Between now and the end of the year, lawyers for the U.S. Justice Department and some of the 27 whistleblowers who sued what is now HCA-The Healthcare Co. will be busy negotiating how to divide their portion of the record $745 million HCA Medicare fraud settlement.
Both sides hope the allocation process goes smoothly, of course; but when the amount of money to be divided is large--in this case, as much as 10% to 25% of that $745 million--things can get thorny.
On May 18, representatives from the Justice Department called to inform whistleblowers of that tentative HCA settlement of fraud charges involving home healthcare, diagnosis-related group upcoding and clinical lab unbundling; but exactly how that allocation process will unfold and the date for sorting things out have not yet been determined.
The settlement is contingent on the Justice Department's resolving the pending civil and criminal charges against HCA in Medicare cost reporting and physician referral arrangements by year-end.
Officials from the Justice Department and HHS' inspector general's office, the two agencies that will negotiate and approve the settlements, would not comment. But HCA spokesman Jeffrey Prescott says, "The tentative agreement indicates the desire of both parties to resolve this within the time frame."
Ten of those active whistleblower suits have been unsealed so far. The government has intervened in seven cases, declined to intervene in two and is undecided in another. Seven of the lawsuits have been dismissed and two have been settled.
Sources close to the case say there are no big surprises among the remaining sealed whistleblower lawsuits, all of which allege some variation of the charges facing HCA. Most attorneys say it's unlikely that any new suits will be filed. To successfully collect on a suit, a whistleblower must be the original source of information. And after the rigorous investigations of HCA, it's unlikely any new charges will be unearthed that haven't been previously publicized.
San Francisco attorney Stephen Meagher, whose firm Phillips & Cohen represents three parties suing HCA, says the whistleblowers have received summaries of all the cases, so they know who filed what, when and where and understand that some will be dismissed for filing too late or repeating previously filed allegations.
Though the allocation process hasn't been determined, Meagher predicts the government will attempt to resolve each category of allegations one at a time, issue by issue.
"People have a vision of all of us corralled together with the allocations handed out from on high," he says. "I think an incremental approach with the issues segregated out is likelier."
John Phillips, a lawyer with the Washington office of Phillips & Cohen, says even though there's been no date set for a meeting with the government to allocate the settlement money, he's not worried.
He says government negotiators who may be leaving office at the end of the year when the presidential administration changes are deeply invested in the HCA case and want to wrap it up.
Phillips predicts the total settlement, including criminal charges, cost reporting and private payer suits, could cost HCA $2 billion--$1 billion higher than first predicted.
Health lawyers say the Justice Department has learned something from its experience in the $325 million SmithKline Beecham clinical lab unbundling case settled in 1997, in which whistleblowers and Justice Department officials turned on one another and embroiled the outcome in litigation that continues today.
"The government did not cover itself in glory in the SmithKline case," Meagher says. "That's a nightmare scenario. Years later there are hard feelings and recriminations between Justice and the (whistleblowers). I think Justice has learned it needs to approach this in a more reasoned and deliberate way."
Stuart Gerson, a former Justice Department official who's now a healthcare defense lawyer with the Washington office of Epstein, Becker & Green, says there's nothing to prevent the criminal case from going forward if the civil case settles.
"They could even use information from the civil case. The question is: Will the government walk away from criminal charges? I doubt it, because Olsten (Corp., HCA's co-defendant in another whistleblower suit, which was settled last year for $61 million) already pled guilty."
He says kickback allegations are potentially the weakest allegation from the government, which has only intervened in one kickback case and declined to intervene in several others.
Gerson says kickback cases are difficult to prove and that HCA, which has employed physician syndication programs for years, has a strong defense.
He says HCA's stock--trading at just less than $28 as of June 9--would dive if the settlement crumbled because investors would lose confidence.
"That gives HCA a terrific inducement to satisfy the December deadlines," he says.