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Context of 'June 29, 2006: Tenet Healthcare Reaches Settlement with Justice Department over Allegations of Defrauding Medicare'

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HCA Inc., the largest for-profit hospital chain in the US, reaches a settlement with the Justice Department over allegations of having defrauded the government. HCA is owned by the family of Senate majority leader Bill Frist. As part of the agreement, the company pleads guilty to 14 criminal counts and agrees to pay more than $840 million in criminal fines, civil penalties, and damages. It is the largest fraud settlement in US history. The Justice Department’s investigation found that the company had employed a variety of schemes to falsely charge or overcharge for services provided to patients covered by federal health plans. HCA billed Medicare, Medicaid, and other federal health care programs for lab tests that were not medically necessary or ordered by physicians. It billed the government for non-reimbursable expenses by disguising them as reimbursable “community education” expenses or as “management fees.” Other violations included using incorrect diagnostic codes when billing the government in order to increase its revenue, billing for services rendered to patients who did not qualify to receive them, and billing for services that were never performed. Of the total amount settled upon, $95 million is for violations committed by two HCA subsidiaries, Columbia Homecare Group Inc. and Columbia Management Companies Inc. The two companies had engaged in cost report fraud, fraudulent billing, paying kickbacks to doctors for referrals, and paying kickbacks in connection with the purchase and sale of home health agencies. [CBS News, 12/14/2000; US Department of Justice, 12/14/2002] Not all of the Justice Department’s allegations are resolved in the settlement. In spring 2003, HCA will reach another settlement over allegations of fraudulent cost reporting and kickbacks to physicians for referrals (see June 26, 2003).

Entity Tags: US Department of Justice, HCA, Inc.

Timeline Tags: US Health Care

Cinergy Corp announces that it is backing out of its settlement with the Justice Department. In 1999, the Justice Department filed a suit against the company for allegedly violating the New Source Review section of the Clean Air Act. Cinergy’s decision to pull out of the settlement comes less than a week after the Bush administration announced that it would review all of the Environmental Protection Agency’s enforcement cases (see May 16, 2001). According to the terms of the settlement (see December 21, 2000), the Ohio-based utility company would have spent $1.4 billion on environmental improvements to their plants reducing its annual emissions of sulfur dioxide and nitrogen oxide by an estimated 500,000 tons. [Air Daily, 5/21/2001; National Environment Trust, 6/29/2006]

Entity Tags: Cinergy Corp

Timeline Tags: US Environmental Record

Mark Colombo, 57, is told by a heart specialist at Redding Medical Center in California, that he needs a double bypass surgery. When he asks a surgeon for a second opinion, he is told the problem is so severe that he shouldn’t go home until after it has been done. The following day, he undergoes surgery. But months later, a Sacramento cardiologist tells him the operation was probably not necessary. In 2004, Colombo, along with more than 769 other heart patients, will sue Tenet Healthcare Corp., which owns the hospital, and settle for $395 million (see December 21, 2004). The company had allegedly performed hundreds of unnecessary bypass surgeries and other medical procedures between 1992 and 2002. [San Francisco Chronicle, 12/22/2004]

Entity Tags: Tenet Healthcare Corp.

Timeline Tags: US Health Care

HCA Inc. and the US Justice Department sign a settlement agreement, resolving allegations that the company paid kickbacks to physicians and submitted false cost reports and fraudulent bills to Medicare, Medicaid, and other federal health programs. Under the terms of the agreement, HCA, the country’s largest for-profit hospital chain, will pay the US government $631 million in civil penalties and damages. Additionally, under a separate agreement that was negotiated more than a year ago, HCA will pay the Centers for Medicare and Medicaid Services (CMS) $250 million to resolve “outstanding cost report issues.” Critics of that settlement have alleged that the CMS head—a former lobbyist for the hospital industry—cut the deal behind the Justice Department’s back saving HCA several hundred million dollars (see March 28, 2002-November 2002). [CBS News, 12/18/2002; Washington Post, 12/19/2002; US Department of Justice, 6/26/2003; Nashville Business Journal, 6/26/2003; New York Times, 6/27/2003] These amounts, when combined with the $840 million settlement reached in December of 2000 (see December 14, 2000), make this the government’s single largest fraud settlement in US history. The $1.7 billion settlement concludes a nine-year investigation that began when whistle-blower James Alderson, a former chief financial officer of one of its former hospitals, filed a lawsuit alleging that the company’s cost reports to the government were fraudulent. During the course of the investigation, authorities discovered a second set of books marked “confidential,” revealing that the company had inflated reimbursable costs billed to government health programs. [Phillips & Cohen, 12/18/2002; New York Times, 12/18/2002]

Entity Tags: US Department of Justice, HCA, Inc.

Timeline Tags: US Health Care

Tenet Healthcare Corp. settles with more than 769 patients over allegations that one of its hospitals, Redding Medical Center in California, performed hundreds of unnecessary operations on its patients between 1992 and 2002. A 2002 FBI affidavit alleged that perhaps as many as 50 percent of the heart surgeries and tests performed by doctors at the hospital were not necessary. Of those, as many as a quarter did not even involve patients who had serious heart issues. According to Russell Reiner, the attorney who represented about half the patients, at least 20 patients died after undergoing unnecessary heart surgery at the hospital, while other patients suffered strokes, brain damage, or amputations. Under the terms of the settlement agreement, Tenet will pay the former patients $395 million. [San Francisco Chronicle, 12/22/2004]

Entity Tags: Tenet Healthcare Corp.

Timeline Tags: US Health Care

Tenet Healthcare Corp., the country’s second largest hospital chain, agrees to a $900 million settlement with the Justice Department over allegations that it defrauded Medicare. In 2003, the company was charged with violating the False Claims Act. The government alleged that Tenet had billed for services not rendered, inflated reimbursable costs, and paid kickbacks to doctors for referrals. The company, which admits no guilt—only that it made billing “mistakes”—will pay $725 million over a four-year period to resolve the billing dispute and will forfeit its right to collect $175 million in Medicare payments for past services. Wall Street analysts had expected the amount to be well over a billion. [Reuters, 6/29/2006; US Department of Justice, 6/29/2006; Tenet Healthcare Corp., 6/29/2006 pdf file]

Entity Tags: US Department of Justice, Tenet Healthcare Corp.

Timeline Tags: US Health Care

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