In a move that could affect Columbia/HCA Healthcare Corp.'s legal woes, home health giant Olsten Corp. said last week it had reached a tentative $61 million criminal fraud settlement with the U.S. Justice Department.
The agreement would settle two federal investigations targeting Olsten, one involving the company's business dealings with Columbia and the other centering on Olsten's Medicare cost reports.
The settlement has yet to be formally drawn up and is subject to "the satisfaction of certain conditions," the company said. A spokesman would not say when those conditions might be met.
The government has been looking into whether Columbia deliberately bought home health agencies from Olsten at cut-rate prices in 1994 and then illegally billed Medicare for inflated fees it paid Olsten to manage them.
Columbia is in settlement talks with the Justice Department over two civil whistleblower Medicare fraud lawsuits against the Nashville-based hospital chain. One of the lawsuits, filed in Tampa, Fla., and unsealed late last year, charged Columbia with running the home health scam.
Columbia also is the subject of an ongoing criminal fraud investigation.
The Olsten settlement could be an indication that a resolution of at least some of Columbia's legal problems is in sight.
The settlement would require Kimberly Home Health Care, the Olsten subsidiary that managed the Columbia home-care agencies, to plead guilty to violations of federal kickback, conspiracy and mail-fraud charges in connection with its dealings with Columbia, according to Olsten's 10-K filing with the U.S. Securities and Exchange Commission. Olsten would also pay the feds $61 million, including $10 million in fines and penalties.
Neil Caesar, president of the Health Law Center, a Greenville, S.C.-based healthcare law firm not involved in the case, said that a guilty plea would bar the subsidiary from participating in the Medicare and Medicaid programs for several years. "It is also possible the guilty plea for Kimberly is the first step toward Kimberly officials testifying against Columbia."
Columbia spokesman Jeff Prescott said he didn't know any details of the Olsten settlement. Columbia is continuing settlement talks with the government, he said.
Last April, Kimberly, Olsten and Olsten's health services division were targeted by a grand jury investigation into possible federal crimes.
The U.S. attorney in Miami was looking into Kimberly's relationship with Columbia, Olsten said at the time. It is unclear whether the federal crimes to which Kimberly would plead guilty are the same ones the U.S. attorney was investigating. John Schlesinger, special counsel to the U.S. attorney, declined to comment.
Melville, N.Y.-based Olsten repurchased 80 Florida home health locations from Columbia late last year, plus two in Alabama, for $34 million. But the company is not expanding its home health operations. Since late last year it has closed at least 60 locations and plans to close at least 15 more.
Separately, Columbia has disclosed that it may be the target of an insider-trading investigation by the SEC.
The company has included information about the SEC probe in its filings with the commission since 1997, but its annual report released last week marked the first mention that the investigation focuses on insider trading.
Columbia's Prescott said the inclusion did not reflect new information.
To bring a successful insider-trading case, the government must show that trading was based on nonpublic, material information and that the party doing the trading had access to the information based on trust or fiduciary duty.