U.S. in Suit Against Columbia / HCA

The Justice Department on Monday joined a whistle-blower lawsuit charging Columbia/HCA Healthcare Corp., the nation’s largest hospital chain, with a massive scheme to defraud Medicare by filing inflated cost reports.

The government has “been damaged in the amount of many millions of dollars,” the Justice Department said in legal documents unsealed in U.S. District Court in Tampa, Fla.

Also named as a defendant in the case is Quorum Health Group Inc., the nation’s largest hospital management firm. Quorum had been owned by HCA--now Columbia/HCA--and continued to follow its billing and accounting practices, the lawsuit claims.

The suit was filed in 1993 by James F. Alderson, who was chief financial officer of a hospital in Whitefish, Mont., when Quorum became the hospital management firm.

Federal law allows individuals to file cases claiming that the federal government has been injured, and permits them to receive a share of any funds recovered. These types of whistle-blower lawsuits are kept confidential until the government investigates and decides whether to enter the case. If there is federal intervention, the whistle-blower can receive 15% to 25% of the amount recovered.

The law was extensively employed in cases against defense contractors, but in more recent years has been aggressively used against frauds involving Medicare--the federal health program for those 65 and older and the disabled--and Medicaid, the federal-state health program for the poor.

Monday’s action was the latest step in a far-ranging federal probe of Columbia/HCA’s billing practices that first became public in March of last year. Four Columbia/HCA executives are under indictment for fraud.

The company replaced its top management in July 1997 and has been cooperating with the federal investigation, Jeff Prescott, spokesman for Columbia, based in Nashville, Tenn., said Monday. “I don’t think [the Justice Department action] is a surprise.”

Quorum Health Group said it strives to “follow the regulations, and in keeping with our ethical commitments and company values, to rectify any problems that arise.”

James E. Dalton, president of the Brentwood, Tenn., firm, said Monday that his company has “cooperated fully with the government throughout this process. We have provided documents promptly when requested and will continue to cooperate to whatever extent may be necessary to resolve this situation swiftly and fairly.”

The Justice Department said Columbia hospitals and the hospitals managed by Quorum received payments for treating patients under Medicare, Medicaid, and CHAMPUS, the health program for military personnel and their families. The government says that Columbia/HCA provided phony cost reports for Medicare. Under the government’s accounting system, the Medicare cost system also is used to prepare reimbursement claims under the other health programs.

Columbia/HCA and Quorum knew that only 25% of the cost reports were audited. They have “systematically defrauded the United States for at least 10 years . . . by including in their individual provider and home office reports reimbursement claims that they knew were greatly exaggerated and/or that were not properly reimbursable at all,” the Justice Department said in its court filings.

The defendants kept one set of records with the inflated claims and another set with the accurate amount to use in repaying the federal government “in the event that they are ever discovered,” according to the unsealed court filing.

The government is asking for payment of treble damages as punishment for the fraud, the Justice Department said. Columbia/HCA owns about 330 hospitals in 35 states. Quorum manages about 250 hospitals and owns 17.