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HCA faces civil fraud allegations

HCA-The Healthcare Co. already has paid more than $840-million to settle federal fraud charges, but it may owe the government even more.

According to a U.S. Department of Justice lawsuit that was expected to be filed late Thursday, HCA routinely falsified hospital cost reports, resulting in more than $400-million in Medicare overpayments.

Lawyers for two whistle-blowers who first brought the cost report accusations to the government's attention said the Justice Department would document in a 1,000-page document how the nation's largest hospital chain systematically cheated the government in a case involving more than 400 hospitals and lasting from 1987 to 1997.

Also expected is a separate complaint against the Nashville, Tenn., company alleging it paid kickbacks to doctors to get patient referrals.

Stephen Meagher, a San Francisco lawyer who represents the two whistle-blowers, said the Justice Department complaint portrays a company that engaged in deep and broad deception.

A Justice Department spokesman said his office would have no announcement concerning HCA on Thursday. A spokesman for HCA did not return a phone call seeking comment.

If the case goes to court and HCA is found guilty of cheating Medicare, it could be forced to pay triple damages, or as much as $1.35-billion. That means heavy pressure on HCA to settle the charges out of court and finally wrap up an eight-year, multiagency investigation into the company's operations.

Negotiating settlements is nothing new to HCA, which has about 200 hospitals across the country and nine in the bay area. In mid-December, it agreed to pay a total of $840.3-million to resolve all criminal charges against it as well as several civil charges.

Though HCA pleaded guilty to criminal charges of falsifying Medicare cost reports and paying doctors kickbacks, it had not resolved civil charges involving the same behavior.

Thursday's complaint was expected to present the government's evidence against HCA, formerly known as Columbia/HCA Healthcare Corp. A federal judge had given the Justice Department until Thursday to file any complaints.

Along with claims that HCA billed for non-allowable charges, such as marketing, the lawsuit alleges that Medicare was wrongly billed for more than $100-million of the costs involved in HCA's 1987 spinoff of HealthTrust Inc. The head of HCA at that time was its current chairman, Thomas Frist.

"They structured a business deal so the government would pay for it," attorney Meagher said of the HealthTrust allegations. "The rest of us thought Medicare was for the elderly."

HCA's stock closed at $36.40 Thursday, up 10 cents. Analysts said the company's likely final settlement with the government would still be within their expectations.

"I think some of this is posturing by the prosecutors just to get a big number out there and then negotiate off of it," said Lehman Brothers Inc. analyst Adam Feinstein, who has a "strong buy" rating on HCA shares. Feinstein previously said he expects a total settlement to cost HCA $1-billion to $1.5-billion.

_ Information from Bloomberg News was used in this report. Kris Hundley can be reached at hundleysptimes.com or (727) 892-2996.

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