HCA in deal to end fed probe

Karin Miller

Wednesday, Dec. 18, 2002 | 11:15 a.m.

NASHVILLE, Tenn. -- HCA, the nation's largest for-profit hospital chain and owner of two Las Vegas hospitals, announced a $631 million settlement today with Justice Department attorneys to resolve civil health care fraud allegations.

The settlement, pending formal Justice Department approval, caps a five-year investigation into HCA that resulted in HCA pleading guilty to defrauding government health care programs and two former executives going to trial.

Whistleblowers alleged the company filed false claims and paid kickbacks to doctors so they would refer Medicare and Medicaid patients to its facilities.

"We are pleased to have successfully negotiated a settlement to the remaining two civil issues -- cost reports and physician relations," said Jack O. Bovender, Jr., HCA chairman and CEO.

"Today, we are a stronger company with a corporate integrity agreement, a corporate compliance initiative that has set the standard for many in our industry and a culture that is focused on the delivery of quality patient care in the communities we serve," Bovender said.

Under the settlement, HCA will pay the Justice Department $631 million, and the government will end its investigation. HCA earlier agreed to pay $840 million to settle federal criminal and civil charges.

In 1999, two former HCA executives -- Jay Jarrell and Robert Whiteside -- were convicted of conspiring to defraud the government and making false statements in Medicare reimbursement cost reports for a hospital in Port Charlotte, Fla. The convictions were overturned this year on appeal. It was the only case that went to trial.

The Justice Department closed its criminal investigation of HCA executives in July, clearing them to testify in the civil Medicare and Medicaid fraud cases.

The company also reached an agreement with attorneys representing states with claims similar to the government's against HCA. Under this agreement, HCA will pay $17.5 million to state Medicaid agencies to resolve the claims.

HCA expects to charge approximately $395 million against earnings after taxes in the fourth quarter of 2002 because of the settlements. The net after-tax cash effect on HCA is estimated at approximately $445 million, considering the resolution of certain Medicare claims and the related deferred taxes.

The company also will be obligated by law to pay legal fees of the whistle-blowers' attorneys. The company expects to record a charge for these fees in the fourth quarter of 2002.

In Las Vegas, HCA owns Sunrise and MountainView hospitals and is building a third hospital in the area.