The federal government's indictment last month of three Columbia/HCA Healthcare Corp. executives should serve as a wake-up call to every healthcare provider filing a Medicare cost report.
Those annual cost reports now appear to be one of the weapons the government will be wielding in its prosecution of Medicare fraud and abuse. Finance experts said the indictment handed up against Columbia's executives could be the tip of the litigation iceberg.
HHS Inspector General June Gibbs Brown has told the inspector general's office to specifically target Medicare cost reports in its criminal investigation of Columbia, HHS spokeswoman Judy Holtz said. But Holtz added that she is not aware of any HHS initiative targeting cost-report fraud by other providers. "If things come to our attention, we'll certainly pursue that," she added.
Linda Ruiz, director of HCFA's program integrity group, said the agency conducts a full audit or focused audit on 10% of all the cost reports it reviews annually. When it finds evidence of fraud, those cases are turned over to the inspector general. Generally, the cost report is not that helpful in finding hospital fraud, she said, because so much Medicare reimbursement is paid prospectively.
But reimbursement experts contend the healthcare industry need only look at the government's handling of the Columbia case for evidence that they could be next in line.
In a press release accompanying last month's five-count indictment of the Columbia executives, Charles Wilson, the U.S. attorney in South Florida, called the case "an important part of my office's commitment to fight against alleged fraud and abuse in our healthcare system." He said the prosecution of such cases "is the top white-collar crime priority of this office, as well as a top priority of the Department of Justice as a whole."
Ruiz wouldn't comment on government involvement in the Columbia case.
As part of that case, federal authorities have zeroed in on cost reports filed by the company's Port Charlotte, Fla.-based Fawcett Memorial Hospital. The indictment charges executives with knowingly overstating the amount of interest on capital expenditures that the hospital was entitled to claim. It further contends they failed to disclose an auditing error and continued claiming interest expenses improperly.
As part of the alleged conspiracy, the government says defendants engaged in certain illegal acts, which are briefly outlined in the indictment. It says, for example, that Robert W. Whiteside, director of reimbursement at the company's Nash-ville headquarters, "participated in a discussion about `reserve' monies being set aside on the Fawcett interest issue."
Reimbursement consultants said it is common practice for hospitals and healthcare providers to set aside reserves on cost items that might be contested by HCFA. To do otherwise, they said, would be fiscally imprudent. Taking a conservative approach and not recording payments before they are received are basic tenets of financial reporting under generally accepted accounting principles.
It also is common, experts said, to keep more than one set of cost reports. The version submitted to HCFA's fiscal intermediary may include costs that the government may not allow. But it is within providers' right to seek reimbursement for those items if they can prove the costs are covered under Medicare. A second cost report containing more conservative estimates may be kept in house.
"There are lots of gray areas in Medicare, and there's lots of room for very honest differences of opinion," explained Ronald Sutter, a partner in the Washington law firm of Powers Pyles Sutter & Verville, who has represented providers in numerous legal challenges of cost report items.
As part of a reorganization plan disclosed last week, Columbia said it would apprise the government of differences between two sets of reports.
Observers fear providers suddenly are being held to new standards, making legitimate accounting practices seem underhanded. "What has happened is the FBI's involvement in this initiative has resulted in lines getting redrawn," said a reimbursement consultant who, fearing reprisal by government officials, spoke on the condition of anonymity. "I don't doubt there are fraudulent people out there, but that's not to be mistaken for someone who does a reserve cost report just so they can keep their books in a conservative fashion."