The U.S. Securities and Exchange Commission (SEC) is investigating whether insider trading took place during a 2013 incident in which financial institutions were tipped off that Medicare was about to raise reimbursement rates.
The SEC is looking into an email blast made in April 2013 by Haight Securities discussing the potential rate increase before it was publicly announced, the New York Times reported. The recipients of the emails used the data to buy stocks in health plans and other companies that would benefit from the rate increase.
"In recent years, we've had a lot of spending on big government programs--and when the dollars start flowing, investors notice, and so do regulators," Scott A. Coffina, partner in the white collar defense group at the law firm Drinker Biddle & Reath, told the Times.
However, the investigation has been hampered by the U.S. House of Representatives Ways and Means Committee, which has refused to comply with an SEC subpoena regarding one of its own staff members, the Times reported.
The staff member, Brian D. Sutter, allegedly had communications with Medicare staffers and an executive with Humana about a deal that was cut to smooth the permanent confirmation of Centers for Medicare & Medicaid Services Chief Marilyn Tavenner in exchange for changes in methodologies that would allow reimbursement rates to rise rather than fall. The SEC is trying to determine Sutter's exact role in how Haight Securities received the information that was the basis of the client email. Humana's stock rose 7 percent in the minutes after the email was sent out, according to the Times.
"We have access to information that is not available to the public, and that information should not be made available to others who want to trade on it," said Rep. Louise M. Slaughter (D-NY), who co-sponsored legislation to ensure that members of Congress and by extension, their staff, should not exploit inside information.
However, other industry observers say that it will be tough for the SEC to make a case that such information is confidential and should be closer to the vest.
The SEC has not taken a lot of action against healthcare organizations as late, although it did recently ding Jackson Health for misleading investors in a bond sale.
To learn more:
- read the New York Times article