How Planned Parenthood Could Go Under, Courtesy of a Whistleblower With a Pro-Life Lawyer
A whistleblowing case about whether Planned Parenthood of California overbilled the government by $180 million for birth control pills illustrates one of those annoying truisms about corporate charity: No good deed goes unpunished.
Planned Parenthood is potentially on the hook because it successfully persuaded pharmaceutical companies to supply it with oral contraceptives at much cheaper rates than those given to retail pharmacies, on the grounds that it's a non-profit organization. Planned Parenthood then marked up the price of the pills when claiming reimbursement from the state Medicaid program. The marked-up price was still lower than that charged by high street drugstores, but the margin -- several million dollars a year -- appears to have been what keeps the group in business.
The case is limited to Planned Parenthood's California branches, but as the group receives funding from both state and federal reimbursers it could threaten the entire organization if it emerged that the practice was widespread. There is no evidence that is the case, as yet. But documents in the case suggest that the reimbursement margin was one of Planned Parenthood's major funding sources, and that its loss could be fatal to its California operations.
The case is being brought by a lawyer whose web site indicates he has very little interest in drug billing issues. Rather, he's a pro-life campaigner who appears to have identified a back-door way of putting Planned Parenthood out of business. Rather than challenge the group over the legitimacy of its abortion services, Jay Alan Sekulow is attacking it via an obscure drug-billing law.
Unfortunately for those who believe that women ought to have more reproductive rights than cattle, the DOJ's brief -- which argues that Planned Parenthood may have known what it was doing was wrong -- assists his case.
Until the case was filed, Planned Parenthood had negotiated a series of deals that were a win-win for everyone concerned: Poor women got reproductive care at low cost; the birth control they received helped prevent abortions; the state's reimbursement costs were lower than those it would have paid in the commercial market; and PP got the funding it needed to stay in business.
Then P. Victor Gonzalez came along. Gonzalez was Planned Parenthood of Los Angeles' CFO from 2002 until 2004, when he was terminated.
During that time he discovered that government reimbursement for drugs should be "billed at cost" under California law, and not at the "usual charge," which was Planned Parenthood's policy. The difference between the two rates allegedly added up to $180 million in over-billing in six years between 1997 and 2003, he claims. Gonzalez claims he was terminated for bringing the overbilling to the attention of management.
His suit provides several internal memos from Planned Parenthood which reveal how PP CEO Mark Salo and his team attempted to grapple with the problem once it dawned on them they may have gotten the law wrong. California's Department of Health Services told Gonzalez and Salo in 2004 that an audit would be conducted on their contraceptive purchases. Salo wrote in an email that if DHS forced Planned Parenthood to charge the government "only what we paid for the product," then "this could kill many of us." Planned Parenthood Los Angeles president Martha Swiller replied with a three-word message: "This is bad" (click to enlarge):
Later that year, Salo lobbied state Assemblywoman Hannah-Beth Jackson for a bill that would allow Planned Parenthood to continue billing under its "usual charge" scheme. The bill passed. But Planned Parenthood's problems were not over. Gonzalez told his colleagues that the DHS audit would discover Planned Parenthood's historic over-billing:
He also likened PP management's position -- which was that their lobbyists had made the problem go away -- to that of Enron president Jeffrey Skilling:
Sometime later that year he was let go. It was a classic management mistake: whistleblower cases frequently emerge when management, instead of fixing a problem, fires the person complaining about it. By doing that, Salo may have created the monster that threatens to beggar his organization if he loses the case.
Ironically -- from Gonzalez's lawyer's point of view -- if Planned Parenthood were to go under it could increase the number of abortions performed in California because of the reduction in the amount of low-cost birth control being handed out.
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