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Op-Ed | The American Prospect | April 4, 2022

The Corporate Past Of Jeffrey Zients

CoronavirusEthics in GovernmentRevolving Door
The Corporate Past Of Jeffrey Zients

In the span of a single week in March, a two-part vanishing act disappeared America’s COVID response plan and the man overseeing it. On March 17th, COVID czar Jeffrey Zients announced that he would be replaced in a month’s time by Brown School of Public Health dean and Albright Stonebridge consultant Ashish Jha, who is set to take over a job without a working budget. According to the White House, basic services like COVID testing, free antiviral drugs, and vaccine funding will all expire without immediate action from Congress to fund these efforts. A deal for $10 billion in funding, less than half of what the administration requested, is trudging through Congress.

The hasty exit of Zients, the government’s most senior pandemic coordinator, follows his attempt to downplay the health impacts of the disease, encourage the removal of mask mandates, and incentivize a return to the workplace. As the COVID coordinator, his leadership and rhetoric read to many as more management consultant than public-health expert.

Zients’s defenders have regularly responded to this criticism by pointing out that he has invested in health care companies throughout his career, making the claim that this executive experience should qualify him as a health policymaker. But a Prospect investigation into those very firms reveals a disturbing pattern that suggests exactly the opposite.

Over the span of two decades, the health care companies that Zients controlled, invested in, and helped oversee were forced to pay tens of millions of dollars to settle allegations of Medicare and Medicaid fraud. They have also been accused of surprise-billing practices and even medical malpractice. Taken together, an examination of the companies that made Zients rich paints a picture of a man who seized on medical providers as a way to capitalize on the suffering of sick Americans. In the end, it seems to have all paid off.

The most egregious violation is documented in a 2015 Justice Department settlement announcement. Portfolio Logic—the investment firm Zients founded with his own money—agreed to pay almost $7 million to resolve allegations of fraudulent Medicare and Medicaid billing, involving a subsidiary (Pediatric Services of America Healthcare, or PSA) that it purchased in 2007.

According to the DOJ, PSA pocketed health care overpayments from the federal government instead of returning them, and even overstated the length of time they’d provided services covered by Medicare and Medicaid. PSA also asked for money from the Georgia Pediatric Program for a home nursing program without documenting any home nursing at all, according to the settlement.

Edward J. Tarver, the United States attorney prosecuting the case, wrote, “The failure to report and return a known overpayment is a serious offense that ultimately drives up the costs of health care for all of us.”

Sheila McCray, the whistleblower in the Portfolio Logic/PSA case, said that when she tried to report the fraud, upper management told her to “hold off to see whether the government ‘caught’ the errors.” McCray says she was then reprimanded with pay cuts and demotions, before finally being fired. A second whistleblower, director of clinical nursing at PSA Yvette Odumosu, also alleged wrongdoing, suggesting that the highest levels of the company were aware of the illegal business practices and ultimately encouraged this behavior.

PSA wasn’t the only company in Portfolio Logic’s portfolio that ended up paying millions to settle insurance fraud. Amedisys, a major American home health care provider and currently the second-largest hospice service provider in the country, settled a similar Medicare and Medicaid fraud suit one year earlier for $150 million, many times more than the PSA case.

According to the DOJ, between 2008 and 2010 “Amedisys allegedly billed Medicare for nursing and therapy services that were medically unnecessary or provided to patients who were not homebound, and otherwise misrepresented patients’ conditions to increase its Medicare payments. These billing violations were the alleged result of management pressure on nurses and therapists to provide care based on the financial benefits to Amedisys, rather than the needs of patients.”

Just a few years later, Zients was heading up President Obama’s efforts to fix the hobbled Obamacare website rollout. With the fraud allegations still unsurfaced, Zients was lauded as a whiz kid, having single-handedly saved the rollout of Obama’s singular policy achievement. (In reality, Zients mainly just hired a team of actual experts, and then bought them pie as they worked.) Years earlier, firms he invested in were allegedly defrauding the same system.

Out of dozens of profiles, write-ups, celebrations, and plaudits heaped on Zients’s managerial brilliance, nowhere did the Beltway press note that his fortune was growing thanks to his companies grabbing at government health care money in an allegedly fraudulent manner. They also failed to ID his business partner, Eric Minkove, who as managing director of Portfolio Logic helped Zients oversee and acquire companies bleeding both citizens and the government’s Medicare coffers dry. Allegedly.

According to Minkove’s LinkedIn profile, he began his career at the Corporate Executive Board, a management consultancy where Zients made the fortune he would use to fund Portfolio Logic. This was followed by a stint at McKinsey, before reuniting with Zients. Minkove then went on to become CEO of a Portfolio Logic investment, Best Practices, Inc., which is a medical outsourcing company that has been accused of both medical malpractice in the death of an infant and, later, potentially illegal billing practices. According to an archived version of the company’s now-defunct website, Best Practices, Inc., employs “a process-centric approach to overlay business practices on clinical care. We use execution-oriented training programs to drive excellence in risk reduction, customer satisfaction, leadership, and billing.”

After managing Best Practices, Inc., Minkove revolved into the federal government for a yearlong stint at both the Office of Management and Budget and the General Services Administration, the gateway agencies to federal funding and private contracts. Zients had overseen OMB as its acting director two years earlier in 2010. In 2013, Minkove assumed the role of CEO at PSA, where he stayed until 2015, when the DOJ announced its settlement with the company. That year, Minkove became a partner at private equity fund TPG Growth. This role wasn’t affiliated with Zients, until Minkove helped sell TPG’s portfolio firm NorthStar Anesthesia to the Cranemere Group, which Zients helped start after leaving the Obama administration. Not long after the sale, Minkove himself would depart TPG to rejoin Zients at Cranemere and assume the role of chairman at NorthStar.

Before Cranemere acquired it, NorthStar had already been accused of gross medical malpractice and overt surprise billing, which involves presenting patients with high charges for unexpected “out of network” services. These trends continued under the new ownership. NorthStar boasts dismal reviews from the Better Business Bureau. In February, ProPublica reported the story of a man who donated his kidney to save his cousin’s life. Living organ donors are never supposed to receive a bill for their act of bravery, and yet NorthStar Anesthesia billed Elliot Malin for $13,000, and threatened to send his bill to collections if he didn’t pay. After being notified, NorthStar hurriedly tore up the bill and claimed it was a mistake.

Cranemere Holdings, which Zients left to take on his current role and where Minkove currently serves as managing director, has invested in multiple health care companies premised on maximizing profits from medical billing.

One of those companies, Arietis, is “a patient-focused RCM company with an innovative approach and a creative, fun team.” RCM stands for “revenue cycle management,” a euphemism for medical billing and its accompanying apparatus. Arietis’s CEO, Ashwini Kotwal, is the former CFO of NorthStar Anesthesia, and would have had direct knowledge of NorthStar’s prior billing practices and their profit-generating potential.

In addition to Arietis, Cranemere is also heavily invested in two medical outsourcing companies, the kind that are notorious for stripping down services and maximizing revenue through billing practices. One company, Extant Healthcare, is engaged in outsourcing of surgeons and nurses. In January, a bipartisan coalition of lawmakers wrote to Zients to urge an investigation into price-gouging by outsourcing nursing companies. That crackdown has failed to materialize.

Outpatient Imaging Affiliates (OIA), another Cranemere company that constructs and oversees hospitals’ imaging facilities, also oversees all revenue cycle management for them, giving it control over billing and the cost of service. According to an Axios report, OIA’s “flagship partner” UVA Health in Charlottesville, Virginia, has an F rating for surprise billing, having filed over 7,000 court actions against patients seeking millions in surprise-billing fees. Of the 100 largest hospitals measured by revenue, UVA Health made it to the top 3 for worst surprise-billing offender.

Returning to the White House after Cranemere, Zients reported in his financial disclosures that his wealth had swelled to somewhere between $89.3 million and $442.8 million. No small part of that wealth was generated by companies hounding Americans to pay for medical treatment and making dubious billing to the federal government. As rumors swirl about Zients succeeding Ronald Klain as President Biden’s chief of staff, his corporate record raises serious questions about his fitness to serve in an administration that has attempted to market itself as a champion of working people. As Politico reported during the Biden transition, a CEO on Obama’s Jobs Council “remarked that he thought Zients, then a top Obama aide, was a Republican.”

PHOTO CREDIT: “Jeffrey Zients” by Center for American Progress is marked with CC BY-ND 2.0.

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