With settlement talks under way, the U.S. Justice Department has asked a federal judge to put on hold a civil lawsuit that accuses Columbia/HCA Healthcare Corp. of widespread Medicare fraud. The government asked for the postponement after filing an amended complaint in the lawsuit.
Government attorneys said proceeding with the case could jeopardize settlement talks and infringe on a separate criminal probe of the nation's largest hospital company, according to motions filed last week in U.S. District Court in Tampa, Fla.
The suit originally was brought by a whistleblower in 1993. The Justice Department joined the suit last year (Oct. 12, 1998, p. 4).
The complaint also names Quorum Health Group, Brentwood, Tenn., another for-profit hospital chain. Quorum is not part of the criminal investigation of Columbia.
The amended complaint offers details of the government's allegations against the two companies.
The companies were charged with preparing reserve cost reports to document false and inflated claims they made on actual cost reports filed with Medicare fiscal intermediaries.
According to the lawsuit, the false claims date back to 1985.
The companies also are accused of defrauding Medicaid and the Civilian Health and Medical Program of the Uniformed Services, the insurance program for members of the military and their families.
Although the government wants the civil proceedings against Columbia postponed, attorneys are moving ahead with their lawsuit against Quorum.
In court papers, government attorneys said Quorum refused a postponement of the civil proceedings and also refused "to enter constructive settlement negotiations."
Quorum spokeswoman Shea Davis disputes the government's contention that Quorum would not enter settlement talks.
"They have not offered us settlement negotiations," Davis said. "They offered for us to stay the case, and we declined a stay in the case that has already been under investigation for six years. We have to move this thing forward."
Quorum filed a motion to separate itself from Columbia in the lawsuit (Feb. 1, p. 14) and asked the court to send the case to a mediator.
U.S. District Court Judge Stephen Merryday has yet to rule on either Quorum request.
Government attorneys said formal mediation is premature because they don't have enough information to give Quorum a settlement figure.
The company has rejected working with the government toward a mutually agreeable figure without litigation, the government said.
As for Columbia, "Obviously, we are hoping to resolve (the case)," said company spokesman Jeff Prescott.
Some analysts predict Columbia may face civil penalties as high as $1 billion.
Although the lawsuit asks for no specific damage figure, the government seeks to recover triple damages and civil penalties under the federal False Claims Act.
Because Quorum is not in settlement talks, the government complaint against it offers specifics on the company's alleged fraudulent activity.
For example, the government charged that reserve-cost-report work papers included more than $50 million in questionable claims that appeared on 250 Medicare cost reports from 94 hospitals owned or managed by Quorum.
A cost report is a claim by providers for Medicare's share of reimbursable operational and capital costs during a year.
Dropped as defendants from the new complaint are 179 hospitals managed since 1984 by Quorum Health Resources or its predecessor, HCA Management Company.
But that doesn't mean those hospitals are off the hook, said Stephen Meagher, the San Francisco attorney representing whistleblower James Alderson. Alderson is a former employee of a Quorum-managed hospital in Whitefish, Mont.
Meagher said because Quorum's management arm has been sued for fraud, cost reports for Quorum-managed hospitals are open to review by fiscal intermediaries for collection of overpayments.
According to the lawsuit, Quorum employees prepared cost reports for hospitals it managed. Thirty-four Quorum-owned hospitals are defendants in the lawsuit.