Columbia’s liability likely to exceed $1 billion
Letter sets no limit on Columbia’s liability
The proposed Columbia/HCA settlement announced recently is only the first step in resolving a series of whistle-blower (qui tam) lawsuits against the company, leaving many, including one filed seven years ago, still unresolved. The total liability for Columbia/HCA could exceed $1 billion, according to attorneys handling the litigation.
The seven-year-old qui tam lawsuit, brought by James Alderson, a former Columbia/HCA chief financial officer in Montana, and another qui tam case, brought by John Schilling, a former Columbia/HCA reimbursement manager in Florida, represent what is probably Columbia’s biggest outstanding liability, the attorneys say. The lawsuits allege that the company and its corporate predecessors submitted fraudulent "cost reports" to Medicare, defrauding the government of more than $1 billion.
Although Columbia has said its $1 billion letter of credit with the government will be reduced to $250 million, that’s not an indication of the remaining liability the company faces, says John Phillips, JD, an attorney with Phillips & Cohen in Washington, DC, which represents Alderson and Schilling and two other whistle-blowers whose lawsuit was included in the recent settlement.
"The $1 billion letter of credit does not set a limit on Columbia’s liability and should not be interpreted as such," Phillips says. "We expect the total of all settlements to far exceed that amount."
Misrepresenting its costs
Among Phillips & Cohen’s clients who will share in the rewards of the $745 million settlement are two Utah doctors who filed a qui tam lawsuit five years ago to stop a corporate practice of bilking Medicare. Robert Rothfeder, MD, and Dennis Wyman, MD, charged in their qui tam lawsuit that Columbia hospitals routinely billed Medicare for blood tests that were not requested by doctors and were not medically necessary.
The proposed settlement also covers a portion of the qui tam lawsuit brought by Schilling that alleged Columbia misrepresented its costs so the federal government would unwittingly finance its acquisition of home health care agencies from Olsten Corp.
"Columbia figured out a lot of ways to overbill the government," says Mary Louise Cohen, JD, another attorney with Phillips & Cohen. "The company pressured managers to increase government reimbursements, which led to many different scams that boosted profits."
Rothfeder and Wyman were independent contractors working as staff emergency physicians at Lakeview Hospital in West Valley City, UT, when they became aware of the billing fraud. Lakeview was a wholly owned subsid-iary of HealthTrust, which later merged with Columbia/HCA.
Their lawsuit states that each time a physician ordered a basic blood test (a complete blood count, or CBC) for a patient in the emergency room or outpatient services, Columbia hospitals ordered additional blood chemistry tests, known as "CBC indices."
In addition, the lawsuit says, when a doctor ordered a "chemistry profile" for a patient in the emergency room or outpatient services, the hospitals also charged for various other blood tests that had not been ordered.
The doctors were extremely concerned about the amounts mischarged to patients and public and private insurers, Cohen reports. When Wyman questioned a hospital manager about the practice, he was falsely told that the additional tests did not result in an additional cost to patients, Medicare, and other insurers, she says.
The portion of the recent settlement involving Columbia’s purchase of Olsten’s home health business results from a separate lawsuit that was filed by Schilling. When Columbia acquired the home health business in 1994, it paid Olsten wildly inflated management fees instead of a realistic purchase price. The cost of management fees can be passed on to Medicare through cost reports.
Once in the home health business, Cohen says Columbia shifted marketing and other hospital expenses into the home health agencies so that they could be reimbursed, again through the cost reports, at a higher rate.
Olsten Corp. paid the federal government nearly $41 million last year to settle allegations that it had acted with Columbia to defraud Medicare.
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