The Columbia/HCA Healthcare Corp. shareholders who sued the company last year are hoping that a whistleblower lawsuit unsealed earlier this month will breathe new life into their complaint.
The shareholders charge that Columbia and its board of directors engaged in a "pervasive and ongoing course of unlawful conduct . . . designed to materially inflate Columbia's revenues and earnings by inflating Columbia's billings to Medicare, private insurers and individuals."
The shareholders claim the scheme artificially inflated the company's stock price and enticed them to buy shares, which lost substantial value when the federal government unleashed a criminal investigation on Columbia in March 1997. The shareholders are seeking unspecified damages to compensate for their alleged losses.
Similarly, the civil whistleblower lawsuit accuses Nashville-based Columbia and Quorum Health Group, both related to the former Hospital Corporation of America, of bilking Medicare of "many millions of dollars" over 14 years by inflating reimbursable costs and including unallowable claims on their annual Medicare cost reports (Oct. 12, p. 4).
The civil suit, joined by the Justice Department and pending in U.S. District Court in Tampa, Fla., also names 200 hospitals in 37 states as defendants.
That complaint was first filed in 1993 by James Alderson, a former chief financial officer at 99-bed North Valley Hospital in Whitefish, Mont., which is still managed by Quorum.
The shareholders' case has lain dormant since July, when a federal magistrate recommended dismissing it, saying the plaintiffs did not try to resolve the dispute with the board of directors before filing a court action (July 13, p. 8).
Both Columbia and the shareholders, which include individual investors and giants like the California Public Employees Retirement System, are waiting for U.S. District Judge Thomas Higgins in Nashville to rule on the magistrate's recommendation. Higgins is not required to follow that recommendation.
Columbia spokesman Jeff Prescott said the company is pleased with the magistrate's decision and hopes to see a favorable resolution soon.
Plaintiffs' attorneys said the whistleblower's case, which they did not know about until it was unsealed Oct. 5, mirrors and supports the allegations made by the shareholders.
"We think (the whistleblower complaint) is interesting," said Jeffrey Leibell, an attorney with Bernstein Litowitz Berger & Grossman in New York who is representing the New York state employees' pension fund, the lead plaintiff in the case. "It confirms what our clients allege in their complaint."
However, the shareholders would have to show that the alleged fraud occurred at the top of the corporate ladder-something the government has yet to prove, said James Blumstein, a law professor at Vanderbilt University in Nashville.