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NEW YORK A series of 1994 transactions between the Columbia-HCA Healthcare Corp.and the manager of home health agencies in Florida has grown into an important part of theunfolding criminal investigations of the giant hospital company.
Federal prosecutors are investigating whether the transactions between Columbia and themanager, now known as the Olsten Corp., were structured to improperly increase the amount ofexpenses that are partly reimbursable by the government, say people with knowledge of thesituation.
At the same time, investigators were said to have obtained evidence that some Columbiahospitals had improperly told the government that money spent on deals for their doctors wereactually expenses related to patient care. In such a circumstance, the hospital could thenimproperly receive reimbursement for part of that expense.
A spokesman for Columbia-HCA said that the company had no knowledge of these areas ofinvestigation. “We don’t know anything this early on about anything to the level of specificitythat you are asking about in either of those particular examples,” said Eve Hutcherson.
The details are some of the first to emerge in the investigation of how certain Columbia hospitalsreported costs to the government, part of a multifaceted inquiry into the company’s practices.Medicare partly reimburses hospitals and other health care providers for certain expenses, sothose cost reports translate into billions of dollars each year in federal expenditures andhundreds of millions of dollars to Columbia hospitals alone.
In recent months, people with knowledge of the situation said, agents with the Federal Bureau ofInvestigation and other law enforcement officials attended a secret government-sponsoredseminar in Florida in preparation for the Columbia raid.
At the seminar, these people said, agents and officials were taught in detail about cost reports,including how they are compiled and the ways in which fraud can occur. They were alsoprovided specific details about certain allegations involving Columbia.
Olsten said last week that it was cooperating with the investigation after some of its operations including home care agencies it manages for Columbia and its offices in Atlanta were servedwith search warrants. Those searches were part of a seven-state raid of offices, hospitals andother facilities affiliated with Columbia, the world’s largest health care company.
In the investigation, federal prosecutors have obtained evidence that certain hospital executivesresponsible for preparing the cost reports had submitted false information to the government,people with knowledge of the investigation said.
At least four Columbia-HCA employees including some managers from the Orlando offices have been subpoenaed to appear before grand juries hearing evidence in the case. Moreover,before the raid, some current and former Columbia employees who have been acting as secretinformants to the government had already testified before grand juries and turned overdocuments, these people said.
At the time, Olsten said in a statement that it had been informed by the government that theinvestigation involved its preparation of cost reports to the federal Medicare program.
One issue for prosecutors, people familiar with the situation said on Monday, involves the 1994transactions between Columbia and Olsten’s home care subsidiary, then known as OlstenKimberly Quality Care. In those transactions, Columbia bought 22 home care agencies fromOlsten, then hired Olsten to manage them. Olsten was also retained to manage 15 other homecare agencies that Columbia already owned.
Medicare partly reimburses hospitals for the expense of acquiring the medical equipment andother physical assets of a home health agency; the cost of acquiring valuable items like patientrosters, revenue streams and other intangibles, though, cannot be reimbursed. Operating costslike management fees, however, can legally be included as reimbursable expenses.
Federal prosecutors are said to be investigating whether the deals were improperly structured tomaximize the reimbursable management fee by minimizing the nonreimbursable costs ofacquiring good will like patient flow. Such a deal would have the same total value for bothentities, but would increase the amount of money paid by Medicare simply by shifting somecosts into other categories. Federal officials were also said to be investigating other possible costshifting by Columbia from nonreimbursable hospital expenses to reimbursable home careexpenditures.
Under the terms of the Olsten deal, according to a copy of the agreement, Olsten would beappointed manager of any home health agency opened by Columbia-HCA. If Columbiapurchased a hospital with an agency run by another company, it would do everything possible tohave that agreement canceled.
David Fluhrer, a spokesman for Olsten, said that the company was continuing to cooperate withthe government, but declined to discuss details of its transactions with Columbia. “Any contractswe have with Columbia are proprietary,” he said.
Robert O’Neill, a spokesman for the U.S. attorney in Tampa, Fla., declined to comment on anyaspect of the investigation.
Federal officials are also said to have obtained evidence that certain Columbia hospitals hadimproperly included expenses for recruiting doctors into their cost reports.
Columbia has long been aggressive in its efforts to recruit doctors, purchasing office buildingsthey own or buying them out of their lease agreements to make it easier for them to move intothe company’s offices, which are frequently next to their hospitals.But such expenses could notbe properly included as reimbursable in the cost reports. Reimbursable expenses must all berelated to patient care.
Some of the government’s critical evidence in the investigation comes from second sets of costreports and worksheets maintained at Columbia hospitals that contained significantly lowerexpenses than in those reports submitted to the government, people with knowledge of theinvestigation said. The differences between those two sets of books are what led governmentofficials to examine certain doctor acquisition costs at some hospitals, people with knowledge ofthe situation said.
