Columbia / HCA Beset by New Allegations

The troubles of Columbia/HCA Healthcare Corp. widened considerably Thursday as a magistrate revealed that more indictments of company executives are expected, while the state of New York filed a shareholder lawsuit against company managers.

The latest actions add to mounting allegations that fraud at the nation’s largest health-care company may be far more extensive than previously believed. The company is facing a sweeping federal probe of suspected Medicare and Medicaid fraud, illegal kickbacks to physicians for patient referrals and other practices. Last month, three mid-level Columbia executives were indicted by a federal grand jury in Florida.

Federal prosecutors have indicated that other indictments in south Florida and other states are expected, U.S. Magistrate Thomas McCoun III in Tampa said in a ruling on a motion by two Florida newspapers to unseal affidavits used in a court-ordered search of Columbia facilities.

And New York Comptroller H. Carl McCall, in announcing a lawsuit against 11 Columbia executives on behalf of state pension programs, alleged that dozens of Columbia managers, including senior executives, are likely to be indicted in the government probe and that fines and penalties “may well exceed $1 billion.”

Columbia’s stock fell $1.44 to close at $31.31 in New York Stock Exchange trading.

Separately, a federal prosecutor said at a court hearing in Florida that there is evidence that Columbia may have destroyed documents related to the criminal investigation. And Columbia confirmed in a federal securities filing that it “believes it may be a target in this investigation,” that it could face “substantial” fines and penalties, including possible disbarment from the federal Medicare and Medicaid programs.

The latter would be a potential blow that could force Columbia to sell many of its hospitals.

Also, state authorities in Utah and Nevada said they are investigating Columbia for possible Medicaid fraud. The attorney generals of Alabama, Florida and Texas already had announced investigations of the company.

An official with the California attorney general’s office said the state is monitoring Columbia’s activities but has begun no formal investigation.

Meanwhile, Columbia’s top executive for California and other Western states, division President Jamie Hopping, has resigned. Hopping was formerly a top executive with Columbia’s south Florida operations, which are a focus of the federal investigation.

McCall said the government investigations “exposed a serious breakdown in corporate governance and internal controls at Columbia/HCA, which appears to have created a corporate culture of criminal activity.”

McCall said New York’s pension system filed the derivative lawsuit to “protect shareholders and the value of their stock. The New York pension fund owns more than 2.6 million Columbia shares with a value of nearly $83 million at Thursday’s close. According to the lawsuit, the state has dumped about 2.3 million Columbia shares since late March, when the federal investigation of Columbia came to light.

Brad Pacheco, a spokesman for the California Public Employees Retirement System, said the state pension fund may be the largest pension system investor in Columbia, with holdings of 3.6 million shares, valued at roughly $112 million.

“As far as I know, we have not filed any lawsuits nor have I heard rumblings of any suit,” he said.

Meanwhile, a fraud investigator with one of California’s largest health insurers said the firm is “reviewing” its billing records from Columbia facilities to detect signs of possible fraud. Some other California insurers are also doing so, he said.

He said any investigation would be complicated by the fact that Columbia acquired many of its California health care facilities in recent years. The company owns 15 hospitals, 13 surgery centers and 10 home-health agencies in the state.