Justice Department Delays $250M Settlement in HCA Medicare Fraud Case

The Justice Department has delayed for eight months a proposed settlement in a Medicare fraud case against HCA, the nation's largest for-profit hospital chain, over concerns that the agreement "may be too favorable" for the company and could "damage the government's civil fraud case against it," the New York Times reports. HCA officials announced in March that the company had agreed to pay the government $250 million to resolve disputed cost reports, or expense claims, submitted to Medicare between 1993 and 2001. The agreement, negotiated by HCA and Medicare officials, requires approval from the Justice Department. The department has delayed approval for eight months to allow accountants and other experts to study the cost reports. In the past few years, the Justice Department has identified several HCA cost reports that it says include fraudulent claims. The proposed $250 million settlement also would cover cost reports not included in the government's civil fraud case. Justice Department officials criticized the settlement amount as "far too low" and said that the agreement could "undermine the government's position in court on the remaining reports," the Times reports. John Phillips, an attorney for former HCA employers who have cooperated with the government in the case, called the proposed settlement "so low it's shocking," and an accountant hired by the government to review evidence in the case described the amount as "grossly inadequate," one unnamed government official said. However, John Hellow, an attorney for HCA, said, "The Justice Department does not always understand enough about the Medicare payment system to know whether there was a real problem or not. In the vast majority of instances, the filings were consistent with the law." He added that the proposed settlement "should have been approved long ago."

The delay in the proposed settlement with HCA "comes at a time when some members of Congress and some people in the health care industry say the government appears to be pursuing health care fraud less aggressively," a trend that they attribute to the appointment of Tom Scully, a former hospital lobbyist, as CMS administrator, the Times reports. In a recent letter to HHS, Sen. Charles Grassley (R-Iowa) cited the HCA case as evidence that the department "is not effectively enforcing the False Claims Act" in health care fraud cases. He wrote that under the proposed settlement, CMS is "proposing to excuse HCA from even routine review of thousands of Medicare cost reports" and "seeking to allow HCA to resolve more than $1 billion of liability to the Medicare program for only $250 million, based on little to no evidence supporting this low figure." Scully disputed the allegations. "There is some perception, which I don't think is fair, that we are not aggressive on health care fraud. I have bent over backward to avoid any involvement in the HCA case," he said (Pear, New York Times, 11/19).