Qui tam lawsuits seeking damages of hundreds of millions of dollars continue to hang over company
May 19, 2000 -- The proposed Columbia/HCA Healthcare Corp. settlement announced yesterday is only the first step in resolving a series of whistleblower ("qui tam") lawsuits against the company, leaving many qui tam cases — including one that was filed seven years — still unresolved.
That qui tam lawsuit, brought by James Alderson, and another qui tam case, brought by John W. Schilling, represent what are probably Columbia's biggest outstanding liability. The lawsuits both 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 that the company faces, said Washington, D.C. attorney John R. Phillips with Phillips & Cohen LLP, which represents Alderson and Schilling and two other whistleblowers whose lawsuit was included in yesterday's settlement.
"The $1 billion letter of credit does not set a limit on Columbia's liability and should not be interpreted as such," Phillips said. "We expect the total of all settlements to far exceed that amount."
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. Drs. Robert Rothfeder and Dennis Wyman charged in their qui tam (whistleblower) 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, a former Columbia/HCA manager in Florida, that alleged Columbia misrepresented its costs so that 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," said attorney Mary Louise Cohen of Phillips & Cohen. "The company pressured managers to increase government reimbursements, which led to many different scams that boosted profits."
Hospital medical lab fraud
Drs. Rothfeder and Wyman were independent contractors working as staff emergency physicians at Lakeview Hospital in West Valley City, Utah, when they became aware of the billing fraud. Lakeview was a wholly owned subsidiary of HealthTrust, which later merged with Columbia/HCA.
Their lawsuit states that each time a physician ordered a basic blood test (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. When Dr. 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.
Both Drs. Wyman and Rothfeder have more than 20 years experience as practicing emergency room doctors. Since 1977, Dr. Wyman has served as director of the Davis County, Utah, Emergency Medical Services, and as paramedic advisor to the county paramedic program. He was named Utah's emergency medical services physician of the year in 1985.
Dr. Rothfeder serves on the board of directors of the American College of Emergency Physicians' Utah chapter. He is a practicing attorney as well, specializing in medical device products liability law.
"It's important for physicians to step forward and blow the whistle on Medicare fraud," said Cohen. "Knowing that their qui tam lawsuit could damage their careers and friendships with their peers, these two well-respected doctors still did the right thing."
Drs. Wyman and Rothfeder filed their qui tam lawsuit under the False Claims Act in 1995 in federal district court in Salt Lake City. It was filed under seal, which means that it was not made known to the public or the defendant to give the government time to investigate the allegations. The lawsuit was transferred to federal district court in Washington, DC, last year.
Purchase of home health care agencies
The portion of today's settlement involving Columbia's purchase of Olsten's home health business results from a separate lawsuit that was filed by John Schilling, a former reimbursement manager in Florida.
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, 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.
Phillips & Cohen is the only law firm nationwide whose practice focuses solely on representing whistleblowers in qui tam lawsuits. The False Claims Act allows private citizens to sue companies that are defrauding the federal government and recover damages on the government's behalf. Liable companies may be required to pay as much as three times damages and $5,000 to $10,000 for each false claim.
For more information about this case, see the following news stories:
- "$745 million and far to go," Barbara Kirchheimer and Mark Taylor, Modern Healthcare, 5/23/00.
- "Two Utah doctors were whistleblowers in Columbia/HCA fraud investigation," Phil Sahm, The Salt Lake Tribune, 5/20/00.
- "Hospital company agrees to pay $745 million in U.S. fraud case," Kurt Eichenwald, The New York Times, 5/19/00.
- "Columbia/HCA to pay the U.S. $745 million," Lucette Lagnado, The Wall Street Journal, 5/19/00.
- "Hospital chain to settle case," Bill Brubaker, The Washington Post, 5/19/00.
- "Columbia agrees to pay $745m penalty," Julie Appleby, USA Today, 5/19/00.
- "Columbia/HCA to pay $745 million in Medicare fraud," Michael A. Hiltzik and Alissa J. Rubin, Los Angeles Times, 5/19/00.
- "Columbia set to pay $745 million," Kris Hundley, St. Petersburg Times, 5/19/00.
- "Columbia/HCA offers $745 million settlement," Keith Snider, The Tennessean, 5/19/00.
- "Settlement likely to cut into Columbia/HCA earnings," Keith Russell, The Tennessean, 5/19/00.
For more information about qui tam lawsuits against Columbia/HCA and related qui tam cases, see the following:
- Columbia executives sentenced to prison for Medicare fraud, Feb. 2, 2000.
- Qui tam lawsuit filed against accounting firm KPMG, May 28, 1999.
- Government joins second Columbia whistleblower case, Dec. 30, 1998.
- "60 Minutes" features story on Columbia whistleblower, Dec. 27, 1998.