Prosecutor: Columbia/HCA execs exploited mistakes of auditors

Paul Heldman and Beth Francis

Wednesday, May 5, 1999 | 11:22 a.m.

TAMPA, Fla. -- Columbia / HCA Healthcare Corp. midlevel executives boosted their careers and the fortunes of the No. 1 hospital chain by exploiting a U.S. auditor's error to win $3 million in fraudulent hospital payments from government health insurance programs, a U.S. prosecutor said.

Government auditors "made a series of mistakes, the defendants found them, recognized them and enriched their company and careers to the tune of $3 million belonging to the United States of America," prosecutor Bob Mosakowski said in an opening statement to jurors in the U.S. District Court criminal fraud trial.

Lawyers for the four defendants began their opening arguments Tuesday. They have said their clients were merely following complex Medicare billing rules that the government's own auditors can't even agree on.

"It's a case about differences of opinion," said Peter George, lawyer for Jay Jarrell, one of the defendants.

He said Jarrell consistently believed his company was entitled to the reimbursement in question, and the government won't be able to show there was any intent to defraud the U.S.

The trial is the first courtroom test of the government's more than 2-year-old criminal and civil investigation of Nashville, Tennessee-based Columbia/HCA.

The trial focuses on charges of wrongdoing at only one of Columbia/HCA's nearly 300 hospitals. Its outcome, however, could help determine whether the government seeks more indictments of current and former Columbia/HCA executives and could influence the pace and bargaining strategies of both sides in talks to settle the larger investigation of the company.

Investors want Columbia/HCA to get the case settled, even if it costs $1 billion. They are already anticipating a comeback for the hospital company after it posted a 12 percent rise in first-quarter earnings.

Columbia/HCA shares, which lost 60 percent of their value after the investigation became public in March 1997, have rallied from a low of 17 3/8 in February. Columbia/HCA shares fell 3/4 to 27 in midafternoon trading.

The company is under federal criminal and civil investigation into whether it engaged in a corporate scheme to defraud government health insurance programs, on which it relies for as much as 40 percent of its revenue.

The indictment of three of the four Columbia/HCA executives headed for trial was unsealed on July 30, 1997, just five days after the company's co-founder, Richard Scott, resigned and the company reversed course by vowing to cooperate with prosecutors.

Jarrell, 43, Robert Whiteside, 48, and Michael Neeb, 36, are accused in a seven-count federal indictment of participating in a conspiracy to overbill Medicare for the elderly and then cover up the error on behalf of Fawcett Memorial Hospital, a southwest Florida hospital.