NEW YORK -- Moving a giant step closer to resolving one of the biggest federal health fraud investigations, Columbia/HCA Healthcare Corp., has agreed to pay $745 million to partially settle allegations it for years overbilled Medicare and other government programs.
The total amount paid by the nation's largest hospital chain is likely to climb higher before the full settlement is completed, the Justice Department suggested. The agency said it has resolved most but not all of the issues it had been investigating since at least 1997.In Utah, the chain operates St. Mark's Hospital, Timpanogos Regional Hospital in Orem, Brigham City Community Hospital, Columbia Ogden Regional Medical Center, Mountain View Hospital in Payson and Lakeview Hospital in Bountiful.
"The department has reached a tentative agreement with Columbia which, if formally approved by the department, would resolve a number of issues under investigation," the Justice statement said. "The agreement would resolve, in part, Columbia's civil liability to the United States but would be conditioned on a number of future events."
Along with the additional Justice officials, the deal must be approved by a federal judge, as well as other federal agencies. Further, the agreement will not be finalized until remaining civil issues and a criminal investigation are resolved.
Analysts have speculated that Columbia will have to pay at least $1 billion overall to settle the probe.
For at least three years, the government has been investigating allegations from whistleblowers and others in the health industry that Columbia submitted false claims and doctored cost reports that determine how much its hospitals are paid under federal programs such as Medicare, a health insurance program for the elderly, and Medicaid, an insurance program that covers the poor.
Columbia/HCA is not admitting any wrongdoing in the deal, said spokesman Jeff Prescott.
The government's fraud probe targeting Nashville-based Columbia/HCA became public in 1997 with a series of raids on several hospitals from central Texas to South Florida. The investigation led to wholesale changes at Columbia/HCA, which once sought to become the McDonald's of hospital care.
Since 1997, the company ousted its top executives, stopped an aggressive hospital acquisition program and began a major downsizing, trimming from a high of 345 to 205 hospitals and other facilities.
In July 1999, two Columbia middle managers in Florida were convicted of conspiring to defraud and defrauding several government health insurance programs.
The government and Columbia have been trying to negotiate a settlement for more than two years.
"We are pleased to have reached an understanding on these issues, and today's announcement signals that a significant step in this process is complete," said Thomas F. Frist Jr., chairman and chief executive officer.
After rising $2.25 or 8 percent on Thursday, shares of Columbia were down $1.06 1/4 to $29.43 3/4 in morning trading Friday on the New York Stock Exchange.
"This is positive," said Nancy Weaver, an industry analyst with Stephens Inc. She said the announcement signals a final settlement is likely.
"This is a step in right direction for Columbia and the industry," agreed Jim Baker, an analyst with SunTrust Equitable Securities in Nashville, Tenn. "The big news is not so much the dollar figures, but people had been questioning if this thing would ever get settled."
Columbia's stock has held up well in recent months as the company focused on controlling medical costs and getting more lucrative contracts with managed care firms.
"This is further indication that all the negatives hitting the sector -- Medicare cuts, HMO pricing discounts and all that stuff is easing," Weaver said.
The tentative deal resolves civil claims actions against the company regarding outpatient laboratory billing, home health issues and how Columbia/HCA used billing codes to get reimbursed. Two issues still remain: physician relationships, such as the legality of contracts that the hospital chain has with doctors; and the accuracy of its cost reports.
In connection with the settlement, Columbia/HCA said it plans to take an after-tax charge of about $498 million in the quarter ending June 30.
In addition, the company said it has a deal with the Office of Inspector General of the Department of Health and Human Services that would allow the company to continue to treat Medicare patients.
Medicare fees often make up at least 25 percent of revenues at most Columbia hospitals.
Columbia last year had filed a letter of credit for $1 billion with the federal government -- in effect putting aside that much money to pay the government for possible costs associated with its fraud.
The tentative settlement reached Thursday allows Columbia to reduce that letter of credit to $250 million. Analysts said that indicated Columbia would have to pay no more than $1 billion once the settlement is finalized.