Rick Scott, former healthcare CEO, faces questions about past

With Republican Rick Scott pouring millions of dollars into his unconventional bid for governor, the front-runners from both major parties are beginning to take his candidacy seriously.

Translation: They're attacking him.

Republican Attorney General Bill McCollum and Democratic Chief Financial Officer Alex Sink are launching new criticisms against Scott and his former hospital company, Columbia/HCA.

"If Scott proposes the same accountability measures for Florida government that he used at Columbia/HCA, we'll have to back up the paddy wagon to the front door of the Capitol," Sink spokeswoman Kyra Jennings said in a May 18, 2010, press release. "Florida simply can't trust someone who was forced to resign as the head of a company that pled guilty to massive amounts of systematic fraud, including 14 felonies, leading to a historic $1.7 billion fine."

Hours later McCollum campaign manager Matt Williams offered a second stinging critique.

"The fact that Rick Scott is running for governor as a 'reformer' would be funny if it wasn't so outrageous," Williams said. "This is a man who barely escaped imprisonment, whose failure in business has been portrayed on national news and around the world. He is an embarrassment."

We're going to be checking statements from both campaigns. We'll start with Sink's claim that Scott "was forced to resign as the head of a company that pled guilty to massive amounts of systematic fraud, including 14 felonies, leading to a historic $1.7 billion fine."

On his campaign website, Scott admits HCA has paid $1.7 billion in fines as part of a federal settlement concerning fraudulent health care billing, so there's not much point in checking that.

But we hadn't heard the claim that HCA pleaded guilty to 14 felonies.

Scott started what was first Columbia in the spring of 1987, purchasing two El Paso, Texas, hospitals. In 1994, Scott's Columbia purchased HCA and its 100 hospitals, and merged the companies to form Columbia/HCA. When Scott resigned as CEO in 1997, Columbia/HCA had grown to more than 340 hospitals, 135 surgery centers and 550 home health locations in 37 states and two foreign countries, Scott's campaign says. The company employed more than 285,000 people.

Now, about why Scott left Columbia/HCA in 1997.

That year, federal agents went public with an investigation into the company, first seizing records from four El Paso-area hospitals and then expanding across the country. The scope of the investigation at first was unclear; even Scott said he didn't know what the U.S. Justice Department was looking for.

But it later became apparent that the investigation focused on whether Columbia bilked Medicare and Medicaid.

Scott resigned as CEO in July 1997, less than four months after the inquiry became public and before the level of fraud became known. Company executives said had Scott remained CEO, the entire chain could have been in jeopardy.

Was he forced out as Sink claims? It's hard to tell. We don't know what happened in Columbia's board of directors meeting back in July 1997. So we have to go on news accounts from that time.

USA Today put it this way: "Under pressure from his board of directors, Columbia CEO Richard Scott quit Friday."

The St. Petersburg Times: "The top two executives at Columbia/HCA Healthcare Corp. resigned Friday under pressure from an increasingly hostile board."

Other articles used the words "amid pressure," or "ousted" to describe Scott's departure.

Scott campaign spokeswoman Jennifer Baker said Scott left Columbia/HCA over a disagreement on how to handle the fraud investigation. "There was a disagreement on how to move forward in light of the investigation and he and the company parted ways," Baker said. "The board wanted to settle the fines and Rick took the position that the courts ultimately did, which was that there could be honest disagreement over how the regulations were interpreted."

In December 2000, the U.S. Justice Department announced what it called the largest government fraud settlement in U.S. history when Columbia/HCA agreed to pay $840 million in criminal fines and civil damages and penalties.

Among the revelations from the 2000 settlement:

• Columbia billed Medicare, Medicaid, the Defense Department's TRICARE health care program, and the Federal Employees' Health Benefits Program for lab tests that were not medically necessary or not ordered by physicians;
• The company attached false diagnosis codes to patient records in order to increase reimbursement to the hospitals;
• The company illegally claimed non-reimbursable marketing and advertising costs as community education;
• Columbia billed the government for home health care visits for patients who did not qualify to receive them.

The government settled a second series of claims with Columbia/HCA in 2002 for an additional $881 million. The claims were largely related to additional allegations of fraud. The combination of the two settlements is how Sink, Scott and others reach the $1.7 billion figure.

But none of that speaks directly to the fact cited in the Sink statement, that HCA pleaded guilty to 14 felonies in connection with the fraud case.

The Sink campaign referred us to a December 2002 New York Times article. Indeed, the article said that in 2000 the hospital chain agreed to plead guilty to 14 separate felonies. But that's an article talking about a 2000 event. There were no stories from 2000 that referenced Columbia/HCA and 14 felonies.

So we went to the Department of Justice looking for help.

There we unearthed the original press release. Dated Dec. 14, 2000, the release highlights the record $840 million settlement agreed to between HCA and the Department of Justice.

"Health care fraud impacts every American citizen. When a company defrauds our nation's health care programs, it takes money out of the pockets of the American taxpayers. It is wrong," then-Attorney General Janet Reno said in the release. "This investigation has been the largest multi-agency investigation of a health care provider ever undertaken by the U.S. and reflects our commitment to vigorously pursuing all types of health care fraud schemes."

The release spells out the settlement, including specific payouts. It also details deals in the settlement of pending criminal cases. From the release:

Southern District of Florida (Miami) -- Columbia Homecare Group Inc., a subsidiary of Columbia, will plead guilty to one count of conspiracy to defraud the U.S. and to violate the Medicare Anti-kickback Statute involving its fraudulent business in the purchase and operation of home health agencies and fraudulent billing of Medicare for management and personnel costs. The criminal fine is $3.36 million;

Northern District of Georgia (Atlanta) -- Columbia Homecare Inc. will plead guilty to one count of violating the Medicare Anti-kickback Statute related to purchase of home health agencies. The criminal fine is $3.36 million;

Department of Justice Criminal Fraud Section -- Another subsidiary, Columbia Management Companies Inc., will plead guilty to one count of conspiracy to defraud the U.S. and to make and use false writings and documents in connection with its fraudulent "upcoding" of bills to Medicare for patients diagnosed with certain types of pneumonia. The criminal fine is $27.5 million. This investigation was based in Nashville, Tennessee;

Middle District of Florida (Tampa) -- Columbia Homecare Group will plead guilty to one count of conspiring to defraud the U.S. and one count of conspiracy to violate the Medicare Anti-kickback Statute in connection with the purchase and operation of home health agencies. The criminal fine is $8.4 million. Also, Columbia Management Companies will plead guilty to eight counts of making false statements to the U.S. in connection with the submission of false cost reports to Medicare. The fine amount is $22.6 million; and,

Western District of Texas (El Paso) -- Columbia Homecare Group will plead to a conspiracy to pay kickbacks and other monetary benefits to doctors in violation of the Medicare Anti-kickback Statute. The criminal fine is $30.1 million.

A couple of important notes. The actual plea deals were arranged with HCA subsidiaries and not the hospital chain itself. That was done so HCA could continue to participate in the Medicare program. Also, all of the charges deal with corporate criminal liability. Scott wasn't charged individually, and the plea deal was struck after Scott already had left the company.

Secondly, we noticed how the discussion regarding the El Paso charge was different than in the other four jurisdictions. But based on the size of the fine, $30.1 million, we feel safe assuming there was at least one count agreed to as part of the settlement.

Adding that in with the others indeed adds up to 14.

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In interviews, Scott accepts responsibility for the problems at Columbia/HCA, but denies direct knowledge of the fraud.

"There's no question that mistakes were made and as CEO, I have to accept responsibility for those mistakes. I was focused on lowering costs and making the hospitals more efficient,'' Scott told the St. Petersburg Times this month. "I could have had more internal and external controls. I learned hard lessons, and I've taken that lesson and it's helped me become a better business person and a better leader."

In its claim, the Sink campaign says Scott "was forced to resign as the head of a company that pled guilty to massive amounts of systematic fraud, including 14 felonies, leading to a historic $1.7 billion fine." Scott's former company, Columbia/HCA, did plead guilty to 14 felony charges stemming from a massive federal fraud investigation, and Scott himself admits the company wound up paying $1.7 billion in fines. Whether Scott was forced to resign or not is something of an HR employment trick, but  media accounts certainly suggest the company's board of directors was under pressure from shareholders to shake things up.

That's enough to rate Sink's claim True.