Rick Scott Ran a Company Involved in The Nation's Largest Medicare Fraud Case

By Sally Kestin, Sun Sentinel

May 20, 2010...It was and still is the biggest Medicare fraud case in U.S. history and ended with the hospital giant Columbia/HCA paying a record $1.7 billion in fines, penalties and damages.

Now the man who ran the company at the time wants to be Florida's governor.

Rick Scott was co-founder and CEO of Columbia/HCA in the 1990s, when the FBI launched a massive, multi-state investigation that led to the company pleading guilty to criminal charges of over-billing the government. Scott was forced to resign.

Today, Scott is a Republican candidate for governor, running his campaign from an office in downtown Fort Lauderdale.

Scott considers himself a health care pioneer who significantly cut costs and improved patient care. But his decision to enter the race and his explanation of what occurred at Columbia/HCA is rankling some of those familiar with the fraud scandal.

"I don't think his background justifies running for governor in any state, especially a state that has a lot of Medicare recipients," said Jim Alderson, a former hospital executive in Montana who received millions as a whistleblower in the case.

U.S. Rep. Pete Stark, a Democrat from California who criticized the government's settlement as being too soft on Columbia/HCA, said in a statement to the Sun Sentinel that Scott had made a fortune running a company "that defrauded Medicare out of billions.”

"Now he wants to run the state government?" Stark said. "Watch out, Florida taxpayers."

The Sun Sentinel requested an interview with Scott this week, but spokeswoman Jennifer Baker said he was unavailable. The campaign would only answer questions submitted in advance.

As former CEO, Scott accepts responsibility for what occurred at Columbia/HCA but had no knowledge of the fraud at the time, Baker said.

"Rick didn't do anything wrong," she said. "If Rick had known what was going on, he would have corrected the problem immediately."

Scott, 57, is running as a political outsider and conservative, calling himself "one of America's foremost entrepreneurs.”

A Dallas lawyer whose clients included health care companies, Scott came from humble Midwestern roots — his father was a truck driver and his mother a JC Penney sales clerk. In 1987, at the age of 34, he started Columbia, investing $125,000 to buy two hospitals in El Paso, Texas.

Within a decade, he was running the largest health care company in the country with more than 340 hospitals and $20 billion in annual revenue. Columbia aggressively bought other health care companies, including the Hospital Corporation of America, and became Columbia/HCA.

The federal government began investigating in the mid 1990s with the help of whistleblowers including Alderson and John Schilling, a Medicare reimbursement supervisor in Fort Myers.

Among the fraudulent practices uncovered: billing Medicare and Medicaid for unnecessary lab tests, creating false diagnoses to claim a higher reimbursement and charging for marketing and advertising costs that were disguised as community education. The company even billed the government for tickets to the Kentucky Derby and country club dues, according to news accounts.

The government's investigation became public in 1997 and that July, the FBI raided Columbia/HCA offices in seven states, including Florida. Days later, the board of directors announced Scott was out.

He and the company "parted ways" over a disagreement about how to handle the investigation, Baker said. The board wanted to settle the case, but Scott felt "there could be honest disagreement over how the [reimbursement] regulations were interpreted," she said.

Four mid-level executives of the company were criminally charged and tried in Tampa. Two were convicted, but both won on appeal.

Scott was never charged and left Columbia/HCA with $10 million in severance and stock valued at $300 million.

Scott was unaware of the billing practices and "would have fired any employees found engaged in that activity," Baker said.

Alderson thinks Scott had to know.

The hospitals kept two sets of books: One showed the reimbursements actually submitted to Medicare and the other, marked confidential, detailed those charges that would likely be rejected if caught by federal auditors.

The company kept funds in reserve to repay the government for those claims and once the time-frame for an audit had passed, the reserves would be reclassified as revenue, Alderson said.

"They had $1 billion in play in these reserves," said Alderson, who now lives in La Quinta, Calif., and speaks to college students and Rotary clubs about business ethics. "Anywhere from 25 to 33 percent of their bottom line was these reserves, so you bet he knew about it.''