Columbia/HCA 1: Healthcare Corporation

The following outline suggests that Columbia’s troubles are more threatening than the ones at ADM.  In addition, healthcare fraud has a political value not found in anti-trust violations at ADM and the graphite electrode industry.  Consequently, two state attorneys general have already begun their own investigations.  The number of investigations and the scope of the Federal criminal investigation only magnify the period of corporate disruption which was discussed in the Verdict Report on the graphite electrode industry dated July 31, 1997.

In addition, the Tenet/Columbia merger was reportedly abandoned because no one could determine how to discount the liability which would result from fines which might be imposed on Columbia.  This suggests that very large fines are expected by insiders. Criminal indictments against three Columbia employees are likely to be followed by indictments of more senior employees at Columbia, and the real question is how far will the Justice Department ultimately be able to get in the corporate hierarchy. Obviously, if criminal liability is proven, damage claims by the Government and private insurers will be much easier to prove.

1)Two Sets of Books: Columbia maintained one set of expense records which were submitted to the government for reimbursement and a second set of reserve cost reports which reserved the “excess” until after the period for government audit passed.

2) Scope of Investigation is very broad, and this indicates a long-term criminal investigation.  When notified of an error, Columbia failed to correct its expense report submission(s).  This triggered the criminal investigation,but a civil investigation had been ongoing for three years.  The fact that the criminal investigation has just recently been reported is misleading: it looks to me like there may have been a lot of information on Columbia before  35 to 50 search warrants were issued in 7 states.  The FBI, the Department of Health and Human Services, the Defense Department, the Criminal Investigation Services, and the Postal Inspectors Service cooperated to conduct searches authorized by the warrants.  This much “cooperation” doesn’t occur unless the various agencies smell blood.

3) Tip of the iceberg: Indictment of 3 Columbia employees covers “fraudulent payments at one hospital” but they were responsible for many more hospitals.and the indictments were issued against lower level employees.  The Justice Department’s  will no doubt follow its practice of trying to “turn” these defendants into prosecution witnesses in return for immunity.

4) The indictments were based on testimony of secret informants and were issued before search warrants were carried out. It’s likely that government knew what to look for when it conducted searches. This was no fishing expedition but probably an attempt to identify particular people to indict for improper reimbursements which have already been identified

5)  The Agent in Charge of the  investigation, Joseph L. Ford, is a specialist in healtcare fraud and is reputed to be dedicated. It would appear that he has successfully mobilized a number of investigative agencies.

6) A professor at Johns Hopkins Hospital Finance Center says that almost every study proves there are no differences in costs at non-profit and for profit hospitals.  He said to make a profit, you have to “take some liberties”.