Even as the company formerly known as Columbia/HCA Healthcare Corp. last month announced a tentative, $745 million Medicare fraud settlement with the U.S. Justice Department and changed its name to HCA-The Healthcare Co., a different group of payers quietly continued efforts to recover hundreds of millions from the healthcare giant.
In the May 18 Medicare announcement (May 22, p. 2), HCA and the Justice Department said they'd reached tentative agreement on three civil fraud issues: clinical laboratory unbundling, diagnosis-related groups upcoding and home healthcare fraud.
But the company has not publicly discussed how much it will pay a group of more than 50 large, private health benefits insurers threatening to sue based on those same fraud charges.
For nearly two years those insurers have been conducting their own independent fraud investigations into HCA's business practices, shadowing many of the government's charges and unearthing evidence of new allegations.
In January MODERN HEALTHCARE reported that three large law firms were pursuing lawsuits on behalf of the insurers to recover more than $500 million in fraudulently filed claims.
Alison Duncan of Porter, Wright, Morris & Arthur, Washington; T.J. Jones of Shipman & Goodwin, Hartford, Conn.; and Kirk Nahra of Wiley, Rein & Fielding, Washington, confirmed that they are representing health insurers investigating HCA, but refused to discuss the case, their legal strategy or the nature of the claims.
Sometimes called "piggyback," or "follow-on" lawsuits because they're often filed after the government has either launched or settled its claims, the insurers' cases purportedly go beyond government allegations into other areas of overtreatment and overbilling.
In its annual report filed March 31 with the Securities and Exchange Commission, HCA revealed that at least two insurers accused it of overbilling from 1994 to 1997, noting that several law firms representing health benefits insurers contacted the company to negotiate repayments.
In an interview last month, Thomas Frist, M.D., chairman and chief executive officer of HCA, said the company hasn't assessed a dollar value for the private payer health insurers' claims.
"If you said it was $1 or $1 million, I'd have no idea," Frist said.
According to its SEC filings, more than half of HCA's annual revenue flows from private payer managed-care or commercial insurance.
Sources close to the case said the health insurers are optimistic about their chances for a large recovery, given the size of the proposed $745 million settlement with the government and the tentative resolution of the issues in that case. Insurers reason that those issues, more than physician kickback arrangements and Medicare cost-reporting fraud, affected them as much as they affected the government.
DRG upcoding could even constitute the lion's share of the private payer cases.
Though the primary whistleblower in the government case alleges DRG upcoding with pneumonia diagnosis overbilling, insurers have said their investigations found that HCA may have upcoded in other disease diagnosis areas, such as stroke, heart disease and cancer, as well as other forms of overcharging. That could mean the private payers might be collecting on issues the government has not disclosed.
So far 26 whistleblower lawsuits have been filed against HCA and its forebears, Columbia/HCA Healthcare Corp., Hospital Corporation of America and HealthTrust-The Hospital Co.
Private insurers worry that the value of their claims could diminish if the government, seeking to speed the process and resolve its 4-year-old investigation, accepts a low price to wrap up everything.
Bill Mahon, president of the Washington-based National Health Care Anti-Fraud Association, said it's unknown how much private-payer insurers received in national fraud settlements.
In the 1991-1992 settlements with National Health Labs, which he called "a wake-up call for private payers and government alike," the government settled for $112.5 million. "And by the time the private payers settled, it was probably equivalent. There were hundreds of payers hit by this. And at the time of the settlement, its size was an unprecedented thing."
Mahon said the government's biggest lever is the False Claims Act, which allows the government to exclude companies from Medicare, charge them triple the alleged damages and threaten to put them out of business.
"Private payers don't have that leverage and start a little further behind the eight ball," he said. "It's unrealistic to expect they will match the government's settlement."
The ballooning potential of HCA's liabilities could cost the company billions. HCA, already tentatively committed to pay three-quarters of a billion dollars to resolve three issues, could pay close to that much to private insurers and hundreds of millions more for the civil cost-reporting and kickback charges, as well as criminal penalties and fines. The final cost to HCA, including the government and private payer cases, could range between $1.5 billion and $2 billion, sources said.