United States of America, ex rel. James Alderson ex rel. John Shilling v. HCA The Healthcare Company et. al.
Cost Report Fraud
$631 million Settlement

This case settled in June 2003 when HCA (The Healthcare Company) agreed to pay the United States $631 million in civil penalties and damages arising from false claims the government alleged it submitted to Medicare and other federal health programs. The allegations were brought by James Alderson (former Quorum employee) and John Shilling, (former HCA employee).

The settlement requires HCA to pay $356 million to resolve whistleblower lawsuits alleging that HCA engaged in a series of schemes to defraud Medicare, Medicaid and, and TRICARE, the military's healthcare program, through hospital cost reports, the year end claims submitted by hospitals to the government to reconcile payments received throughout the year with amounts they claim are actually owed. Other components of the settlement include billing Medicaid and TRICARE unlawfully for claims generated by the payment of kickbacks and other remuneration to physicians in exchange for referral patients; billing Medicare for unallowable costs incurred by a contractor that operated HCA wound care centers and for a non-covered drug that the contractor manufactured and sold to hospital patients; transferring patients from HCA facilities to other facilities and claiming of excessive costs for those transfers; inflating entitlements to funds to treat indigent patients and shifting employee salary costs in order to increase its reimbursement from the federal health care program; and shifting home office costs to hospitals. In total, the two relators are to receive a total of $100 million as their statutory share of the settlement.

HCA also made an additional payment to CMS for $250 million in order to resolve claims they maintained against each other arising from HCA’s hospital cost reports and home office cost statements for cost reporting periods ending July 31, 2001.

This settlement marks the conclusion of the most comprehensive health care fraud investigation ever undertaken by the Justice Department, working with the Departments of Health and Human Services and Defense, the Office of Personnel Management and the States. Combined with a previous payment of more than $840 million for substantial criminal conduct, makes the total government recovery of $1.7 billion from HCA the largest recovery every reached by the government in a healthcare fraud investigation.