Opinion ID: 752178
Heading Depth: 3
Heading Rank: 3

Heading: Lobbying Expenses

Text: 13 Medicare reimburses providers only their actual costs for patient care. Thus, Medicare providers cannot make a profit. A legislative proposal exists, however, that would change this system. Under the proposal, called the prospective payment system, or PPS, providers would receive a flat fee for patient care. Hence, an efficient provider--or one that successfully inflated the baseline costs on which the flat fee rested--could realize a profit. As Jack explained in a speech to First American employees, with PPS First American could go public and make lots of money. 14 For this reason, Jack hired lobbyists to promote PPS. Some were politicians such as former Georgia senator Mack Mattingly, whom First American hired as a consultant to introduce Jack to influential lawmakers and to exploit his connections for First American's benefit. Others were full-time, professional lobbyists. One of these was Paul Berry, a former roommate of President Clinton's. First American hired Berry, a federally registered lobbyist, in 1992 and 1993. Although nominally a consultant, Berry in fact lobbied for First American. For example, he memoed Jack a recitation of his progress in persuading lawmakers of PPS's advantages. And Jack himself described Berry's job as help with the project of get[ting] prospective pay so that First American could go public. (R.41 at 483.) Furthermore, Berry's functions included introducing the Millses to Capitol Hill staffers and members of President Clinton's newly formed health care task force. Another lobbyist was Steve Clark, a former attorney general of Arkansas and friend of President Clinton's, who was hired as a vice president of managed care. Clark was well connected and succeeded in getting Jack into a foursome with Donna Shalala, Secretary of Health and Human Services, at a charity golf tournament in Texarkana. 15 In addition to exploiting their networks, Clark and Berry worked hand-in-glove with two Washington lobbying firms--one Democrat and one Republican--Global USA and the Borden Group. Together, they orchestrated a large First American campaign focused on changing certain proposed legislation. This campaign included television advertisements that were facially for nurse recruitment, but were in fact intended to influence congressmen at home during recess. The drive also involved a mass distribution of a pro-PPS position paper to First American employees with the instruction for them to retype it and send it as a letter to the editor to their local papers. Some of this lobbying activity was nominally for the American Federation of Home Health Agencies, an organization that Jack claimed to control. 16 Lobbying costs are not reimbursable. First American's lobbying expenses were therefore reported on First American's cost reports as consulting expenses, which are reimbursable. There was no mistake here: Borden Group bills were indeed originally taken off First American's cost report by First American's reimbursement department. At Jack's direction, however, the bills were claimed on the report. And these misrepresentations were backed up by well-engineered paperwork. For instance, the check request generated to pay Mattingly's fee for introducing Jack to important politicians showed the purpose of the check as consulting fee for matters relating to existing regulations--an arguably reimbursable cost. All the contracts with the other lobbyists were couched in consulting agreement terms; Berry's contract in fact forbade him from lobbying.