Former General Counsel for Minnesota Hospital Association Offered $150k as ‘Hush Money’ to Stay Silent on Healthcare Fraud

In 2010, David Feinwachs was asked to look into what he describes as a lack of transparency and accountability in Minnesota’s Medicaid program. As general counsel for the Minnesota Hospital Association, Feinwach found that certain hospitals were being reimbursed well below their costs while four HMOs were making an astounding amount of money off the state’s Medicaid program.

ambulance-1334534-mAs he learned more, the figures struck Feinwachs as nearly impossible, leading him to conclude that fraud must somehow be involved. His suspicions were legitimized when, later in 2010, he was on a conference call in which a woman with the Department of Human Services admitted that the state was “playing with the books,” in effect bilking federal dollars.

After the call, Feinwachs went to his boss and said that what he heard was not only inappropriate, it was Medicaid fraud. Shortly thereafter, he was put on administrative leave and ultimately fired for insubordination.

Here’s where the story takes a weird turn: not long after he was terminated, Feinwachs was offered $30,000 in exchange for signing a severance agreement saying he wouldn’t speak about the Medicaid fraud to anyone. He refused. Three weeks later, he was again approached, this time by the person who fired him. Feinwachs was this time offered $150,000. He again refused, but this time took action by filing a lawsuit against the HMOs.

At the beginning of 2011, one of the four HMOs made a strange admission. UCare told the state that it was refunding $30 million, describing the sum as a donation because Minnesota was in the middle of a budget crisis. But UCare also sent a letter to the committees in charge of oversight for HMOs and the state Medicaid program, saying they were giving back the money because they were paid at an inflated rate.

According to Feinwachs, this admission, “together with the statement on the conference call, virtually cemented the notion that this was fraudulent.” In spite of this, Feinwachs lost his lawsuit against the HMOs. Still, he believes he continues to fight the good fight by lobbying his issue at the state capitol. “If you are within the system, you play the game,” Feinwachs told the Corporate Crime Reporter. At some point, every once in a while, somebody decides – enough is enough. If nothing else, I’d like to be remembered as the guy who didn’t take the money and spoke out.”