 largest False Claims Act recoveries listed on the Web site of Taxpayers Against Fraud, a group that supports whistle-blowers and their lawyers, 19 involved health care companies. (The other involved municipal bonds.)

The size of recoveries has soared in recent years. All told, the government has recovered more than $20 billion since 1986, when the False Claims Act was last amended, with $5 billion of it in the last two years.

The biggest single whistle-blower settlement to date was the $900 million that Tenet Healthcare, a hospital company, paid last year to settle accusations of overbilling the Medicare program. That settlement is dwarfed by the $1.7 billion that HCA, another big hospital chain, paid between 2000 and 2003 to settle a number of fraud suits.

Ms. Fitzgerald wasn't able to get another job in her field after Novation fired her. She did form her own company, Dimension Medical Supply.

Read this excellent account here.