From London to Washington to Kansas City, Mo., HCA is facing legal actions that could have impacts measured in hundreds of millions of dollars.
Here a lawsuit, there a lawsuit
HCA sued in U.K., U.S. but denies wrongdoing
Last week, the Nashville-based company said that the U.S. Securities and Exchange Commission is looking at allegations made by a former employee in its London payroll department; HCA operates six hospitals in London. The former employee sued the company regarding nurse scheduling and compensation at the six hospitals, the company said. According to a published report, the lawsuit alleges that up to 120,000 nurse shifts may have been wrongly logged and paid for.
Meanwhile, in Kansas City, HCA faces a lawsuit in Missouri state court brought by one of the two foundations set up with the proceeds from the sale of Health Midwest to HCA in 2003. The Health Care Foundation of Greater Kansas City alleges in its lawsuit that HCA has failed to document its compliance with the $450 million capital spending commitment and $300 million charity care commitment in the asset purchase agreement. The foundation also asked a judge in the Jackson County Circuit Court in Independence, Mo., to find that the foundation has complied with noncompete sections of the agreement regarding grants of $250,000 or more, according to the lawsuit.
In separate statements, HCA denied any wrongdoing.
Vicki Bryan, a senior high-yield bond analyst for Gimme Credit, an independent research service, wrote that the SEC investigation added another concern for her about the company. Bryan previously raised concerns that HCA's improvement in operating earnings was based on a potentially unsustainable change in its emergency department billings.
HCA said in April that its emergency department coding system is based on one developed by the American College of Emergency Physicians. The company implemented the system by the end of 2008 after the CMS said that a so-called proxy system, like ACEP's, would comply with Medicare regulations, HCA said then.
Bryan also wrote that the investigation could speed any plans that HCA may have to return to the public equity markets with an initial public offering of shares. “If the company is indeed planning an IPO as rumored, we would expect it to proceed. It might even accelerate those plans before bad news has a chance to escalate and while the market is hungry for new deals,” Bryan wrote.
The London case was brought by a woman who worked for HCA's London hospitals from August 2004 through January 2008, first as a payroll administrator and later as finance co-coordinator for the temporary staffing services department, according to court records. She alleges that her login and password were misused by others to commit fraud, court records stated.
The SEC requested information regarding the case from HCA, and the company voluntarily provided the documents that the SEC requested, HCA said. The allegations have no merit, HCA said. The company continues to vigorously defend itself against the former employee's lawsuit, HCA said.
The allegations echo a major aspect of the federal government's fraud probe of HCA that began with a whistle-blower lawsuit filed in 1993 by a former employee and ended a decade later with HCA paying a total of $1.7 billion in fraud settlements. One key allegation in the earlier probe was that HCA padded its Medicare cost reports with sham expenses. HCA's statement noted that British authorities have looked into the new allegations and have declined to take action.
An HCA spokesman would not identify the British authorities, but the Washington Post, citing court documents, said these include the National Health Service and the Serious Fraud Office.
In Kansas City, the Health Care Foundation's lawsuit alleges that HCA's documentation of its capital spending has been riddled with inaccuracies and double-counting.
The lawsuit also alleges that HCA's disclosure is much too vague to satisfy the reporting requirements of the asset purchase agreement. The foundation received $445 million, equal to 80% of the net proceeds from the sale of Health Midwest to HCA for $1.13 billion. The remaining 20% went to the Reach Healthcare Foundation, Kansas City, Kan., as Health Midwest's hospitals were split across the state line.
In a written statement from HCA Midwest Health System, the company said it has exceeded its $450 million capital commitment, spending nearly $600 million, including money that went toward two replacement hospitals. Regarding charity care, the statement said, HCA agreed to provide more than $650 million in 10 years, but has provided more than $700 million in six years.
All of this has been documented in six annual reports to the Community Health Group, which is the successor organization to Health Midwest, HCA said.
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