The federal government last week answered hospital industry calls for leniency in its anti-fraud efforts by raiding the nation's largest for-profit hospital chain and alleging that Medicare loses billions annually in provider payments because of fraud or waste.
At a July 17 congressional hearing, HHS Inspector General June Gibbs Brown said her agency isn't considering a requested moratorium on billing investigations. Then, a day after FBI agents swarmed over facilities operated by Columbia/HCA Healthcare Corp., she released an agency report on Medicare billing errors that may have cost the government more than $20 billion in overpayments to providers last year (See related stories, pages 12, 13 and 14).
In a surprise attack last week, federal officials served about 35 warrants in six states to current and former Columbia facilities (See box). The raid, in which agents reportedly seized Medicare billing documents, follows the March search of the company's facilities in El Paso, Texas.
HHS' Brown said federal officials served search warrants at Columbia facilities in a seventh state, Georgia, and that more search warrants were still to be executed. Columbia could not confirm the Georgia search at press time.
"We're still putting out more search warrants," Brown said. "That will be an ongoing process for the next couple of days."
Columbia, which owns 342 hospitals in 36 states, has maintained it is innocent of wrongdoing. Its Nashville headquarters was not hit in the raid.
The warrants requested various records and documents concerning hospital billing for laboratory and home-care services, the company said.
The company also confirmed late last week that at least four employees were subpoenaed to testify before a federal grand jury this week in Florida as part of the investigation. It declined to elaborate.
The government has an ongoing investigation of how hospitals bill Medicare for lab work. It involves allegations of hospitals billing Medicare separately for lab tests that should have been billed collectively. The home-care field has been a major target of federal fraud fighters for two years.
Columbia has become a large home-care operator in the states hit in the raid (See story, p. 3).
Reports coming from the states where the facilities were served said FBI officials-armed with warrants and storage boxes-marched into Columbia offices seizing documents related to Medicare billing.
FBI Special Agent Derek McGraw said the FBI agents conducted the raids on behalf of five state and federal agencies: the U.S. Justice Department, HHS, the U.S. Defense Department's criminal investigative division, the U.S. Postal Inspection Service and the Utah Department of Investigation's Medicaid Fraud Unit.
FBI agents also seized documents at the Atlanta-based accounting firm Hyatt, Imler, Ott & Blount in connection with the raid on Columbia. The firm markets a computer software program called RegCom, which is designed to help providers avoid Medicare billing problems. Columbia confirmed that Hyatt has done consulting work for the chain.
John Hyatt, the company's president, confirmed it was served search warrants on July 16. He said the raid was related to lab charges and not to RegCom.
An FBI spokeswoman said the warrants are part of an ongoing investigation and that the warrants were issued under seal.
The July 16 raid occurred exactly one week after the American Hospital Association called for a six-month moratorium on new hospital billing investigations executed under the False Claims Act (July 14, p. 12).
After the government's latest action, Richard Wade, the AHA's senior vice president for communications, said: "The government is trying to do the right thing in the wrong way. They're creating a public impression that fraud and abuse is everywhere, and that simply isn't the case."
Many agreed the raid's nationwide news splash is going to severely affect Columbia and its plans to acquire more hospitals.
But spokeswoman Eve Hutcherson said Columbia hopes potential partners see it for all its advantages and not the unproven allegations against it.
"The opportunities we offer-in terms of our focus on quality patient care, upgrading physical layouts, financial stability . . . . all these advantages continue to be true," Hutcherson said.
Bill Penny, a partner at Manier, Herod, Hollabaugh & Smith in Nashville, said the raids will have a chilling effect on acquisitions, with sellers seeking hold-harmless clauses from Columbia to insulate them against liability for wrongdoing.
In Rhode Island, the widened investigation could be the final push needed to override the governor's veto of a not-for-profit hospital sales bill.
Gov. Lincoln Almond earlier this month vetoed a bill passed by both houses of the Rhode Island Legislature that would make for-profit companies wait three years to buy a second hospital in the state.
Rhode Island has 11 acute-care hospitals. All are private not-for-profit facilities, but Columbia has a pending sales deal with one of them.
The state Legislature this week is scheduled to meet in special session to vote on an override of the veto.
Legislative watchers in Rhode Island say a two-thirds override vote is assured in the state House but isn't a sure thing in the state Senate.
A spokesman for Senate Majority Leader Paul Kelly said the expanded Columbia probe likely would sway "legislators on the fence" to vote to overturn Almond's veto.
If the bill imposing a three-year waiting period becomes law, Columbia would "seek to cancel its agreement to purchase Roger Williams Medical Center," the Providence, R.I., hospital said.
"There is no justification and no need for a law that is clearly aimed at one company," the hospital said.
Josh Nemzoff, a Nashville-based hospital consultant who's made a living hooking up for-profit buyers with not-for-profit sellers, said many of his not-for-profit clients want to know the details of the government's action.
While Columbia "needs to get back on its feet and respond to the issues," he said, "the feds need to prove something" and not splash allegations nationwide.
"Columbia may be the Richard Jewel of healthcare," Nemzoff said, referring to the security guard who was wrongly alleged to be behind the 1996 bombing at Centennial Olympic Park in Atlanta. "I'm not very impressed with allegations or accusations."
Nonetheless, the allegations have already caused damage.
Rep. Fortney "Pete" Stark (D-Calif.) said he believed Columbia executives were orchestrating a campaign of Medicare fraud from their Nashville headquarters and, therefore, should be investigated under federal racketeering statutes.
"(Columbia) is a cookie-cutter operation. They do not have a decentralized management style," Stark said. "They give their hospital managers as much leeway as Pat Robertson's Christian Coalition gives you to interpret the Bible. I think what they are doing is committing a crime."
Many observers believe Stark is behind the ongoing investigation of Columbia. Prior to the initial March raid in El Paso, he had been pressuring HHS and HCFA to investigate the company's Medicare billing practices.
Columbia's stock also took a hit, falling more than 12% on the day of the raids. It closed at $31.88 per share on Friday, down 18% from $38.94 on Tuesday, July 16, the day before the raid.
"It was not a fun day," Richard Scott, Columbia's chairman and chief executive officer, told CNN's "Moneyline" the evening of July 16. "But as you know, government investigations are a matter of fact today in healthcare."
-With Eric Weissenstein and Scott Hensley