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Longboat Key Wednesday, Jul. 14, 2010 7 years ago

Scott explains what happened


Editor’s note: Florida’s daily newspapers and Rick Scott’s gubernatorial opponents have rushed to paint him as an unethical profiteer. And everything they present you is through their filter. Below, we’re reprinting Scott’s own explanation of the Medicare fines that his former company paid in 2000 and 2003. To learn more, see

Is it true that Rick Scott was guilty and paid $1.7 billion for Medicare fraud?
No. Rick was never fined, and never charged with doing anything wrong — he was never even questioned as part of the investigation. And he played no part in Columbia/HCA’s decision to settle claims with the government.

He acknowledges that mistakes were made at Columbia/HCA during the time he was CEO, and he accepts responsibility for that. He has said on the campaign trail he should have hired more auditors who focused on compliance with the government regulations.

So what really happened?
Rick Scott started Columbia Hospital Corp. and became CEO of that company in 1988, with just two hospitals. Six years later, Columbia Hospital Corp. merged with HCA Inc. to become the largest health-care company in the world, eventually employing more than 285,000 people in 37 states and generating $20 billion in revenues.

Roughly a year after merging with HCA, the federal government launched an investigation of Columbia/HCA as part of a hard-line approach to control the escalating costs of Medicare.

At that same time, many other health-care companies found themselves at odds with the federal government over how to interpret Medicare regulations and faced a tough choice when the government began sending out demand letters asserting that companies had committed fraud and asking for a quick settlement to resolve the issue. Some companies settled their cases immediately to avoid additional legal fees and compounded fines.

Rick and Columbia/HCA parted ways in mid-1997 over the issue of how to move the company forward in the face of the federal government’s investigation of Columbia/HCA …

… Almost four years after Rick and the company parted ways, Columbia/HCA, like many other companies, ultimately reached a settlement with the government. According to press reports, the company agreed to pay $840 million in fines in early 2000. Then in 2003, another settlement was reached that settled all further claims for $881 million. All told, the fines and restitution totaled just over $1.7 billion.
Rick Scott has made it clear that as CEO, he accepts responsibility for the mistakes that were made on his watch.

Some people try to imply that Rick Scott was guilty of some crime. Is that true?
No. Rick Scott was never charged with doing anything wrong, and he was never even questioned.
Was Rick fired for fraud?

No. Rick was CEO of Columbia/HCA until 1997, when he and the company parted ways over how to move Columbia/HCA forward in light of the government’s investigation.

When he left the company, the Columbia/HCA board of directors voted to give Rick a severance package and a 10-year consulting contract.

The investigation continued for almost four years after Rick’s departure, when the company reached the first of two settlement agreements with the government. Rick played no part in the decision to settle any of the complaints. Columbia/HCA agreed to pay fines in 2000 and later in 2003.

But didn’t the government single out Columbia/HCA?
No. In 1995, the Clinton administration announced a “crackdown” on Medicare billing practices across the health-care industry (Source: Philadelphia Inquirer, May 4, 1995). The number of Medicare investigations increased from around 600 in 1992 to more than 2,200 investigations by 1996. At the time, there were tens of thousands of pages of Medicare regulations, and virtually all healthcare companies were affected by the government crackdown.

By 1998, the government “crackdown” was becoming controversial. The healthcare industry started pushing back, complaining that the federal government was classifying many honest mistakes as “fraud,” and playing a game of “Gotcha!” (Forbes, May 18, 1998)

Eventually, the government was forced to launch a program to help train hospital billing personnel in how to properly interpret Medicare billing regulations (Source: “Hospitals get advice on fraud prevention,” USA Today, February 12, 1998).

Was Rick’s company, Columbia/HCA, the only one to pay fines?
No, it wasn’t. Thousands of companies paid fines — virtually the entire industry was affected. And many well-known hospitals got hit with multimillion-dollar fines. Among those hit the hardest: Harvard University Hospitals, University of Chicago Hospital, Yale Hospital, Duke University Hospital and the Johns Hopkins University Hospital.

Is it true that Columbia/HCA had to pay the largest fine in history?
Columbia/HCA ended up paying the largest fine in the healthcare industry at the time. But Columbia/HCA was also the largest healthcare company in the world at the time.

What were the fines for?
News reports say that Columbia/HCA settled the claims which enabled the company to put the matter to rest and avoid expensive legal fees.

According to news accounts, the settlement covered a broad range of federal regulation compliance problems. (Source: “HCA, largest for-profit U.S. hospital chain, to pay government $631 million settlement,” Associated Press, December 18, 2002).

How far back did these Medicare compliance problems go?
The settlement paid by Columbia/HCA included compliance problems at some hospitals at least as far back as 1987, years before those hospitals became part of Rick Scott’s Columbia/HCA network (Source: “Roots of trouble run deep,” Modern Healthcare Magazine, March 19, 2001).

Rick became CEO of Columbia Hospital Corp. in 1988, after he and another investor bought two hospitals, and over the next several years, bought hundreds of other hospitals and healthcare companies, and in 1994, Columbia acquired HCA and its 96 hospitals, making it the largest healthcare company in the world.

Is it true that two Columbia/HCA managers were convicted of fraud?
Actually, government prosecutors failed to prove that what the managers did was intentional. The 11th U.S. Circuit Court of Appeals ruled that the federal government’s vast number of Medicare regulations were too vague and “reasonable people could disagree over how to interpret them.” (Source: “Court clears ex-HCA executives,” St. Petersburg Times, March 26, 2002).

Rick says he will turn Florida around, but what did he accomplish as CEO of Columbia/HCA?
Rick Scott demanded accountability and got results. Let’s look at what Rick Scott accomplished from 1988 to 1997:

• A decade of success — The company started with two hospitals and rapidly grew to more than 340 hospitals in under 10 years.

• High patient satisfaction — Columbia consistently outperformed the rest of the hospital industry in patient satisfaction. The Gallup Organization found that 94% of patients at Columbia were satisfied or very satisfied, compared with just 88% for the rest of the industry (Source: “Investing in 21st Century Hospitals,” Health Affairs Magazine, March/April 1997)

• “Gold Star” professional standards — Columbia dominated in objective measurements of quality, such as the “Accreditation with Commendation” standard, by 36%, compared to fewer than 10% of hospitals for the rest of the industry. (Source: “King Kong of Hospital Industry Stays on Top,” CNN/Money Magazine, April 1997).

• Fixing what doesn’t work — Under Rick Scott’s guidance, previously struggling hospitals dramatically improved once they were part of Columbia. Nursing Economics Magazine said, “When these other institutions became affiliated with you, they started to perform better.” (Source: “An Interview with Rick Scott,” Nursing Economics Magazine, March 1, 1996).

• Lowering costs — An independent analysis by Yale University found that after lowering costs for patients, quality did not suffer at the top 100 hospitals: “There was no evidence that quality was sacrificed for increased financial efficiency among the top 100 hospitals.” (Source: “Performance of the Top 100 Hospitals: What does the report card report?” Health Affairs Magazine, July/August 1999). Also, the Center for Healthcare Industry Performance Studies (CHIPS) calculated that the average net price per discharge shows Columbia/HCA was able to treat patients for the lowest cost (see box).

• Reducing waste and inefficiency — In 1996, Time magazine named Rick Scott one of the 25 Most Influential People in America for showing that free-market health care could significantly reduce waste and inefficiency (Source: Time’s 25 Most Influential Americans, Time Magazine, June 17, 1996).

• Changing the industry for the better — Columbia/HCA’s free-market approach to health care started to show significant effects on reforming the entire healthcare system. Healthcare inflation virtually disappeared from the industry at Columbia’s peak between 1993 and 1997. Beginning in 1987, when Rick started Columbia with a focus on quality and cost control, it went from 18% down to just 0.2% in Rick’s last year as CEO.

Average Net Price/Patient Discharge in 1995
Government (non-federal): $,6442
Tax-exempt (church-run): $5,315
For-profit (non-Col./HCA): $4,709
Tax-exempt (other): $4,516
Columbia/HCA: $4,393
Source: Healthcare Forum Journal, September/October 1997

In 1998, then Florida Congressman Bill McCollum sided with the hospital industry (i.e. Columbia-HCA) when he spoke against the federal government’s efforts on Medicare fraud. These are excerpts from the Congressional Record of McCollum’s remarks on March 19, 1998, on the Health Care Claims Guidance Act. McCollumn is now criticizing his opponent, Rick Scott, former CEO of Columbia-HCA, for alleged Medicare fraud:

“We should not carelessly paint all health-care billing mistakes as billing fraud.”

“The most innocent of providers often feel forced to settle these claims instead of facing the prospect of an automatic $10,000 fine for a small disputed amount.”

“Considering that providers are faced with a federal health-care payment system of more than 1,700 pages of law and over 1,200 pages of regulations interpreting those laws, as well as thousands of additional pages of instruction, it is inevitable that human error will occur and that erroneous claims will be submitted.”

“Even if a provider could clearly prove their innocence and show that these claims resulted from innocent clerical error, they would be likely to settle the case rather than incur large legal costs.”


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