The government wants the nation's largest hospital chain to pay millions of dollars in back taxes on a reserve fund kept in case Medicare challenged its bills.
Columbia/HCA Healthcare Corp. filed a protest with the U.S. Tax Court on Dec. 11 against the Internal Revenue Service's demand for $267 million in taxes for 1993 and 1994. The case involves other tax issues in addition to the reserve fund.
Auditors contend the company took improper deductions for reserve accounts held in case federal health insurance programs such as Medicare questioned the Nashville-based hospital chain's bills, according to Columbia spokesman Jeff Prescott.
"We think those are legitimate deductions," Prescott said. "The reality of it is virtually every healthcare company does this."
IRS officials declined to comment on the case.
It is routine for healthcare firms to keep money in reserve to guard against errors made in the complex process of filing Medicare claims.
Columbia's reserve accounts are under scrutiny in a Medicare fraud probe by federal investigators who indicted three of the company's executives last year. U.S. Justice Department officials are questioning whether the reserves are evidence that Columbia officials knew bills charged to Medicare were improper.
Company officials consider the dispute over taxes on the reserve fund to be an entirely separate matter triggered by a routine IRS audit, Prescott said. He said the disagreement over back taxes stems from the fact that several companies that merged in 1993 and 1994 to create Columbia were using different formulas to calculate the tax deductions.
Court papers show the IRS pegged the reserve account of Hospital Corporation of America-one of the firms folded into Columbia-at $84 million, while another, Galen Health Care, kept $168 million on hand in case of Medicare challenges.
In other Columbia developments, Senior Vice President David Manning resigned from Columbia effective Jan. 1.
Manning could not be reached for comment.
A Columbia spokesman said Manning left to pursue a consulting career. He said the resignation was not part of a reorganization effort that will reduce Columbia's 36 divisions to 18, effective Jan. 1.
Manning, who helped craft Tennessee's Medicaid managed-care Tenn-Care plan, had been a Columbia senior vice president for three years. His responsibilities included government relations and issues concerning Medicaid and the uninsured.
Manning is the 12th senior executive to leave Columbia since July, when the government's fraud investigation of the chain escalated.