The Biggest Healthcare Fraud (of the 20th Century)
In the end of September 2000, I was assigned to a healthcare fraud squad in the Miami Office of the FBI. I had worked these cases for the last six years in San Diego, which has a very large presence as one of the most advanced places for healthcare in the United States. While Miami also has a large number of hospitals and medical facilities, what it is better known for is its status in the realm of healthcare fraud—certainly, it is number one in the nation. In fact, one out of ever three such fraud cases in the country takes place in the city of Miami. So, as an experienced special agent, finding new cases was easy pickings.
But my days in the FBI were numbered and my 29-year career was coming to a close. I had worked over two decades in foreign counterintelligence—catching spies in Washington, D.C.—and then conducting backgrounds on judicial appointees in San Diego, but all agents would like to end their careers on a high note.
Within a few days of my planned retirement, a teletype was received by every field office indicating there was a major healthcare fraud case being investigated in the Tampa Division. It solicited agents experienced with this violation to come join the dozen-member task force. The subject of the case, the wrongdoer, was Columbia HCA. It was the largest hospital system in America, 339 strong, which was six times the size of the one in second place.
They had been under investigation for five years and, finally, the federal judge overlooking the matter told the FBI she was giving them three more months, either to find more fraud, or, Columbia HCA would just get away with what had not been discovered. She was drawing the line. The government would have to initiate its prosecution, or negotiate a plea agreement, soon.
Because of this defecate-or-get-off-the-pot ultimatum by the judge, the Bureau put its best foot forward for available troops to fly Tampa to help out, with the timeframe of October through December, 2000.
I could only imagine that a plethora of agents from Detroit, Minneapolis, and Boston, would love to have a three-month assignment in sunny Tampa while their hometowns were beginning to freeze over for the winter, but this was not the case. There were only two takers for this all-expenses-paid, very generous offer—that I likened to a Wheel-of-Fortune trip prize—and I was one of them.
Over the five years, the agents on the task force had come up with just over $900 million in fraud committed by Columbia HCA. You might ask how the number could possibly have gotten that high, and I was as amazed as anyone.
While the treatment for thousands of patients received in their hundreds of hospitals seemed to be up to proper medical standards, it was in Nashville, Tennessee, where Columbia HCA’s billing center was located, which was where the devil could be found.
Current Procedural Terminology, CPT codes, determine how a patient is billed for any treatment or diagnostics, and there are nearly 10,000 such codes. If you walk into a hospital, for instance, with the sniffles, they treat you. Your resistance is low, and they don’t want you infecting other low-resistance patients. So they would deal with your runny nose, and a CPT code would be assigned to that treatment. But there are several higher-up code levels for more advanced symptoms, with accompanying more complex treatment as thought, for instance, you had walking pneumonia.
Should a healthcare provider upcode your entries in the billing system from treating you for the sniffles, to coding as though you had pneumonia, that enormously increases the cost for whoever is paying—Medicare, your insurance company, or out of your own pocket. But, without an accompanying worsening health condition, upcoding is illegal.
Columbia HCA inserted an algorithm in their billing computer so whenever the minimal treatment for sniffles was entered at a local hospital, that information, when it reached the Nashville complex, would automatically be upcoded to appear as though the patient required the much more complex treatment. If they had done this to the records of some patients in some of their hospitals, it might have gone unnoticed, but because they did this with almost every patient in almost every hospital, it finally came to the attention of the FBI. The total reimbursement for all of this upcoding, which took place over several years, became the single largest individual count charged in U.S. history—an astonishing $400 million!
There were many other billing practices that Columbia HCA was doing wrong, and the issue was to figure out what. This is not to say they were being picked on by the FBI and the Department of Justice, it was just that there was so much information, and so many records, that connecting all of the dots required a yeoman’s task to discover other ways they were cheating the system.
In my later international investigations, I found that few people who were involved in certain kinds of illegal activity were doing only one thing that was illegal. A man who was trying to defraud his insurance company out of $17 million in Panama, also pretended to be a bank and made loans, but was not licensed—another criminal violation. He was also running a ring involving sex with minors. That is to say, he did not do just one thing bad in his life, but every single day, this is what he would do. Organizationally, that is what the Soviet KGB did during the Cold War, and what the Mafia and drug lords do on a daily, even hourly, basis, cheat someone, somewhere.
The Tampa task force had a computer which held all of the documents obtained in discovery. A brilliant support person, Ellen, was the “Queen of the Columbia HCA Documents,” with a million of them at her disposal. But the stacks, even electronically, were so tall and deep that it was almost impossible to figure how to analyze them to find the fraud. Reading over the already-conducted investigation was good for starters, but I had really been brought in, not to create an addendum to what had been done, but to find something brand new in Columbia HCA’s nefarious activities.
I wondered how Columbia had chosen the hospitals they had taken over, why some and not others? Their pattern was not to become involved with inner-city medical centers, or ones that were completely rural, but rather those in that broad mid-area, from suburban to a little bit rural. Looking at the map, there were a lot of those in western-central-Florida, and several were Columbia HCA hospitals. After some digging, I found a possible lead to speak with the director of a hospital who had met the Columbia HCA people, but his hospital had not become one of theirs.
It was located a bit north of Tampa-St. Pete, and he was friendly on the phone. He welcomed me to come and hear his story. In fact, he had wanted to tell it to someone, but did not know who. He said it did not describe anything illegal—egregious, yes, but illegal, no.
In his office he laid out what had happened. One day a few years before, with no notice at all, a helicopter landed on the hospital helipad, but it was not a medical emergency flight. Rather, several men exited the chopper and came directly to his office. They had not called ahead to make an appointment, but were intent on meeting with him.
Completely taken aback by this, the director ushered them into his conference room where they all sat around the table.
He described them as looking like they were from the movie Men in Black, all dressed in black suits and wearing ties. They had briefcases which they opened on the table and brought out several charts and documentation. They, essentially, told him they were aware of the financial status of his hospital, that it was in arrears on many payments, and the short and long-range financial outlooks were not good. They could quickly and easily solve all of his problems. They made him a onetime offer to purchase the hospital, bringing it into their system. He could stay on as the director, but they would be in charge of all financial matters.
They put several charts in front of him which they had created to demonstrate some of what would happen, and then the prepared legal documents for him to sign, which would turn over control of the hospital to them. It seemed to the director that they had learned a good deal of confidential and proprietary information about his hospital, which pleased him not at all, but he did have to admit they came up with a pretty accurate analysis of his hospital’s financial picture.
However, he had a board of directors to deal with and the hope that he would be able to turnaround his hospital’s situation to recover from whatever financial ailments it had. He loved his job and community and saw these men as unwanted interlopers who would change all of that.
Apparently, many hospital directors had succumbed to this Men-in-Black, now-or-never overture, but he was determined not to be one of them.
After a few hours, and very disappointed with him, the visitors gathered up their paperwork to depart, but not without indicating that the downfall of his hospital could have been averted that day, and the onus would now be all on his shoulders. There was no business card left so he could think about their offer, or even an opportunity to discuss it with his board. Again, he told them his decision was “Never,” and even asserted it a bit adamantly, so they left.
The director’s main problem in telling this story was his realization that this same scenario must have occurred in the dozens of other hospitals that were now part of the Columbia HCA system. He saw all of those directors as having been, not just taken over, but hoodwinked. Now, with the FBI investigation looking into them, he felt some personal satisfaction at having turned them down. His hospital had not gone under, as many city-outskirts-hospitals had, but it still had problems. He was dealing with them at a local level, and not under the gargantuan overlay of a mega-hospital system.
Well, I didn’t like it, not at all. There are ways to deal in the business world and this Men in Black scenario struck me as way outside of the norm, by a lot. It took me back to the Gene Hackman movie, The French Connection. As Detective Popeye Doyle, Hackman is in a ritzy New York restaurant looking over at a table with New York City locals, Sal and Angie, having a high-priced meal with two Frenchmen (Frog 1 & Frog 2) with whom they are involved in a major drug deal. Pointing at their table, Hackman turns to his partner and says, “That table’s dirty!” He was expressing what is termed a law-enforcement sixth sense, and he was right.
Here, the Columbia HCA team had misrepresentation and ulterior motives written all over them. But I didn’t have enough facts to go on, just an unwavering gut-feeling from all those years of catching bad guys that there was much more to their story than we already knew.
A good investigator will walk up the stream of an investigation, turn over the rocks and look for mud. If the waters remain clear, that’s fine, but if the waters become muddy, it is incumbent upon him to look further, turning over more rocks to see what can be found.
The entire task force had been in that process for years, but my role was to locate a new tributary up stream, shoes and socks off, pants rolled up to the knees, and bending over to reach for each next stone.
I discussed this with Barbara, supervisor of the task force. She was all for it, so I drove the 400 miles to Tallahassee to meet with several state administrators in the hope of finding a solid lead, something that would take me in that new direction.
In what seemed to be a darkened room among dozens of administrative offices in the capital, I found some recordkeeping folks to speak with. They would not often be interviewed by FBI agents, but their thoughts were more to inquire about what the Bureau was doing regarding Columbia HCA, than say what they knew, which could move the investigation along.
Before I left, I saw an older man over in the corner at his desk. He had been peeking across the room at our little group, but had not joined in the conversation. I had met wallflowers before and, in my youth, was even considered to be “timid and shy,” until one day I was not. But this man still seemed to suffer from the long-held syndrome, so I approached him. I made a friendly overture, and he was a bit surprised.
As estimated, he wasn’t far from retirement and had held his same position for many years. Conversation was easy, and he was actually an interesting fellow, once the ice had been broken. Knowing he had overheard my earlier conversation with his colleagues, I asked if he had any thoughts on the matter.
“Well,” he began, with a slight shake of his head, “you know, I don’t think they have all the licenses they should have to run all those facilities.” I asked what he meant.
The state requires medical offices to be in buildings that are licensed for such business activity. Have you ever wondered why you don’t see a dentist office, or a podiatrist on the third floor in a building where there are lawyers, insurance salesmen, and real estate offices? It is because buildings licensed for medical treatment have specific requirements, and there are a lot of them. Should there be a medical emergency related to their practice, many things must be present.
They have to have elevators large enough for ambulance gurneys, and hallways wide enough to push them down, as well as doorways wide enough for them to get through to deal with a person suffering some sort of trauma. There must be orange electrical outlets, the ones that will always have power and have a generator at the other end of the wires, at-the-ready, should there be a power outage. Importantly, it is at the very inception of the building’s construction, when it is being permitted, that all of these items are planned as part of the edifice, including ceilings of at least a certain height, ventilation at a certain level, and even handwashing stations.
All hospitals in the state received such certifications, and also the buildings nearby on what is considered to be their campus. But there are many facilities which are usually far away from the main hospital campus, for the convenience of their outpatients who may live far from the hospital. They include over a dozen different categories, as wound-care centers, hand therapy, foot therapy, wellness centers, and many more.
The objective, the man said, is to be able to handle emergencies. There are statistics where patients in outlying locations die, “preventable deaths,” he called them, because those facilities did not, for example, enable EMTs to maneuver the hallways or elevators, as the emergency required.
He concluded by saying what they wanted to avoid was having “some witchdoctor open his teepee for business across town,” who would then bill Medicare.
I asked whether there are state inspectors who go out to check on these facilities, and he said that is not how the system works. If someone wants a license, an inspector makes an on-site visit to make sure they have fulfilled all the requirements. But if their office never gets a call, there is no place for them to go, resulting in a medical-related office in an unlicensed building. He added, they call this a “licensure issue.”
Wow! Here I finally was, in a new tributary of the already-wide stream, my work cut out for me.
Back at the squad, I asked Ellen if she would ping her computer for the term “license.” Of the many hits for this word, only two were relevant. One had a Columbia HCA executive’s email raising the issue of licenses in their buildings and asked the recipient if he thought there should be a “reserve fund” set aside to deal with it, if the matter were ever raised. In his response, the man agreed and suggested a figure of $20,000 to be held “in reserve.”
Bingo! But what did that really mean? None of my colleagues on the task force had dealt with this issue and they were all far too busy tying up their own loose ends from years of investigation to jump on my tangent.
Well, I thought, why not go to one of the horses’ mouths?
I had been living in an extended-stay facility out near Brandon, a suburb twelve-miles east of Tampa, and there happened to be a Columbia HCA hospital right down the road.
I went straight up to the hospital director’s office, unannounced, and asked his secretary if he was free. I showed her my credentials and said it would only take a moment.
The main case against Columbia HCA was being dealt with by the U.S. Attorney’s office in Tampa and certain AUSAs, Assistant U.S. Attorneys. Their contact points with Columbia HCA were at the organization’s headquarters in Nashville. Much of their communicating took place through conference calls. So, my attempt to deal with a local man, even if the head of a hospital, was a few levels down from their Nashville contacts. I wanted to shake the trees, but not so hard that large branches might fall on my head.
Very reluctantly, the director agreed to see me, and I entered his office. I tried to picture several men wearing black suits, seemingly taking over his office a few years before, and hoped I did not bring back what must have been a bad memory for him.
Bluntly, but with some deference, I told him I was interested in knowing if the buildings that were off-campus for his hospital were licensed facilities.
The question clearly shocked him, as he had, I am sure, been asked about a great number of topics by the company’s lawyers in recent months, but never this. In fact, it was not clear if he knew the answer, but if he did, he certainly was not going to tell me. He made reference to the ongoing legal action and said it would not be good for him to speak with me.
That would have been fine if I had been a novice at this, but here is what a person says if he is completely innocent and wants to clear the air: “I have records of them right here, and my secretary will give you copies.” But that is not what happened. Fine, I knew my next stop.
A mile or two away in a shopping mall was a wellness center affiliated with the hospital. Just from the dimensions of the place, and the general description of certain requirements I had received, it seemed impossible to me that it would pass the test to be licensed. I went inside.
In the too-narrow hallway, where there should have been a required license hanging on the wall in a little black frame, there was none. I found the person in charge and asked if there was an office where the license for the building could be found to operate their medical facility.
The woman had absolutely no idea what I was talking about, so I did not push the point. She may just have seemed uncomfortable merely because an FBI agent was asking her questions, and Bureau agents get that a lot. But she didn’t seem to have any knowledge for me, guilty or otherwise. That was another block checked.
I went to three more of the hospital’s facilities across town with pretty much the same result. Meanwhile, when I returned to the office the next day, there was already a message for me to call a certain AUSA. Apparently, the local hospital director had called his company’s army of attorneys, who, in turn, called their contacts in the Tampa U.S. Attorney’s office to report that some rogue agent was out there bending and breaking the rules they had agreed upon. Couldn’t they keep their agents in line?
Within a day or so, several of the agents on the task force were invited to sit in a conference room at the U.S. Attorney’s offices with a couple of AUSAs running the show. They were talking into a squawk box in the middle of a long, beautiful wooden table. It didn’t seem to me as though the AUSAs were speaking from a position of authority, but rather, they were more on a very collegial basis—almost speaking as pals—with their Nashville counterparts, the opposition. It was a very mild give-and-take.
Then the licensure issue was raised, followed by some discussion about the email that had been found referring this the “reserve” figure of $20,000. That seemed to be a beginning spot to negotiate how much more might be added to a larger settlement sum. But the dollar number didn’t go up very much, maybe a few thousand. It was as though the Columbia HCA attorneys were tossing small stacks of hundred-dollar bills into an ante pot to keep the play moving.
My problem was, at no time had it been quantified what exactly this licensure problem was, and what its value was in the overall scheme of things. It seemed to be treated as a minor administrative oversight. Even after that meeting, I still didn’t know, although one of the AUSAs did approach me to make the comment that I should not rock the boat by doing anything again like I had done in speaking with the hospital director out in Brandon. After all, they were in charge and, in their view, they had a handle on what was going on. My butting in was not something they wanted repeated.
With this admonition, I could either have been less inspired to put forth additional effort, or more so. I chose the latter. There were more rocks in the stream to turn over.
The next day I scurried around, trying to figure some new leads to understand the issue a little better and to see if there were any real consequences to what I had learned. I needed someone like the hospital director who had turned down the Men-in-Black, but on the licensure issue.
Something else came out in a few discussions that I guess I knew in the back of my mind, but it really needed to be quantified. It was not just that unlicensed facilities were not following the rules. The fact is, they were much cheaper to lease than spaces that were specially made-for-medical-practice office buildings. To me, that meant Columbia HCA had been “saving” a ton of money on their leases. It was certainly one way they were cutting costs and able to come up with a more profitable bottom line. But didn’t that mean they were also knowingly putting thousands of patients in these off-campus facilities at risk?
So this would be motivation for Columbia HCA not to use licensed buildings, but were there any other consequence to their actions?
As a completely unconnected tangent to this investigation, I happened to meet a medical doctor who was friendly. It was not common knowledge outside of the Bureau that there was an investigation of Columbia HCA, although it was known by many that “something was up.”
I had met him on a lead, not anywhere like at a bar, but our conversation was very cordial. I was not feeling down, just still in a bit of a tizzy about my next step. I opened a conversation with this new fellow in a most circumspect way. For whatever reason, he had the answer I had been looking for, and had no idea its value to me when he explained it.
He said a doctor’s medical malpractice insurance would not pay on a claim if the incident in question had taken place in an unlicensed medical facility. Of course, you can think of the classic “back-alley abortions,” as a ground-level to understand the reason for this. But it was because any misfeasance, nonfeasance or malfeasance that could not be dealt with because the unlicensed facility was not physically capable of handling it, possibly, to be able to save a life, was far beyond the scope of what liability insurance companies could withstand. So, no services rendered in unlicensed facilities would be defended by them in a lawsuit.
I went back to another doctor I had met, who was affiliated with a Columbia HCA hospital, who had not been particularly helpful. There was some level of the Mafia’s omerta, in not speaking about things-Columbia HCA with investigators. He hadn’t been snooty, but said he had a family to think about and, after all, he did have to make a living. Fine, that was then.
On this go-around I told him that his medical malpractice insurance would not cover him if he practiced in off-campus, Columbia HCA facilities. That was something he had not known, and it really struck him. He realized this meant he would have to change his practice entirely and pull out of the Columbia HCA system, which could be catastrophic for him. Plus, there were many of his colleagues who would have the same plight.
He broke down and admitted he was not aware of any of the off-campus locations for Columbia HCA that were licensed, even though he knew they should have been. That was a significant admission, one it would have been nice to know earlier. As it turned out, after some effort, I could not locate any off-campus location that was licensed by the State of Florida, so the amount of money Columbia HCA was not spending on the appropriately licensed facilities was monstrous.
Then the real answer hit me, at least I thought it did, but I would have to check it out. It lay in the rules of Medicare.
If medical malpractice insurance companies would not defend lawsuits from actions in unlicensed facilities, how about Medicare? It wasn’t so egregious as refusing to defend a lawsuit, but would they pay on any claims for insurance coverage for normal, run-of-the-mill, medical treatment in these facilities?
Under their rules, I learned, payments would only be made for services rendered in licensed facilities. Well, that was interesting, but how about claims that had already been paid out by Medicare for services rendered, which had been performed in those same unlicensed facilities?
This was the kicker!
When the Medicare authorities learned they had been paying on these claims, pure and simple, they wanted their money back! Not only that, but the calculation on improperly submitted claims would go as far back as the statute of limitations would allow.
There was something else that I thought got too little coverage in the press about this case, and that was the role of the senior Columbia HCA executives. Some were indicted, and some were not. The senior man, the CEO of all of this seemed to have come out relatively unscathed, yet still a many-times-over millionaire, at least in part, as a result of his Columbia HCA creation. It was hard for me to think that those at the highest levels had not been aware of the ramifications with this licensure issue, which would have made all of them quite culpable. But none of that was up to me, and I was about ready to walk out of the door and retire.
Most agents in the FBI play a mental mathematical game that they would like to bring back to the government coffers as much money from their cases as they were paid in salary. It is difficult to calculate the actual value of working foreign counterintelligence for two decades, as the value of our nation’s security is difficult to quantify. But recovery of money in bank frauds, catching fugitives who had money stashed away from their criminal activities, and drug busts with stacks-upon-stacks of money seized, could all be readily calculated.
When Medicare and its small army of accountants made the final tally regarding the licensure issue, the amount of money owed by Columbia HCA to the federal government, for its use of unlicensed facilities, hundreds of them, and for tens of thousands of patients over many, many years, amounted to $93 million—that’s with six zeros!
This added to the already-calculated amount of over $900 million, back when I had arrived at the Tampa task force three months before. This is what brought the final figure owed by Columbia HCA to the billion-dollar mark!
So, if I were to figure how much income I had earned in my 29 years in the Bureau, adjusting for inflation and increased salary over time, I had brought back about 50-times my entire, lifelong salary, in just the last three months of my career in the FBI. That would put a smile on the face of anyone crossing the threshold to retirement.
Plantation, FL
February 12, 2018