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Obama health ‘czar’ worked at legally troubled health firms

- The Washington Times - Tuesday, December 8, 2009

Nancy-Ann DeParle, one of President Obama's chief advocates for the health care reform bill wending its way through Congress, earned more than $6.6 million as a paid director for health care firms, some of which were targeted in government investigations or whistleblower lawsuits on suspicions of billing fraud and other legal problems.

Five of the companies faced allegations ranging from overcharging Medicare to failing to warn patients of the dangers of their products, according to a study by the Investigative Reporting Workshop at American University and a review by The Washington Times of U.S. Securities and Exchange Commission (SEC) records and Mrs. DeParle's financial disclosure statement.

Mrs. DeParle, a former top administrator for the agency that runs Medicare and Medicaid, has resigned from her corporate directorships and said she will remove herself from any matters directly involving the companies. According to a handwritten note attached to her financial-disclosure form by an ethics official in June, she also has divested "all conflicting assets."

But a Washington watchdog group said it plans to monitor the pending health care reform legislation to make sure her new job does not conflict with her prior industry ties.

"We want to look at it to be sure there was no conflict," said Steve Ellis, vice president of Taxpayers for Common Sense. "We need to look at the end to see who wins and who loses."

Mrs. DeParle, named in March as director of the White House Office of Health Reform, collected at least $6.6 million from the health care companies since 2001, including directors' fees and the profits from selling stock that she acquired through options or awards as a director, according to American University's July study and a subsequent review by The Times. Most of the companies are publicly traded.

Nearly all the companies, whether they had legal troubles or not, have a huge stake in the shape of the pending health care bill. Mrs. DeParle is one of the administration's key officials helping to push through the legislation.

Her spokeswoman, Linda Douglass, said there was no conflict between Mrs. DeParle's involvement in health care reform and her past work as a corporate director for the health care companies, where she was not involved in day-to-day operations.

Mrs. Douglass described her boss as a dedicated public servant who sold some of her stocks at a loss and took a pay cut to accept the $158,500-a-year "health czar" job. She said that as a corporate director, Mrs. DeParle pushed for the companies to comply with federal and state regulations and investigations.

"Throughout her professional life, Nancy-Ann DeParle has been known for her integrity, extraordinary hard work and meticulous adherence to ethical guidelines," Mrs. Douglass said. "Now she is fighting to implement the president's health insurance reform plan."

David Axelrod, a senior Obama adviser, also praised what he called Mrs. DeParle's "honesty and integrity," saying that during health care reform meetings the two attended, he never saw her "advocate for industry at all" or "try to set policy."

Before she went into the private sector, Mrs. DeParle was a key health care adviser to President Clinton, running Medicare and Medicaid as administrator of the Health Care Financing Administration (HCFA) from 1997 to 2000. HCFA is now known as the Centers for Medicare and Medicaid Services.

In March, Mr. Obama named Mrs. DeParle and Health and Human Services Secretary Kathleen Sebelius to push his health care plan through Congress after his original choice for both jobs, former Sen. Tom Daschle, South Dakota Democrat, withdrew over questions about his income taxes and his work for the health care industry.

Mrs. DeParle did not have to undergo the Senate confirmation process that Mr. Daschle faced because she is a White House staffer, not a Cabinet officer. She reported $2.3 million in income on her financial disclosure form covering 2008 and through her May 13, 2009, filing.

The companies for which she served as a director include:

c DaVita, Inc., a Colorado firm with 1,513 outpatient kidney dialysis centers in 43 states and Washington, D.C., with more than 117,000 patients, most on Medicare. From May 2001 to July 2008, Mrs. DeParle received more than $1.64 million in directors' fees and profits from the sale of stock she acquired as director through options and awards, SEC records show.

The U.S. attorneys in Texas, New York, Georgia and Missouri have subpoenaed records from DaVita since 2004 in civil and criminal investigations, some of which involved how the company billed Medicare, according to the SEC records. The inspector general's office at Health and Human Services also subpoenaed the firm in December 2008 regarding its billings of Medicare for drugs.

DaVita said in May that the U.S. attorney in New York had closed that investigation without charges, but other inquiries are still pending, according to records that the company filed in November with the SEC.

"DaVita always cooperates fully and assists the federal government in all ongoing matters," said company spokesman Craig Handzlik.

While she was a board member, campaign disclosure records show, Mrs. DeParle gave $15,000 to DaVita's political action committee, which bankrolled the company's political friends.

c Boston Scientific, Corp., a developer, manufacturer and marketer of medical equipment including heart devices such as stints and defibrillators. Mrs. DeParle served as a director from April 2006 to March 2009, earning more than $174,808 in directors' fees, according to SEC records.

Boston Scientific said in an SEC filing that it received notice in 2008 of seven federal or state investigations into its practices. In a separate inquiry, the U.S. Army requested information about the company's "sales and marketing interactions" with doctors at an Army medical center in Tacoma, Wash.

c Guidant Corp., a heart device manufacturer accused of concealing flaws in some of its devices. Mrs. DeParle served as a director from May 2001 until its sale in April 2006 to Boston Scientific, earning at least $1.19 million in profits from the sale of stock she acquired through awards and options, SEC records show. Most of the profits came from cashing in her Guidant stock options when the company was purchased by Boston Scientific.

In May 2005, Guidant acknowledged that it had not told doctors over a three-year period that one of its defibrillators had a flaw causing it to short-circuit in about two dozen cases - including one in which a college student died. The company later recalled the product, and in November 2005, the New York attorney general's office accused Guidant of concealing safety problems with some of its defibrillators.

In November, Boston Scientific agreed to pay $296 million to settle a Justice Department investigation into charges that Guidant failed to properly report the problems with its defibrillators to the U.S. Food and Drug Administration (FDA).

Although she was a director of the company, Mrs. DeParle was "not aware of the defibrillator issue" until it was mentioned in a May 2005 New York Times article, Mrs. Douglass said.

In July 2003, a Guidant subsidiary pleaded guilty to felony charges of failing to report 2,628 incidents to the FDA in which one of its cardiac devices malfunctioned - including a dozen cases in which the patients died. The subsidiary agreed to pay $92 million to settle the case, the largest amount ever paid by a defendant up to that time in a case involving flawed medical equipment.

The total includes a $49 million payment to Medicare, Medicaid and the Department of Veterans Affairs to settle claims that they had paid for defective products.

Mrs. DeParle joined the Guidant board in 2001, a few days after the company told the FDA about the malfunctions with its cardiac device. She was involved as a director in trying to settle the issue, Mrs. Douglass said.

c Specialty Laboratories, Inc., a California-based chain where Mrs. DeParle served as a director from April 2001 to June 2004, earning an estimated $66,000 in directors' fees, records show. In 2002, the company was suspended for several months from receiving Medicare and Medicaid reimbursements for violating state and federal law by using unlicensed personnel in testing and as supervisors.

The company was cited for similar problems in 1999 by HCFA, which was then headed by Mrs. DeParle.

c Medco Health Solutions Inc., the No. 1 firm in the pharmacy benefits management business, where Mrs. DeParle began serving on the board of directors in October 2008, earning $13,500 in fees. The company has been the target of three federal whistleblower lawsuits, all of which are under seal and predate her board appointment. The company has spent nearly $2.6 million in federal lobbying, including on health care reform, for the first nine months of this year.

"Nancy-Ann DeParle was a valued Medco board member during her limited time of service," a Medco spokesman said in a statement.

c Cerner Corp., an information technology company that makes software for health care firms and could benefit from the Obama administration's plans to spend billions of dollars encouraging the use of electronic medical records. Mrs. DeParle was a director from May 2001 through March 2009, earning $970,900 in fees and profits from stock sales, according to the SEC records.

In February, Congress approved $35 billion in incentives for health care companies to modernize operations through the use of information technology. Cerner reported in an SEC filing last summer that although it did not expect an immediate boost from the technology provisions in the bill, "the longer-term potential could be significant" and the company was well-positioned to benefit from the incentives.

The legislation was passed before Mrs. DeParle became health care czar, but while she was a Cerner director.

c Triad Hospitals Inc., one of the largest publicly owned hospital companies in the U.S. with 54 facilities. Mrs. DeParle was a director from July 2001 to July 2007, when the company merged with Community Health System.

She earned $1.525 million in directors' fees and profits from stock and stock options when the companies merged, according to SEC records.

c CCMP Capital, a private equity firm where Mrs. DeParle was a managing director overseeing health care investments from August 2006 to her federal appointment. Her personal financial disclosure form shows that she received $1 million in salary and bonus from CCMP for 2008 and early this year.

It could not be determined how much she made from the firm in 2006 and 2007 because CCMP is not a publicly traded company. As part of her work, she served on the boards of two health care companies in which CCMP had invested - Legacy Hospital Partners and CareMore Health Plan.

Although her appointment has drawn some criticism because of her ties to the health care industry, others said she had established a record of fighting Medicare abuse.

"She is the person who put the notion of eliminating fraud and abuse in Medicare and Medicaid on the agenda at HCFA," said Dr. William L. Roper, dean of the School of Medicine at the University of North Carolina and one of Mrs. DeParle's predecessors at HCFA. "It should not be a bar to government service because you served honorably in the private sector."