Debating in Tampa, Florida this month, Mitt Romney strongly denied that his investment company Bain Capital did “any work with the government like Medicaid and Medicare.”
However, under Romney’s “supervision,” Bain purchased and ran the Damon Corporation, which pled guilty to Federal conspiracy charges -- as a result of tens of millions of dollars in systemic Medicare fraud, alleges an ad now being run by a PAC sympathetic to former Speaker of the House Newt Gingrich.
When the dust settled after a consuming federal investigation, Damon was fined over $119-million, which was, at the time, the largest criminal healthcare fine in Massachusetts history, touts the ad.
As featured in the ad, Romney’s participation was characterized in 1996 by Corporate Crime Reporter: “As manager and board member of Damon Corp, Mitt Romney sits at the center of one of the top 15 corporate crimes of the 1990’s.”
All the above and more is set forth in a Winning our Future PAC video, “LIVE NOW: Blood Money: Romney's Medicare Scandal,” which backs up its dramatic representations with a catalog of documents made available to viewers on the Internet as a footnote to the film.
The Background
According to a cited Forbes report, in 1989, Bain Capital purchased controlling interest in Damon Corp., a medical testing company located in Needham, Massachusetts.
“During the time that Bain held its ownership of the company, Mitt Romney personally sat on the board of directors,” notes Forbes. “And during that same period, Damon Corp. was busy submitting fraudulent reimbursement claims to Medicare to the tune of millions of dollars charged for unnecessary blood tests.”
According to federal prosecutors, Damon was misleading physicians into ordering unnecessary blood tests, assuring the doctors that the testing would be covered by Medicare.
The criminal Information filed at the time by the U. S. Attorney for the District of Massachusetts charged that Damon bundled three different tests with certain blood panels, causing doctors to order tests that were not medically necessary for the treatment and diagnosis of Medicare beneficiaries. After physicians had ordered the medically unnecessary tests, Damon then billed Medicare for the bundled tests, knowing that the tests were in fact not necessary.
Medicare, the largest government payer for laboratory services, reimburses laboratories for clinical laboratory testing services only if those services are medically necessary for the diagnosis and treatment of illness or injury to Medicare beneficiaries.
The information further states that in 1988 and in 1989, Medicare announced across- the-board fee reductions to clinical laboratories like Damon for all laboratory services, as a part of an effort to control the growth of reimbursement for blood testing for Medicare beneficiaries.
The criminal Information charged that Damon, in direct response to Medicare's attempt to control its costs, bundled the unnecessary tests with other tests for the purpose of offsetting the Medicare rate reduction. The bundled tests included serum ferritin tests (a test that measures iron storage) and serum iron tests, which Damon bundled with a basic blood chemistry panel, and tests for apolipoproteins (a test that measures blood lipid proteins), which Damon bundled with a coronary risk profile.
The ferritin and serum iron charges involve a series of laboratory tests conducted on automated laboratory machines capable of performing a "panel" or "battery" of chemistry tests on a single specimen of blood.
Medicare pays a flat fee for chemistry tests performed simultaneously on an automated machine, requiring only that the ordering physician believe that at least one of the tests was medically necessary for the patient.
This panel of tests, which Damon called a "LabScan," was ordered by physicians in high volume for a variety of diagnostic purposes. By bundling, Damon received both the flat fee and the extra test charge as if doctors had separately ordered those tests.
Prior to the bundling, detailed the prosecutors, doctors had ordered these extra tests less than ten percent of the time that they ordered a LabScan test. After bundling the tests in 1988, that percentage increased to in excess of 90 percent.
As charged in the criminal Information, in order to insure that doctors did not complain about receiving the unnecessary iron and ferritin tests, “Damon gave those tests for free to physicians, made it difficult for doctors to order the LabScan without those tests, and did not disclose to the physicians that Damon was going to bill Medicare approximately $17 for each unnecessary test.”
The number of ferritin and serum iron tests billed by Damon to Medicare on an annual basis skyrocketed, explained prosecutors in the criminal pleadings, and Damon received millions more from government programs for the addition of these medically unnecessary tests.
According to the Forbes summary, by the time Damon Corp. pleaded guilty to defrauding the United States Government, Bain had conveniently and in the nick of time sold the company to Corning, Inc.
What Did Romney Know and When?
According to Forbes, when Mitt Romney was hammered with the scandal during his campaign to become the Governor of Massachusetts, he acknowledged that he did have some awareness of the shady dealings going on at Damon.
According to The Deseret News, when his Democratic opponent for the governorship, Shannon O’Brien, accused him of lax oversight at Damon and failing to report the fraud, Romney defended that he had helped uncover the illegal activity at Damon, asking the board’s lawyers to investigate. As a result, he said, the board took corrective action before selling the company in 1993 to Corning Inc.
However, according to the court records, the Damon scheme continued throughout Bain’s ownership, and prosecutors credited Corning, not Romney, with taking corrective action.
According to a Boston Globe report, then Republican gubernatorial candidate Mitt Romney, while insisting that he and fellow board members at Damon Corp. uncovered what was later determined to be a criminal scheme to defraud Medicare in 1993, acknowledged that the directors did not turn over their findings to federal authorities then investigating the medical testing industry.
While the medical testing company went bankrupt, with thousands losing their jobs, Bain Capital captured a $12 million profit— over $450,000 of that money going to Romney personally.
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