COLUMBIA: Gov’t Joins Whistleblower’s Fraud Suit
The Department of Justice announced yesterday that it has joined a whistleblower lawsuit against Columbia/HCA Healthcare Corp. and Quorum Health Group Inc. Bloomberg News/Tampa Tribune reports that the suit, filed in 1993 by a former Quorum employee and unsealed yesterday in Tampa, charges the hospital operators with defrauding Medicare and other federal health programs since "at least 1984" by filing "bogus" reimbursement claims (10/5). According to the suit, Columbia and its former subsidiary Quorum "were keeping two sets of books" -- one containing "aggressive" cost reports they filed with the government and one with reserve reports containing the correct billing information. While the suit does not name a specific amount of damages, it charges that the federal health programs "have been damaged in the amount of many millions of dollars." The Justice Department said more than 200 hospitals in 37 states are defendants in the case (Eichenwald, New York Times, 10/5). According to USA Today, Justice's decision to join the whistleblower suit "could be a precursor to filing its own civil fraud action against the USA's largest hospital chain" (Lowry, 10/6).
The Nashville Tennessean reports that the case amounts to the "first time" Nashville-based Columbia has been "formally" accused of "wrongdoing that allegedly began on the initial watch" of CEO Thomas Frist Jr. The charges "partly mirror those under investigation in the government's criminal case" against Columbia, which is also being heard in Tampa (Bell, 10/6). The New York Times reports that the suit is also the "first time since a series of government raids last year that federal officials have publicly contended in court that [Columbia] itself engaged in a sweeping fraud scheme." Healthtrust, a for-profit hospital chain acquired by Columbia, was also named in the suit. The Times reports that the "defendants share one thing in common: they were all at one point owned by or were owners of the Hospital Corporation of America," which was led by Frist until 1994 when Columbia bought the company. Frist became CEO of Columbia last year after former CEO Richard Scott stepped down (10/6).
Billion Dollar Tune
Responding to yesterday's developments, Columbia spokesperson Jeff Prescott said, "The issues in this (whistleblower) suit are for the most part identical to some similar allegations we had known about and, in fact, been in discussions with the government about." He also said "the government's intervention may facilitate a faster settlement of the suit" (Tennessean, 10/6). According to analysts, Columbia "may have to pay more than $1 billion to settle the various fraud claims being investigated by the government, including the cost-reporting case" (New York Times, 10/6).
Innocent Until Proven Guilty
James Dalton Jr., CEO of Quorum, conceded that his company "may have made mistakes in cost reports over the years," but defended Quorum's "rigorous honesty," noting that it "has been cooperating with the investigation." In a statement, Dalton "said generally accepted accounting principles require hospitals to estimate an allowance for cost-report settlements still to come" (Tennessean, 10/6). But according to Phillips & Cohen attorney Stephen Meagher, whose law firm represents James Alderson, the former Quorum worker who filed the whistleblower suit, "The evidence we have seen absolutely establishes systemic wrongdoing at Columbia. Given the size of reimbursement claims contained in the cost reports, the liability is potentially staggering" (New York Times, 10/6). Phillips & Cohen attorney Peter Chatfield said, "They knew that only one-quarter of cost reports ever get a full audit. When they do catch up, hospitals simply pay back the money. So it's like an interest-free loan" (Goldreich, Washington Times, 10/6). The Los Angeles Times reports that Alderson's case was brought under the False Claims Act, which entitles whistleblowers to 15% to 25% of recovered dollars (Rosenblatt, 10/6). Also, see coverage of the story in today's St. Petersburg Times -- www.sptimes.com.