SaludCoop Executives Behind Bars After Health Care Fraud Unraveled

The SaludCoop scandal, involving the collapse of a major private health insurance firm in Colombia thirteen years ago, has culminated in a significant legal ruling. Carlos Palacino, the ex-president of SaludCoop, has been sentenced to fifteen years and eight months in prison for his role in “procedural fraud and continuous swindling.” Alongside the prison term, Palacino faces a fine of 1,313,000 million pesos. Additionally, he is prohibited from holding any public office for 88 months. Javier Sabogal, the former vice-president of SaludCoop, received the same sentence, marking a decisive moment in the case’s resolution.

Colombia’s justice system has uncovered a corruption scandal responsible for the downfall of SaludCoop, the country’s biggest private health firm, in the early 2000s. Starting in 2011, SaludCoop faced severe financial issues, leading to state intervention to prevent its collapse. Despite five years of government oversight, the company was unable to recover and was officially dissolved in 2016.

The judge decreed the “conditional suspension of the execution of the sentence and home imprisonment”, so that the sentence will be effectively served in a penitentiary center.

The collapse of a healthcare giant

During the process, the prosecutor’s office proved that, while he was president of SaludCoop, Palacino had “full knowledge” of the issuing of 2,912 checks which were not delivered to health service providers, but that were cancelled or kept, and that with these checks 14,000 million pesos were embezzled from the health system.

According to information provided by W Radio, “the titles were used to give the appearance of legality to payments to health service providers and suppliers that in reality never existed. With this maneuver, the then Security and Guarantees Fund disbursed in favor of SaludCoop 14,000 million pesos for recoveries for the supposed care of patients”.

Likewise, it was proven that Vice-President Sabogal, who had the powers of financial director, was involved in the preparation of 913 false invoices that were taken from the Security and Guarantees Fund. This criminal maneuver facilitated the recovery of 9,673 million pesos.

For these facts, the prosecutor’s office issued an indictment resolution and called to trial the former president and legal representative of SaludCoop EPS, between 1995 and 2010, Carlos Palacino, who has been under preventive arrest since March 2018.

Second conviction of both managers

It should be recalled that the conviction that occurred yesterday, February 29, 2024, is the second conviction that both executives have received from the Colombian justice system. On November 14, 2023, a court in Bogota convicted Palacino and Sabogal for the crimes of forgery in private documents, procedural fraud and swindling, and maintined the decision of the Superior Court of Bogota to order a prison sentence of nine years and a fine of 112,000 million pesos.

The prosecutor’s office warned that the resources that should have been used for the provision of health services to its nearly 7 million members were diverted to increase the personal assets of the health care company. In that process, Palacino was found guilty of diverting more than 390,000 million pesos from the public fund, with which he bought real estate in Colombia, Mexico and Ecuador, bought buildings and offices, made loans and even paid for personal trips and bought luxurious vehicles.

The former president of the health insurance company also carried out maneuvers, according to the investigating entity, which modified the population census covered by the company. Thus, 240,000 members who appeared as adults were actually under 18 years of age.

Health performance in Colombia

For 30 years, the health system in Colombia has operated with private companies, known as EPSs, which act as intermediaries between the money paid by the state and the companies that provide medical care in the country, the IPSs. The former are large companies where users are affiliated in order to have access to health care.

Although the lion’s share of the cost is borne by the state, these EPS companies collect public money and use it to pay for hospitals and primary care in the IPS.

Twenty years ago, SaludCoop became the most important EPS in Colombia by volume of affiliates. The health giant began to suffer from financial problems, as has been proven in the trial, due to the mismanagement and swindling that its top leaders committed until the company was plundered.

Finally, history repeated itself and the EPS ended up disappearing after a period of time under state intervention to guarantee medical care to users. The health reform project which the Colombian government has been pursuing for months aims to substantially modify the role of these companies, prioritizing public management in the Colombian health system.

The debate, controversial and combative, still has a long way to go before the legislature will have the last word on how the country’s health system will look in the coming years.