Columbia/HCA payout to help settle fraud probe

Tentative agreement with Justice includes $745 million payment

Health care

May 19, 2000|By NEW YORK TIMES NEWS SERVICE

The Columbia/HCA Healthcare Corp., the nation's largest health care company, has agreed in principle to pay $745 million in civil penalties to resolve a portion of the government's inquiry into whether its success was achieved in part by cheating federal health programs.

The settlement, if approved, will be by far the largest health care fraud settlement ever obtained by the Justice Department, exceeding the next highest by more than 50 percent.

But the deal announced yesterday does not bring an end to the sprawling investigations into the health care company, some of which have lasted more than seven years. Criminal and other civil investigations into some of the company's business practices remain unresolved.

The settlement addresses civil allegations that the company fraudulently increased patient billings to the government from its hospitals and home health care businesses, and for unnecessary laboratory tests.

The allegations that remain unresolved have long been at the heart of the case: whether Columbia hospitals fraudulently overstated their expenses to increase reimbursement from federal health programs and engaged in illegal financial relationships with doctors.

Still, yesterday's deal included an unusual structure that will put immense pressure on both Columbia and the government to resolve the entire case before the end of this year.

Under the terms of the agreement, the criminal cases against Columbia must be settled by Dec. 31. If that does not happen - or if the government does not grant certain extensions for negotiations - Columbia can withdraw the settlement offer.

In other words, if the two sides do not resolve the criminal case this year, the government stands to lose hundreds of millions of dollars, while Columbia would return to square one in the negotiating process - or be on its way to trial."It's an elegantly crafted settlement to put the arm on everybody to get the rest of the deal done," said Stephen Meagher, a lawyer who represents some of the people who first brought allegations of fraud at Columbia to the government's attention. "It's a settlement time bomb."

The Justice Department issued a statement yesterday acknowledging generally that a tentative agreement had been reached with Columbia on certain issues.

Officials declined to comment further, as did Michael Chertoff, a lead lawyer in Columbia's defense efforts.

Victor Campbell, a senior Columbia executive, said that the company had hoped to resolve the entire case but that both sides had decided to announce the progress."Our goal had been to get a total global settlement," he said. "But we were at a point in time on three areas where we felt we could get a settlement and thought we should proceed with that."

Until yesterday, the largest health care fraud settlement was for $486 million, by Fresenius Medical Care AG, the nation's largest provider of dialysis services. The settlement, which was announced in January, involved allegations of fraud at National Medical Care, a dialysis provider that was being investigated by the government when it was bought by Fresenius in 1996.

The three areas covered by the tentative settlement with Columbia all involve technical financial issues that the government contends resulted in overpayments to Columbia by federal health programs.

The first involves a practice known as upcoding, in which hospitals receive larger payments from Medicare by inflating the seriousness of illnesses they treat. A 1997 computer analysis by the New York Times of more than 30 million billing records found that many Columbia hospitals billed Medicare for high-paying treatments far more often than competing hospitals serving similar populations. Federal authorities at the time called such findings an indication of possible over-billing.

The second portion of the settlement addressed allegations of fraud in Columbia's laboratories. In this area, Columbia is facing allegations that have been made against several other health care companies. During the past decade, these other companies have settled charges that they improperly "bundled" additional and unnecessary diagnostic analysis onto simple blood tests - in the end billing the government for the unneeded tests.

The last area of the settlement, involving Columbia's home health care business, is the most complex. Home care reimbursement from the government is based on expenses reported to federal health authorities in documents called cost reports.

But the government has contended that Columbia fraudulently added improper expenses onto the home-care business to increase reimbursement.

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