Largest Government Fraud Settlement in U S History

FOR IMMEDIATE RELEASE

CRM/CIV

THURSDAY, DECEMBER14, 2000

(202) 514-2007

WWW.USDOJ.GOV

TDD (202) 514-1888



HCA - THE HEALTH CARE COMPANY & SUBSIDIARIES

TO PAY $840 MILLION IN CRIMINAL FINES
AND CIVIL DAMAGES AND PENALTIES

Largest Government Fraud Settlement
in U.S. History



WASHINGTON, D.C. - HCA-The Healthcare Company (formerly known as Columbia-HCA), the largest for-profit hospital chain in the United States, has agreed to plead guilty to criminal conduct and pay more than $840 million in criminal fines, civil penalties and damages for alleged unlawful billing practices, Attorney General Janet Reno announced today.

Today's agreement is the largest government fraud settlement ever reached by the Justice Department.

"Health care fraud impacts every American citizen. When a company defrauds our nation's health care programs, it takes money out of the pockets of the American taxpayers. It is wrong," said Attorney General Reno. "This investigation has been the largest multi-agency investigation of a health care provider ever undertaken by the U.S. and reflects our commitment to vigorously pursuing all types of health care fraud schemes."

Under today's agreement, which is subject to review by the court, HCA will pay a total of $745 million to resolve five allegations regarding the manner in which it bills the U.S. government and the states for health care costs. The agreement does not resolve allegations that HCA unlawfully charged for the costs of running its hospitals on cost reports submitted to the government, and that it paid kickbacks to physicians to get Medicare and Medicaid patients referred to its facilities.

Of the $745 million, the settlement requires HCA to pay:

more than $95 million to resolve civil claims arising from the company's outpatient laboratory billing practices, which included billing to Medicare, Medicaid, the Defense Department's TRICARE health care program, and the Federal Employees' Health Benefits Program, for lab tests that were not medically necessary, not ordered by physicians, as well as other billing violations;

more than $403 million to resolve civil claims arising from "upcoding," where false diagnosis codes were assigned to patient records in order to increase reimbursement to the hospitals by Medicare, Medicaid, TRICARE and the Federal Employees' Health Benefits Program. The guilty plea includes one count relating to this upcoding practice;

$50 million to resolve civil claims that the company illegally claimed non-reimbursable marketing and advertising costs it disguised as community education. Medicare reimburses providers for "community education" - costs to educate the community at large about public health issues - but not for advertising and marketing a hospital's services;

$90 million to resolve civil claims that HCA illegally charged Medicare for non-reimbursable costs incurred in the purchase of home health agencies owned by the Olsten Corporation, as well as other agencies in Florida, Georgia and Alabama. According to the government, HCA devised an elaborate scheme to hide these costs in reimbursable "management fees" paid to third parties. In 1999, a subsidiary of Olsten Corporation, Kimberly Quality Care, entered into criminal plea agreements in three districts and paid more than $10 million in criminal fines. Olsten paid nearly $41 million as part of a civil settlement arising from its collusion with HCA for that conduct. HCA has now agreed to pay $90 million to settle this issue, and;

$106 million to resolve civil claims for billing Medicare, Medicaid and TRICARE for home health visits for patients who did not qualify to receive them or were not performed and for committing other billing violations.

Many of the civil issues resolved as part of today's agreement arose from lawsuits filed by relators, commonly known as "whistleblowers," under the False Claims Act. This law allows whistleblowers who qualify under the statute to receive up to 25 percent of the settlement recovery in cases the government pursues. Under the civil settlement announced today, whistleblower shares remain undetermined pending further negotiations or court proceedings.

In addition to the civil settlement, two subsidiaries of Tennessee-based HCA, Columbia Homecare Group Inc. and Columbia Management Companies Inc. entered into a criminal plea agreement in which they agreed to pay $95,336,432 in criminal fines and plead guilty to several charges involving a wide range of criminal conduct which occurred at HCA's hospitals nationwide. The plea agreement and the sentences are subject to the approval of federal courts.

According to the terms of the plea agreement, the companies will plead guilty to charges involving cost report fraud, fraudulent billing of Medicare for personnel who worked at home health agencies and at wound care centers, fraudulent billing to Medicare for patients diagnosed with pneumonia, paying kickbacks and other remuneration to doctors to induce referrals, paying kickbacks in connection with the purchase and sale of home health agencies and fraudulent billing of Medicare for fees paid to manage those agencies. The guilty pleas will be filed in five district courts and, with the courts' permission, consolidated for plea and sentencing in the district courts in the Middle District of Florida and the Western District of Texas (El Paso).

The subsidiaries will plead guilty to the following criminal charges, which will be filed in five District Courts and will be consolidated for sentencing in District Courts in Tampa and El Paso:

Southern District of Florida (Miami) Columbia Homecare Group Inc., a subsidiary of Columbia, will plead guilty to one count of conspiracy to defraud the U.S. and to violate the Medicare Anti-kickback Statute involving its fraudulent business in the purchase and operation of home health agencies and fraudulent billing of Medicare for management and personnel costs. The criminal fine is $3.36 million;

Northern District of Georgia (Atlanta) Columbia Homecare Inc. will plead guilty to one count of violating the Medicare Anti-kickback Statute related to purchase of home health agencies. The criminal fine is $3.36 million;

Department of Justice Criminal Fraud Section Another subsidiary, Columbia Management Companies Inc., will plead guilty to one count of conspiracy to defraud the U.S. and to make and use false writings and documents in connection with its fraudulent "upcoding" of bills to Medicare for patients diagnosed with certain types of pneumonia. The criminal fine is $27.5 million. This investigation was based in Nashville, Tennessee;

Middle District of Florida (Tampa) Columbia Homecare Group will plead guilty to one count of conspiring to defraud the U.S. and one count of conspiracy to violate the Medicare Anti-kickback Statute in connection with the purchase and operation of home health agencies. The criminal fine is $8.4 million. Also, Columbia Management Companies will plead guilty to eight counts of making false statements to the U.S. in connection with the submission of false cost reports to Medicare. The fine amount is $22.6 million; and,

Western District of Texas (El Paso). Columbia Homecare Group will plead to a conspiracy to pay kickbacks and other monetary benefits to doctors in violation of the Medicare Anti-kickback Statute. The criminal fine is $30,116,592.

Today's plea agreement resolves only corporate criminal liability. The government has the option to investigate and prosecute any individuals as the plea agreement specifically requires the companies to cooperate with the government in ongoing investigations. As a further result of the plea agreement, two subsidiaries will be excluded from participating in the Medicare Program.

In addition to today's agreement, Inspector General June Gibbs Brown announced that HCA is entering into two agreements with HHS - a Corporate Integrity Agreement and a divestiture agreement.

The Corporate Integrity Agreement, which requires the company to engage in significant compliance efforts over the next eight years, calls for the health care company and independent review organizations to conduct audits and reviews of HCA and its hospitals' inpatient coding, laboratory billing, hospital outpatient billing, and financial relationships with physicians.

The agreement also requires HCA to:

maintain a code of conduct and compliance policies and procedures;

conduct training of its employees on general compliance matters and substantive federal health care program requirements;

ensure that certain employees and committees are responsible for compliance at all levels of the organization from the Board of Directors to individual facilities;

promptly report and pay back all overpayments,

maintain means for employees and other individuals to report on suspected misconduct; and,

screen prospective and present employees and contractors to ensure that they are not excluded from federal health care programs.

"This settlement includes an extensive corporate integrity agreement that is intended to ensure HCA's strict compliance with the laws of doing business with the federal health care programs," said HHS Inspector General Brown. "The agreement will be in force for a period of eight years and includes audit and other compliance provisions that are unprecedented in their scope and level of detail."

Throughout the term of the integrity agreement, HCA will be required to report to the Office of the Inspector General at HHS annually and with respect to certain events.

The divestiture agreement will bar any HCA subsidiary that is entering a guilty plea to Medicare-related offenses from participating in Medicare and other federal health care programs. The Inspector General has agreed to delay the exclusion for a limited time to allow the subsidiary to divest itself of the hospital it operates in order to minimize the risk of disruption to patient care.

In exchange, HCA is obligated to take certain measures to ensure that quality services are provided at the hospital and that the new operator is approved by appropriate government agencies prior to divestiture. The agreement provides the OIG with multiple remedies other than exclusion, including financial penalties and the right to appoint a trustee to divest the hospital, if HCA fails to meet the deadlines to divest the facility.

Finally, a state negotiating team appointed by the National Association of Medicaid Fraud Control Units consisting of representatives from Tennessee, Nevada, Washington and Ohio, has reached an agreement in principle with HCA to resolve related issues with affected Medicaid programs. The Medicaid program, which is funded by the federal and state governments, represents approximately $36.3 million of today's $745 million settlement; of this, the states will receive about $13.6 million, representing their share of Medicaid funds. The state negotiating team will send proposed settlement agreements to 33 states and recommend that those states become part of the settlement.

"Today's developments stand as a testament to our success in the fight against health care fraud and abuse," said Attorney General Reno. "Federal health care programs operate on the good faith and honesty of health care providers. The government will not tolerate misuse of the reimbursement systems for financial gain and will hold the responsible parties accountable for their conduct."

The Attorney General was joined in today's announcement of the criminal and civil agreements by Assistant Attorney General David W. Ogden of the Civil Division; Richard Deane, U.S. Attorney in Georgia; Donna Bucella, U.S. Attorney in Tampa; June Gibbs Brown, Inspector General of the Department of Health and Human Services (HHS); Thomas Kubic , Deputy Assistant Director, Criminal Investigative Division of the FBI; Carol Levy, Director of the Defense Criminal Investigative Service and Assistant Inspector General for Investigations of the Department of Defense; Patrick McFarland, Inspector General of the Office of Personnel Management; Dr. James Sears, TRICARE; and Barbara Zelner, Counsel to the National Association of Medicaid Fraud Control Units.

The Attorney General recognizes the prosecutors in the following divisions and districts that assisted in bringing this case to a successful resolution: Department of Justice, Civil Division, Commercial Litigation Branch, Fraud Section; Department of Justice, Criminal Division, Fraud Section; Middle District of Alabama; Eastern District of Arkansas; Western District of Arkansas; Central District of California; District of Colorado; District of Columbia; Middle District of Florida; Southern District of Florida; Middle District of Georgia; Northern District of Georgia; Northern District of Illinois; District of Kansas; Eastern District of Kentucky; Eastern District of Louisiana; Middle District of Louisiana; Western District of Louisiana; District of Massachusetts; District of Nevada; District of New Hampshire; Eastern District of North Carolina; Western District of North Carolina; Northern District of Ohio; Northern District of Oklahoma; Eastern District of Pennsylvania; District of South Carolina; Eastern District of Tennessee; Middle District of Tennessee; Eastern District of Texas; Northern District of Texas; Southern District of Texas Western District of Texas; District of Utah; Eastern District of Virginia; Western District of Virginia; and District of Wyoming. She also wishes to acknowledge the extensive assistance provided by agents, investigators, and auditors for the Federal Bureau of Investigation, the HHS Office of the Inspector General, the Health Care Financing Administration, the Defense Criminal Investigative Service, the Office of Personnel Management Inspector General, and State Medicaid Fraud Control Units.