Illegal physician referral arrangements among several hospitals owned by HCA-The Healthcare Co. and several hundred doctors cost the Medicare program nearly $175 million in bogus claims, the U.S. Justice Department has charged.
The department's allegations are included in three of the eight new civil fraud whistleblower lawsuits the government has joined against the nation's largest hospital chain.
Former HCA employees and a former physician investor in one of the suspect referral arrangements filed the three lawsuits from 1995 to 1999. Last month, the Justice Department filed amended complaints in the three cases as well as the five others with the U.S. District Court in Washington (March 19, p. 6).
The other five suits the government joined cover cost-reporting fraud and wound-care billing fraud allegations.
The three amended kickback complaints reveal for the first time the specific allegations against HCA's "physician syndication" strategy, in which select physicians were offered investment opportunities in HCA hospitals. The strategy, which was popularized by then-Columbia/HCA Healthcare Corp. as well as other for-profit hospital chains, was designed to keep physicians and their patients loyal to particular hospitals. Most of the deals have been unwound.
The kickback provisions of the Medicare and Medicaid fraud-and-abuse statutes bar any form of remuneration to induce the referral of patients. Violations of the kickback provisions can be civil, punishable by fines and suspensions, or criminal, and punishable by fines and imprisonment. The fact that the government is joining civil suits is seen by some observers as evidence it won't pursue criminal charges.
According to the three complaints, HCA went to great lengths to disguise the kickbacks as legitimate investment vehicles or as payments for services rendered. For example:
Investment opportunities were not available to the general public or to doctors determined to be poor referral sources.
Kickbacks were paid through personal serviceagreements for positions like medical directorships and consulting posts for which little or no work was required.
* Physicians were loaned money at little or no interest, and other such loans were forgiven.
* Physicians were given rent-free office space.
* Physicians' staff were put on HCA's payroll.
* Physicians and their families were given free pharmaceuticals from HCA hospital pharmacies.
In three markets, HCA allegedly paid 234 doctors in Florida and Texas $17 million in kickbacks from 1988 to 1999, according to the Justice Department. Those doctors generated 112,452 Medicare claims and business worth $173.8 million to HCA and its predecessor companies during that period.
In addition to violating the anti-kickback laws, HCA violated the False Claims Act, according to the Justice Department, because the claims submitted to Medicare as a result of the illegal referral schemes are by definition false. The Justice Department also is making the connection between kickback schemes and false claims in a separate whistleblower lawsuit that it has joined against Tenet Healthcare Corp. (March 5, p. 22). In each case, both HCA and Tenet would be subject to substantially higher settlement costs or fines if the government's position is upheld in federal court.
The suits against HCA allege that some of those suspect practices continued into late 1997, even after a series of raids in March and July that year on HCA hospitals and business offices. Eventually, HCA began unwinding its physician syndication deals as part of its major restructuring after the government's criminal and civil fraud investigation of the company became public.
HCA spokesman Jeffrey Prescott said in 1997 about 3,000 of HCA's 90,000 staff physicians participated in the syndications at more than 45 HCA hospitals and facilities. He said by 2000 fewer than 200 doctors still owned stakes in syndications.
Healthcare consultant James Unland, president of Health Capital Group of Chicago, said if the 1997 FBI raids on HCA facilities didn't kill physician syndication as a hospital business strategy, the government's intervention probably will.
"From a practical standpoint it's been dead for many years," Unland said, conceding that some deals have survived quietly. "HCA and other companies have been unwinding these deals for years, but it's been terribly difficult. There's a lot of resistance to unwinding them, particularly when the critical mass of the medical staff is involved. There's a lot of pressure to maintain the status quo when the status quo lines the pockets of doctors."
Prescott declined to comment on specific allegations, saying the charges are nothing new.
Stuart Gerson, a former Justice Department official now with the Washington office of law firm Epstein, Becker & Green, said the government's intervention in the civil kickback suits probably means there will be no criminal prosecutions against current or former HCA officials.
"You need clear evidence of criminal intent and the government didn't feel that it had it," Gerson said. "The government generally is moved by the evidence, not the allegations."