June 26, 2003: Largest Hospital Chain in US Settles with Government over Allegations of Health Care Fraud

HCA Inc. and the US Justice Department sign a settlement agreement, resolving allegations that the company paid kickbacks to physicians and submitted false cost reports and fraudulent bills to Medicare, Medicaid, and other federal health programs. Under the terms of the agreement, HCA, the country’s largest for-profit hospital chain, will pay the US government $631 million in civil penalties and damages. Additionally, under a separate agreement that was negotiated more than a year ago, HCA will pay the Centers for Medicare and Medicaid Services (CMS) $250 million to resolve “outstanding cost report issues.” Critics of that settlement have alleged that the CMS head—a former lobbyist for the hospital industry—cut the deal behind the Justice Department’s back saving HCA several hundred million dollars (see March 28, 2002-November 2002). [CBS News, 12/18/2002; Washington Post, 12/19/2002; US Department of Justice, 6/26/2003; Nashville Business Journal, 6/26/2003; New York Times, 6/27/2003] These amounts, when combined with the $840 million settlement reached in December of 2000 (see December 14, 2000), make this the government’s single largest fraud settlement in US history. The $1.7 billion settlement concludes a nine-year investigation that began when whistle-blower James Alderson, a former chief financial officer of one of its former hospitals, filed a lawsuit alleging that the company’s cost reports to the government were fraudulent. During the course of the investigation, authorities discovered a second set of books marked “confidential,” revealing that the company had inflated reimbursable costs billed to government health programs. [Phillips & Cohen, 12/18/2002; New York Times, 12/18/2002]