Columbia / HCA Execs Charged With Fraud

Prosecutors charged three Columbia/HCA Healthcare Corp. executives with allegedly cheating Medicare of $1.8 million in indictments unsealed Wednesday, the first charges in a federal probe that has shaken the nation’s largest for-profit hospital chain.

Two regional executives for Columbia and another from the the firm’s Nashville headquarters each face charges of conspiracy and making false statements. The fraud indictments mark the first phase of the government’s sweeping investigation of Medicare and Medicaid overbilling, said Charles Wilson, the U.S. attorney for central Florida.

There was speculation that the indictments of the lower-level executives might lead to charges against others. Columbia’s two top executives, founder and Chairman Richard Scott and President David Vandewater, resigned last week after federal raids on Columbia facilities in seven states.

“It’s three indictments, but three out of what?” asked Leo Murphy, a fund manager at Pioneering Management, which owned 3.9 million shares of Columbia stock at the end of March.

Wilson said the indictments are “part of a large, ongoing investigation into Columbia/HCA. We consider this to be the first phase of our efforts. . . . We’re going to go where the investigation leads us.”

However, the indictments allege the illegal acts began in 1986, or six years before Columbia acquired the Florida hospital where the events are said to have occurred. The acts continued after the acquisition, the indictments say.

Robert Whiteside, a senior executive in the department that seeks reimbursement for Medicare-related expenses at Columbia hospitals, made an initial appearance in U.S. District Court in Nashville Wednesday.

His lawyer, Hal Hardin, said that Whiteside would plead innocent. The indictment “was quite a surprise to us. We look forward to clearing it up,” he added.

Two top executives at Columbia’s Florida operation also were named in the five-count criminal indictments unsealed in Fort Myers, Fla.: Jay A. Jarrell, 42, head of the company’s southwest Florida division and Michael T. Neeb, 35, chief financial officer of Columbia’s northern Florida operations.

“I am innocent and I have no comment at this time,” Jarrell told reporters as he left the U.S. Courthouse in Fort Myers.

He was released on $100,000 bond.

According to the indictments, handed up three weeks before the July 16 raids, Whiteside, Jarrell and Neeb conspired to overbill Medicare by requesting reimbursement for capital expenses at Fawcett Memorial Hospital in Charlotte County, Fla.

They received 100% reimbursement even though the expenses were eligible for just 39%, prosecutors said. The resulting overpayments by Medicare and a military health program totaled about $1.8 million, according to the indictment.

“I can assure you that we take these allegations very seriously and will cooperate fully with the government,” said Thomas Frist Jr., who took over Scott’s posts after his resignation. He said attorneys for the executives are meeting with federal officials to discuss the charges.

Columbia’s second-quarter earnings, released hours before the indictment, appeared unaffected by the fraud probe, although some analysts have warned of possible future disappointments.

The company matched analysts’ expectations with earnings of $412 million, or 62 cents a share, a 15% increase over the $364 million, or 54 cents a share, Columbia earned in the same quarter last year. Revenue was $5.2 billion, up from $4.9 billion.

Columbia shares fell 75 cents to close at $33.81 on the New York Stock Exchange.