FRIDAY, MARCH 16, 2001

WWW.USDOJ.GOV

JUSTICE DEPARTMENT SUES HCA - THE HEALTH CARE

WASHINGTON, D.C. - The Justice Department announced today that it has filed civil complaints in eight False Claims Act whistleblower lawsuits alleging fraud by HCA - The Healthcare Company (formerly known as Columbia/HCA), the largest for-profit hospital chain in the United States. The lawsuits charge that HCA, over the past decade, has systematically defrauded and unlawfully claimed hundreds of millions of dollars from Medicare, Medicaid and other federally funded health care programs. The lawsuits address three broad categories of fraud schemes - the payment of kickbacks to physicians to increase the numbers of government-insured patients, the inflation of hospital cost reports to increase Medicare and other government reimbursement and kickbacks and inflated cost reports for wound care services.

In December 2000, a partial settlement was reached with HCA in connection with a number of other fraud allegations, involving laboratory billing, upcoding of inpatient diagnoses - the practice of using billing codes that provide higher payment rates than the codes that actually reflect the service furnished to patients, home health overbilling and charging of other non-reimbursable home health costs disguised as management fees and community education. HCA agreed to pay $745 million to settle those claims and at the same time settled its corporate criminal liability, paying $95 million in criminal fines.

The lawsuits are pending in U.S. District Court for the District of Columbia, where 28 qui tam suits filed around the country have been consolidated. A number of the pending qui tam cases will be resolved or partially resolved by the December settlement. The complaints filed today address the government's civil claims that HCA did not settle with the December agreement, including damages for some of the conduct to which HCA companies pled guilty in January 2001.

Healthcare Corporation et al.; United States ex rel. King v. Columbia/HCA Healthcare Corporation et al.; United States ex rel. Mroz v. Columbia/HCA Healthcare Corporation, et al. the government alleges that, from the time one of its predecessors, Columbia Hospital Corporation, was formed in 1987 in El Paso, Texas, many of HCA's hospitals engaged in a pattern and practice of paying kickbacks to physicians to induce and reward patient referrals and tying the financial interests of certain physicians to the success of the hospital. The government alleges that the kickbacks and financial relationships violated the Anti-Kickback Statute, and a provision of the Social Security Act commonly known as the Stark Statute. Both laws were enacted to ensure that health care providers do not make treatment decisions based upon improper financial considerations rather than the necessity, reasonableness, quality and effectiveness of services. Congress sought to deter healthcare providers from making utilization decisions based upon improper incentives created by kickbacks and by their financial interests in and relationships with other healthcare providers. The complaints allege that HCA hospitals submitted false claims to the government to receive payments for services rendered to patients referred to the hospitals by the physicians who received kickbacks and other improper financial incentives. An HCA subsidiary pled guilty to certain charges of the Anti-Kickback Statute on January 11, 2001.

In United States ex rel. Alderson v. Columbia/HCA Healthcare Corporation and United States ex rel. Schilling v. Columbia/HCA Healthcare Corporation, the government has alleged that HCA and its predecessors engaged in a pattern and practice of knowingly including unallowable charges in cost reports, unlawfully shifting costs from hospital departments paid flat rates set by Medicare to departments reimbursed on cost, and committing a variety of other accounting improprieties, all designed to extract from Medicare and other government programs money to which the HCA hospitals were not entitled. Many of these schemes were known to HCA management and documented on internal documents known as "reserve cost reports." An HCA subsidiary pled guilty to certain of these charges on January 25, 2001.

In United States ex rel. Marine v. HCA-The Healthcare Company et al, the government has alleged that by improperly shifting home health costs from Cedars Medical Center to HCA's other Miami area hospitals through their cost reports, HCA received government funds to which it was not entitled.

Two of the lawsuits, United States ex rel. Parslow v. Curative Health Services, Inc. et al., and United States ex rel. Lanni v. HCA-The Healthcare Company et al., allege that 56 HCA hospitals across the country operating outpatient Wound Care Centers committed fraud by knowingly including claims for unallowable expenses on Medicare cost reports. In Parslow, the government alleges that HCA and Curative engaged in a scheme to disguise and include unallowable advertising costs on the hospitals' costs reports. An HCA subsidiary pled guilty to these charges on January 25, 2001. The government also alleges that certain HCA hospitals paid kickbacks to Curative, also in the guise of management fees charged to Medicare on cost reports, for recommending and arranging for wound care patients to receive services at HCA hospitals. Separately, in Lanni, the government alleges that HCA and some of its hospitals improperly and knowingly included the cost of Procuren, a proprietary wound salve manufactured by Curative, on Medicare cost reports even after the Department of Health and Human Services declared the product to be one Medicare would not pay for because it had not been approved by the Food and Drug Administration.

Under the qui tam provisions of the False Claims Act, individuals may sue on behalf of the United States and allege violations of the Act and potentially receive a share of any recovery to the treasury. The government has the opportunity to investigate the case, and intervene in it and prosecute the action, or decline it and let the private plaintiff litigate the case. The complaints filed today are in cases in which the government has intervened.

The Department also announced that in filings made since the December 14 settlement and today, the government has informed the court that it declined to intervene in a number of the pending qui tam cases. The government has also asked for dismissal of the claims of five whistleblowers, in both declined and intervened cases, on the grounds that the False Claims Act bars their actions.

The government filed these complaints, notices and motions on March 15 according to the terms of a scheduling order entered in the consolidated proceeding pending before U.S. District Court Judge Royce C. Lamberth.

###

01-111