Feds Reach Largest Government Fraud Settlement
W A S H I N G T O N, Dec. 14, 2000 -- The Healthcare Company-HCA, the nation’slargest for-profit hospital chain, agreed today to plead guiltyto defrauding government health-care programs and will pay morethan $840 million in criminal fines, civil penalties and damages.
The agreement reached after a seven-year federal investigationtriggered by private whistleblowers is the largest government fraudsettlement ever negotiated by the Justice Department.
The company agreed to cooperate with a continuing investigationthat Attorney General Janet Reno said could still produce criminalcharges against individuals in what Deputy Assistant FBI DirectorThomas Kubic called “one of the FBI’s highest prioritywhite-collar crime investigations.”
The agreement did not settle civil allegations that HCAunlawfully charged the government for the costs of running itshospitals and that it paid kickbacks to doctors so they would referMedicare and Medicaid patients to its facilities.
The two HCA units that pleaded guilty — Columbia Homecare GroupInc. and Columbia Management Companies Inc. — agreed to pay morethan $95 million in criminal fines and were barred from furtherparticipation in federal health-care programs.
Separately, HCA agreed to pay $745 million in civil penaltiesfor its alleged false billing practices — a figure negotiated lastspring but not finalized until the criminal settlement wasannounced today.
Reno: Fraud Hurts
“Health care fraud impacts every American citizen,” Reno tolda news conference. “If you overbill the U.S. taxpayer, then we aregoing to make you pay it back and then some.”
She said it was the largest health-care fraud investigation inhistory, involving 30 U.S. attorney’s offices, 22 FBI fieldoffices, inspectors general from the Health and Human ServiceDepartment and the Office of Personnel Management, DefenseDepartment investigators and state fraud units.
HCA co-founder and chief executive Thomas Frist Jr., the brotherof U.S. Sen. Bill Frist, R-Tenn., said from the company’s Nashvilleheadquarters: “Today’s action represents one of the last stepsneeded to put the Columbia investigation behind us and allows us tomove forward, maintaining our focus on providing quality patientcare.”
Frist ousted Richard L. Scott as chief executive in July 1997and began a restructuring of the company. HCA got out of the homehealth-care business and sold or consolidated more than 100hospitals. The chain currently has about 200 hospitals.
Reno said the civil settlement covers allegations the companyoverbilled government health-care programs for services itperformed, charged for services it did not perform and for coststhat were not eligible for reimbursement.
In the criminal case, the two units agreed to plead guilty tofiling false cost reports, fraudulently billing Medicare for homehealth-care workers and management and wound care center workers,fraudulently billing Medicare and other health programs byinflating the seriousness of pneumonia diagnoses, paying kickbacksin the sale of home health agencies and kickbacks to doctors torefer patients, Reno said. The guilty pleas will be filed in Miami;Atlanta; Nashville; Tampa, Fla.; and El Paso, Texas.
Where the Money Goes
Assistant Attorney General David Ogden said that $731.3 millionof the civil settlement would to go the federal government, butthat some portion of that, up to a maximum of 25 percent, would beallocated through negotiations to private whistleblowers, of which29 have been identified publicly. “Whistleblowers brought valuableinformation to the attention of the U.S. government,” Ogden said.
An additional $13.6 million of the civil settlement will bedistributed to state governments for their share of losses underthe state share of the Medicaid program.
The company, formerly known as Columbia/HCA Healthcare Corp.,was alleged by whistleblowers and others in the health industry tohave defrauded Medicare, which covers the elderly; Medicaid, whichcovers the poor; Tricare, which covers the military and theirfamilies; and the Federal Employees’ Health Benefits program, whichcovers civilian federal workers.
Stephen Meagher, a San Francisco attorney who represents severalHCA whistleblowers, described the settlement as “prettymind-blowing.”
John Schilling, one of the whistleblowers, was a key witness andprovided documents in a 1999 criminal trial that resulted in prisonsentences for two mid-level HCA executives in Florida. They areappealing. Another executive was acquitted and a fourth pleadedguilty after a hung jury to avoid a second trial.
There have been no criminal convictions of any top HCAexecutives.