After a one-week recess for the Memorial Day holiday, the criminal Medicare fraud trial of four Columbia/HCA Healthcare Corp. executives is scheduled to begin its fifth week on June 7 with the government's star witness facing intense cross-examination in U.S. District Court in Tampa, Fla.
Later, the jury will decide whether the financial officers intentionally defrauded Medicare or were innocent victims of overly complex Medicare billing procedures.
A spokesman for the U.S. attorney's office in Tampa predicted the trial could last into July. The government has put more than 30 witnesses on the stand and expects to complete its case within a week.
Then it's the defendants' turn. Their lawyers can select from more than 80 witnesses they've listed, including at least one former high-level Columbia executive, Samuel Greco. Greco, who resigned in 1997, was Columbia's vice president of financial operations and supervised its purchasing program.
In June 1998 Greco filed a civil suit in Tampa federal court against Columbia, claiming it violated an exclusive medical claims management agreement with his company, Florida Software Systems.
In October last year Columbia countersued, charging that Greco, his company and other vendors defrauded the company of nearly $10 million.
The indictments and subsequent trial of the four executives represent the first criminal charges stemming from the government's ongoing criminal fraud investigation of the nation's largest for-profit hospital chain and its executives. The investigation went public with a series of FBI raids in March and July 1997 on dozens of Columbia facilities in six states. The FBI has acknowledged it's conducting criminal investigations of Columbia in El Paso, Texas, and Salt Lake City.
Columbia also faces four civil whistleblower fraud lawsuits, which the government has joined as a plaintiff, and faces numerous unsealed lawsuits.
The witness whose testimony had been most keenly awaited was whistleblower John Schilling, a former reimbursement supervisor who worked for Columbia's southwest Florida division in Fort Myers. The 14th floor courtroom of Judge Susan Bucklew buzzed May 27 as Schilling took the stand, avoiding eye contact with his former bosses.
Schilling, 36, is the heart of the government's case against Jay Jarrell, 43, chief executive officer of Columbia's southwest Florida division; Michael Neeb, 36, chief financial officer of the Jacksonville, Fla., division; Robert Whiteside, 48, the director of the company's single-market division; and Carl Lynn Dick, 54, CFO of its central Florida division in Orlando.
The four are charged with conspiring to defraud Medicare by filing false Medicare cost reports and conspiring to divert a federally appointed auditor from investigating the alleged fraud. They are on paid leave pending the results of the trial.
In opening arguments in May, Assistant U.S. Attorneys Robert Mosakowski, Kathleen Haley and Anthony Peluso alleged that the four illegally sought through Medicare cost reports to obtain higher reimbursement for capital interest than they were entitled to for Fawcett Memorial Hospital in Port Charlotte, Fla. The result was a nearly $3 million overpayment to the hospital.
The government accuses the four defendants of knowing about an auditor's mistake that benefited Fawcett, failing to disclose it and conspiring to hide it.
The allegedly fraudulent cost reports date back to the 1980s, but the government did not learn of the cover-up until Schilling, who once reported to Whiteside, filed his whistleblower suit in 1996.
Under examination from Mosakowski, Schilling explained how be became aware of millions of dollars in cost reserves the hospital was maintaining. Schilling, now an auditor with Blue Cross and Blue Shield United of Wisconsin, told defendant Whiteside he'd spoken with the hospital's Medicare fiscal intermediary, Thuan Tran, about the reserves.
Schilling said Whiteside exploded and ordered him to never tell anyone about the reserves. Schilling said the reserves were kept by the defendants to pay back the government if the fraud were ever discovered.
"Just let it lie. Jobs could be lost if this gets out to the intermediary," Schilling said Whiteside told him.
But it didn't stop there. At Jarrell and Neeb's urging, Whiteside, Schilling and Fawcett Controller Jim Burns met in early April 1994 to discuss strategy, Schilling said.
Schilling told jurors that at that meeting a plot was hatched to divert the auditor, first by keeping her distracted with questions and other reimbursement issues. If all else failed, Jarrell, who participated in the meeting through a conference call, suggested hiring Blue Cross and Blue Shield of Florida auditor Tran.
"The intent was to divert her attention," Schilling said. "I was afraid of losing my job if I didn't do anything. They seemed overly concerned about the issue. I felt uncomfortable."
He said he didn't tell Tran about the cost report errors, although he knew he should have.
"I had concerns that it should be disclosed. I'd hope they (the defendants) would take the right steps" and disclose it.
The government presented e-mail messages and "to do" lists from Neeb and Schilling to support its belief that a conspiracy existed to defraud the government. "Hire her," was one of the instructions on Neeb's list.
Tran was never offered the job because the cost report errors never came up.
Before the defense had a chance to grill Schilling, prosecutor Mosakowski walked him through some of the land mines the defense could use to tarnish his credibility. He admitted signing a falsely prepared cost report that went to the Civilian Health and Medical Program of the Uniformed Services and failing to inform the government of the scheme.
Before leaving Columbia in August 1995, Schilling consulted an attorney and collected four boxes of evidence that would launch the investigation.
Schilling also filed a whistleblower suit against accounting firm giant KPMG, alleging the firm falsified cost reports for five Florida Columbia hospitals from 1990 to 1992. That lawsuit was unsealed May 28 (See story, p. 52).
After four hours of government questioning, the defense began its cross-examination. In their opening statements defense attorneys portrayed Schilling as a greedy, deceitful man who would rat on his friends for money and who may have been the guiltiest culprit.
He acknowledged he could collect up to 25% of a government recovery.
But by the end of testimony on May 28 Schilling demonstrated that while his memory was sometimes cloudy, he could stand up to intense cross-examination without breaking.