Department of Justice Seal


(202) 514-2007
(202) 514-1888


WASHINGTON, D.C. ­ The Department of Justice announced today that it has joined a lawsuit alleging that Columbia/HCA Healthcare Corporation, the largest health care services provider in the nation, defrauded the Medicare program and other federally funded health insurance programs.

Columbia/HCA owns approximately 300 hospitals in 32 states. More than 100 of those hospitals are included in the suit, which also alleges fraud by five former Basic American Medical, Inc. (BAMI) hospitals in their Medicare cost reports, which continued after the company's acquisition by Columbia/HCA in 1992.

Assistant Attorney General of the Civil Division Frank W. Hunger and United States Attorney in Tampa, Fla., Charles R. Wilson said a complaint was unsealed today that alleges that Columbia/HCA routinely submitted hospital cost reports to Medicare, Medicaid and CHAMPUS (the Civilian Health and Medical Program of the Uniformed Services) that included false claims in order to increase the amount of reimbursement the government paid to the hospitals.

The suit was initially brought by John Schilling, a former Supervisor of Reimbursement for the West Florida Division of Columbia, under the qui tam provisions of the False Claims Act, a federal law that allows private individuals to sue on behalf of the government. Under the False Claims Act, a company can be fined up to three times the amount of the fraudulent billings and assessed civil penalties. In addition, under certain circumstances, a whistle blower can recover up to 15 to 25 percent of the government's recovery in a case that the government joins.

The lawsuit alleges that beginning around 1986, Columbia and BAMI, made false statements to various fiscal intermediaries, the companies which process Medicare cost reports for the government, in their hospitals' annual cost reports, claiming that they should receive reimbursement of costs that the hospitals knew were unallowable. The lawsuit claims that Columbia and BAMI prepared "reserve cost reports," internal documents identifying those unallowable costs included in their filed cost reports, and kept those reserve cost reports hidden from government auditors. The complaint alleges that the purpose of the reserve cost reports was to set aside funds to repay the government in the event the unallowable costs were eventually discovered.

On October 5, the Justice Department joined a prior lawsuit in which another whistle- blower, or relator, made similar allegations against HCA and HealthTrust, two hospital chains which Columbia purchased in 1994 and 1995, respectively. Schilling's lawsuit that was unsealed today is limited to hospitals owned by Columbia prior to its 1994 merger with HCA.

The lawsuit unsealed today alleges that in January 1993, Columbia's Southwest Florida Regional Medical Center, located in Fort Myers, Fla., purchased a home health agency from ResCare, and retained ResCare to manage the agency. According to the lawsuit, when Southwest bought Able Care Home Health Agency in late 1993, Columbia had Able Care take over ResCare's responsibilities. The lawsuit alleges that Columbia bought out ResCare's management contract by continuing to pay ResCare's monthly management fees for minimal work, and improperly included those fees on Southwest's cost reports.

Today's action also alleges that in 1994, Columbia purchased several Florida home health agencies from Olsten Kimberly Corporation at artificially low prices and paid Olsten inflated fees to manage the home health agencies. The lawsuit contends that the management fees that Columbia paid to Olsten, and passed on the Medicare, included the costs of goodwill, which is not reimbursable by Medicare. The lawsuit also claims that Columbia hospitals with home health agencies managed by Olsten routinely double-billed Medicare for certain costs included in the management fees paid to Olsten.

The case unsealed today, United States ex rel. Schilling v. Columbia/HCA Healthcare Corporation et al., Case No. 96-1264-CIV-T-23B, and the case unsealed in October, United States ex rel. Alderson v. Columbia/HCA Healthcare Corp., Case No. 97-2035-CIV-T-23E were filed in U.S. District Court for the Middle District of Florida.

A list of hospitals is attached.