U.S. Rep. Pete Stark (D-Calif.), a longtime critic of Columbia/HCA Healthcare Corp., called on the Financial Accounting Standards Board late last month to investigate whether accounting firm KPMG Peat Marwick acted ethically in helping Columbia hospitals prepare their Medicare cost reports.
Stark was reacting to a Dec. 18 article in the New York Times that described how some Columbia hospitals allegedly filed inflated claims to Medicare for payment and then set aside money to cover those claims in case of an audit. The article said Peat Marwick advised the hospitals.
How Columbia and its hospitals have billed Medicare for services is central to the government's ongoing fraud investigation of the company.
In a letter to Tim Lucas, director of research at the FASB in Norwalk, Conn., Stark asked whether Peat Marwick's actions were ethical.
"If the facts in the Times article are half accurate, I think it is an outrageous violation of KPMG's duty," Stark said.
Peat Marwick officials said the firm did nothing wrong and that it's work for Columbia was "appropriate and professional."
Separately, the U.S. partners of Peat Marwick and Ernst & Young have approved the merger of the two companies, which would create the world's largest accounting firm with a dominant presence in healthcare.
New York-based Ernst & Young advises more than 3,500 healthcare organizations in the U.S. Montvale, N.J.-based Peat Marwick's Health Care & Life Sciences Practice provides performance improvement consulting and tax services. The combined company would have worldwide revenues of $18 billion (Oct. 27, 1997, p. 30).
The international partners of both firms are expected to vote on the merger this month. The merger then will require federal antitrust clearance.
-With Bloomberg News Service