Less than a week after a jury convicted two hospital executives of criminal Medicare fraud, national hospital groups launched a multistate advertising campaign to pressure lawmakers to cough up more Medicare money for their members.
The success of that lobbying campaign may depend on how big a hit the hospital industry's already shaky image takes from those convictions and those of two other hospital executives in April.
Drew Altman, president of the Henry J. Kaiser Family Foundation, said the public already believes that Medicare fraud is a big problem.
"They see fraud, waste, abuse and profiteering as (forces) driving healthcare cost increases," explained Altman, whose Menlo Park, Calif.-based group routinely conducts public opinion polls on healthcare issues. "These convictions are only going to fan those flames. They will have an impact, but how widespread an impact we don't know yet. It will not help the industry in making its case."
On July 2, a 12-member jury in U.S. District Court in Tampa, Fla., convicted two midlevel executives of Columbia/HCA Healthcare Corp. of six of seven criminal charges related to Medicare fraud (July 5, p. 4).
The jury acquitted a third defendant in the case and failed to reach a verdict on a fourth.
Three months earlier, on April 5, a 12-member jury in U.S. District Court in Kansas City, Kan., convicted four people, including two former executives of Baptist Medical Center in Kansas City, Mo., of engaging in an illegal patients-for-cash scheme in criminal violation of the federal anti- kickback statutes (April 12, p. 2).
Then on July 6, the American Hospital Association, the Federation of American Health Systems and more than two dozen state hospital associations kicked off a 25-state radio and newspaper ad campaign, urging consumers to insist that their representatives in Congress back various financial relief bills for providers (See story, p. 8). The measures would undo or soften the Medicare spending limits Congress passed in 1997 as part of the Balanced Budget Act.
Asking Congress for more money could be a tough sell after several prominent members of the industry have been convicted of stealing.
Bill Vaughan, staff assistant to Rep. Fortney "Pete" Stark (D-Calif.), the ranking minority member of the House Ways and Means health subcommittee, said the convictions throw cold water on some of the industry's lobbying goals.
"It gives guys like Stark more ammunition to say: 'Don't undo that,' " Vaughan said.
Not surprisingly, hospital industry representatives are trying to separate the two events-the criminal convictions and the push for Medicare payment relief-in the minds of the public and lawmakers.
Thomas Scully, president and chief executive officer of the Federation of American Health Systems, insisted the convictions of the Columbia executives will have no effect.
"That will have zero effect on the lobbying efforts," said Scully, whose group represents the for-profit hospital industry. "I'm on the Hill every day, and I don't see any impact. It's largely old news."
Scully's group is footing the bill for the series of radio and newspaper ads running in Florida, where Columbia operates 56 of its hospitals and where the criminal trial was held.
Charles Pierce Jr., president of the 246-member Florida Hospital Association, said he's uncomfortable discussing the Columbia verdict because the 56 Florida Columbia hospitals are FHA members. But Pierce said he believes the jury's decision will not affect the industry's lobbying efforts.
Linda Quick, president of the South Florida Hospital Association, said the Columbia convictions and the circumstances leading to the case are isolated incidents and pale in comparison to the size of the hospital industry and the Medicare program.
Twelve of the SFHA's 52 members are Columbia hospitals, including 249-bed Fawcett Memorial Hospital in Port Charlotte, Fla. That's where the four Columbia executives were accused of intentionally overbilling Medicare for the hospital's capital expenses. The executives said any billing problems resulted from over-complex Medicare regulations, not an attempt to deliberately defraud the government.
"Given the billions of dollars that change hands every day, it is to the industry's credit that this is so rare," Quick said.
Nevertheless, Quick also recognized that from a public relations perspective, the industry was lucky that the verdict came late in the day on a Friday before a holiday weekend. The impact was muted by the timing, she said.
Convicted were Jay Jarrell, 43, CEO of Columbia's Southwest Florida division, and Robert Whiteside, 48, director of reimbursement at Columbia's Nashville headquarters. Acquitted was Michael Neeb, 36, former chief financial officer of Fawcett Memorial Hospital and CFO at Columbia's North Florida division. The jury was couldn't reach a verdict on the charges against Carl Lynn Dick, 54, CFO at Columbia's Central Florida division. The four have been on paid leave, and Columbia has paid their legal fees.
The sentencing hearing for Jarrell and Whiteside is scheduled for Oct. 15 in U.S. District Court in Tampa.
Mary Grealy, the AHA's chief Washington counsel, said the convictions hammer home the message that compliance is important.
"Beyond that I'm not sure if there's any one, single message from this one, single case," she said. "These are isolated cases, two hospitals out of more than 5,000."
Yet the indictments and subsequent convictions in the Columbia case stem from an ongoing criminal investigation of the nation's largest hospital chain and its executives, which began in 1996. And the taste of victory could propel that investigation, leading to other indictments.
Thomas Crane, a former HHS lawyer now in private practice, said the U.S. Justice Department could be champing at the bit for other Columbia scalps.
"Those convictions exert some very powerful leverage that can be used in a settlement process," Crane said. "It wouldn't surprise me if the government even slows up a little and wants to get one or two more cases before a jury before extracting a few pounds of flesh from the company."
The Tampa triumph also increases the likelihood that federal prosecutors may try to persuade the convicted executives to testify against upper-echelon Columbia officers, past and present, Crane said.
The convictions also may add pressure on Columbia to settle the seven known and unsealed civil whistleblower Medicare fraud cases pending against the company in various federal district courts. The Justice Department has joined four of those cases as a plaintiff.
Observers said Columbia has little choice but to cooperate with the government in the criminal investigation, continue to press for a settlement of the civil cases and stay the course on compliance. Events such as future prosecutions, whistleblower lawsuits and fines are out of its control.
Columbia spokesman Jeff Prescott said the global settlement of the civil cases and the criminal charges should be regarded as two separate processes. Prescott said the company has transformed itself and should be judged on its present and future, not its past.
"Everyone knows what happened and sees that and knows what we've done since then," Prescott said.
But at least financially, the news isn't all bad for the company, which made its mark and reputation in the mid-1990s with an aggressive acquisition strategy and bullying competitive tactics.
John Hindelong, a healthcare analyst at Donaldson, Lufkin & Jenrette in New York, said investors already know about Columbia's legal troubles.
"And the stock market looks forward, not backward," Hindelong said. "I don't think the verdict will have a major impact one way or the other. I think even this one trial isn't overwhelmingly negative in the sense that two of the four defendants were not penalized."
Columbia stock closed at $22.88 per share July 2, right before the jury handed down its verdict. It dipped to $22.44 July 6, the first trading day after the verdict. It closed at $23 on Friday.
But other healthcare providers may be looking over their shoulders for a long, long time as the government's victories in the Columbia case and the Baptist kickback case add momentum to government fraud-fighting.
Justice Department spokeswoman Chris Watney said the department was pleased with the Columbia verdict.
"We've been seriously pursuing healthcare fraud since 1993, and this case was a good example," Watney said. "We're going forward with our efforts to fight healthcare fraud and hope that our efforts, including this case, will prove to be a deterrent."
Despite the health industry's squealing from the pain, cost and scrutiny, that sentinel effect appears to be working. In February HHS' inspector general's office audited Medicare fee-for-service claims expenditures. It estimated that improper payments from errors, fraud, waste and abuse cost Medicare $12.6 billion in fiscal 1998, down from a 1996 estimate of $23.2 billion, a reduction of 45% in improper payments in two years.
"There's no doubt that (the Florida case) improves their leverage," said Neil Caesar, a healthcare fraud lawyer with the Health Law Center, Greenville, N.C. "This victory provides a lot of fuel, gives the government a sense of vindication that they're on the right track and helps them wield the substantial weapons of civil penalties much more aggressively and persuasively."