HCA, Giant Hospital Chain, Creates a Windfall for Private Equity

The following is an excerpt from an article in 

The New York Times
Wednesday, August 15, 2012

HCA, Giant Hospital Chain, Creates a Windfall for Private Equity

By JULIE CRESWELL and REED ABELSON

During the Great Recession, when many hospitals across the country were nearly brought to their knees by growing numbers of uninsured patients, one hospital system not only survived — it thrived.

In fact, profits at the health care industry giant HCA, which controls 163 hospitals from New Hampshire to California, have soared, far outpacing those of most of its competitors.

The big winners have been three private equity firms — including Bain Capital, co-founded by Mitt Romney, the Republican presidential candidate — that bought HCA in late 2006.

HCA’s robust profit growth has raised the value of the firms’ holdings to nearly three and a half times their initial investment in the $33 billion deal.

The financial performance has been so impressive that HCA has become a model for the industry. Its success inspired 35 buyouts of hospitals or chains of facilities in the last two and a half years by private equity firms eager to repeat that windfall.

HCA’s emergence as a powerful leader in the hospital industry is all the more remarkable because only a decade ago the company was badly shaken by a wide-ranging Medicare fraud investigation that it eventually settled for more than $1.7 billion.

Among the secrets to HCA’s success: It figured out how to get more revenue from private insurance companies, patients and Medicare by billing much more aggressively for its services than ever before; it found ways to reduce emergency room overcrowding and expenses; and it experimented with new ways to reduce the cost of its medical staff, a move that sometimes led to conflicts with doctors and nurses over concerns about patient care.

In late 2008, for instance, HCA changed the billing codes it assigned to sick and injured patients who came into the emergency rooms. Almost overnight, the numbers of patients who HCA said needed more care, which would be paid for at significantly higher levels by Medicare, surged.

HCA, which had lagged the industry for those high-paying categories, jumped ahead of its competitors and was reimbursed accordingly. The change, which HCA’s executives said better reflected the service being provided, increased operating earnings by nearly $100 million in the first quarter of 2009.

To some, HCA successfully pushed the envelope in its interpretation of existing Medicare rules. “If HCA can do it, why can’t we?” asked a hospital consulting firm, the Advisory Board Company, in a presentation to its clients.

In one instance, HCA executives said a private insurer, which it declined to name, questioned the new billing system, forcing it to return some of the money it had collected.

The hospital giant also adopted a policy meant to address an issue that bedevils hospitals nationwide — reducing costs and overcrowding in its emergency rooms. For years, the hospital emergency room has been used by the uninsured as a de facto doctor’s office — a place for even the most minor of ailments. But emergency care is expensive and has become increasingly burdensome to hospitals in the last decade because of the rising number of uninsured patients.

HCA decided not to treat patients who came in with nonurgent conditions, like a cold or the flu or even a sprained wrist, unless those patients paid in advance. In a recent statement, HCA said that of the six million patients treated in its emergency rooms last year, 80,000, or about 1.3 percent, “ chose to seek alternative care options.”

“Many E.R.’s in America, particularly in densely populated urban areas where most HCA-affiliated facilities are located, have adopted a variety of systems to determine whether a patient in fact needs emergency care,” the statement said. “About half our hospitals have done so. Typically, our affiliated hospitals have two caregivers — usually a triage nurse and a physician — make that determination. It should be noted that other non-HCA affiliated hospitals are using similar processes to address E.R. issues.”

As HCA’s profits and influence grew, strains arose with doctors and nurses over whether the chain’s pursuit of profit may have, at times, come at the expense of patient care.

HCA had put in place a flexible staffing system that allowed it to estimate the number of patients it would have each day in its hospitals and alter the number of nurses it needed accordingly.

Several nurses interviewed said they were concerned that the system sometimes had led to inadequate staffing in important areas like critical care. In one measure of adequate staffing — the prevalence of bedsores in patients bedridden for long periods of time — HCA clearly struggled. Some of its hospitals fended off lawsuits over the problem in recent years, and were admonished by regulators over staffing issues more than once.

For more, visit www.nytimes.com.

News release from the FBI, Kansas City Division:

Texas Man Convicted of Medicare Fraud in Kansas

U.S. Attorney’s Office February 16, 2012

District of Kansas (316) 269-6481

— filed under: Health Care Fraud, Press Release

KANSAS CITY, KS—A Texas man has been convicted of fraudulently billing Medicare for power wheelchairs and other medical devices, U.S. Attorney Barry Grissom said today.

A jury convicted Edmund Nwaudobi, 48, Sugar Land, Texas, on one count of conspiracy to defraud Medicare, two counts of health care fraud, and one count of aggravated identity theft.

“Health care fraud is a widespread problem,” said U.S. Attorney Barry Grissom. “We are working hard to protect the American people and safeguard precious taxpayer dollars.”

During trial, federal prosecutors presented evidence that from 2004 to 2009 Nwaudobi conspired with co-defendants Tom Alabraba, Iyaye Ishmael, and George Tasie to fraudulently bill Medicare for power wheelchairs and other medical devices, such as leg and body braces. In some instances, Medicaid was billed for devices that were not medically necessary, including leg braces for an individual who had previously had his legs amputated, and who never received the braces. In other instances, Medicare was billed for medical devices that Medicare recipients never received.

Nwaudobi conducted business on behalf of Good Care, Inc., an Overland Park, Kan., company that supplied durable medical equipment such as orthotics. Nwaudobi shared patient information with Tom Alabraba, who owned or operated Tal-Med, Inc., a Kansas City, Kan., company that supplied durable medical devices; George Tasie, who owned or operated Central Medical, Inc., a Kansas City, Kan., company that supplied durable medical devices; and Iyaye Ishmael, who was a manager of Central Medical, Inc.

The companies billed more than $2.9 million in Medicare claims for 397 beneficiaries living in Missouri and Kansas, and received more than $1.5 million from those claims.

Prosecutors presented evidence at trial that Nwaudobi:

• Submitted false statements to Medicare that physicians had prescribed durable medical devices;
• Provided durable medical devices to Medicare recipients that were different than stated in bills to Medicare;
• Did not require Medicare recipients to make co-payments required by Medicare; and
• Used doctors’ identities without permission to make fraudulent claims to Medicare.

Brian Truchon, FBI Special Agent in Charge, said: “The FBI is fully committed to investigating health care fraud and working with our law enforcement partners to stop individuals or groups that commit fraud against government sponsored programs such as Medicare and Medicaid as well as fraud against private insurance companies. This verdict puts those individuals on notice that these crimes will be fully investigated and brought to successful prosecution.”

Tom Alabraba and Iyaye Ishmael are fugitives. George Tasie, who pleaded guilty to one count each of conspiracy and health care fraud, failed to appear for sentencing.

Sentencing is set for April 30. Nwaudobi faces a maximum penalty of 20 years in federal prison and a fine up to $250,000 on the conspiracy count, a maximum penalty of 20 years and a fine up to $250,000 on each of the health care fraud counts, and a mandatory two years consecutive to any other sentence and a fine up to $250,000 on the identity theft count.

Grissom commended the Federal Bureau of Investigation, HHS-OIG and Assistant U.S. Attorneys Chris Oakley and Jabari Wamble for their work on the case.

In all cases, defendants who have been indicted are presumed innocent until and unless proven guilty. The indictments merely contain allegations of criminal conduct.

Man Sentenced for Medicare Fraud Scheme

News release from the FBI:

Los Angeles Man Sentenced to 77 Months in Prison for Medicare Fraud Scheme Resulting in More Than $18.9 Million in Fraudulent Claims to Medicare

U.S. Department of Justice February 07, 2012

Public Affairs Specialist Laura Eimiller (310) 996-3343

— filed under: Breaking News, Health Care Fraud, Press Release

WASHINGTON—A Los Angeles-area man was sentenced yesterday to 77 months in prison for organizing and leading a medical clinic fraud scheme that used the stolen identities of physicians to submit more than $18.9 million in fraudulent claims to Medicare, the Department of Justice, the FBI and the Department of Health and Human Services (HHS) announced.

Eduard Aslanyan, 38, of Sherman Oaks, Calif., was sentenced by U.S. District Judge Consuelo B. Marshall in the Central District of California. In addition to his prison term, Aslanyan was sentenced to three years of supervised release and was ordered to pay $10.8 million in restitution.

Aslanyan pleaded guilty in April 2011. He admitted that between March 2007 and September 2008, he established a series of fraudulent medical clinics in and around Los Angeles to defraud Medicare. Carolyn Vasquez, who previously pleaded guilty to conspiring with Aslanyan to defraud Medicare, recruited physicians to serve as the medical directors of Aslanyan’s fraudulent medical clinics. The physicians did not perform services at the clinics and were rarely present at the clinics. Physician assistants were hired by Aslanyan and Vasquez and were complicit in the fraud scheme at the clinics.

According to court documents, Aslanyan hired patient recruiters to find Medicare beneficiaries who were willing to provide the recruiters with their Medicare billing information in exchange for expensive, high-end power wheelchairs and other medical equipment which the patient recruiters told the beneficiaries they could receive for free. Often, the Medicare beneficiaries did not have a legitimate medical need for the power wheelchairs and equipment. The patient recruiters then provided the beneficiaries’ Medicare billing information to Aslanyan or brought the beneficiaries to Aslanyan’s clinics. Aslanyan paid the patient recruiters cash kickbacks in exchange for recruiting the Medicare beneficiaries.

In court documents, Aslanyan admitted that he and Vasquez instructed and paid physician assistants who worked at his clinics to prescribe medically unnecessary power wheelchairs, medical equipment and diagnostic tests for the Medicare beneficiaries. The physician assistants used stolen identities of physicians who did not supervise them or work at the clinics.

According to court documents, Aslanyan profited from the scheme at his fraudulent medical clinics in several ways. Aslanyan admitted that he allowed fraudulent diagnostic testing facilities to use the Medicare billing information he purchased from patient recruiters to submit false claims to Medicare for tests ordered at the clinics. In exchange, the fraudulent diagnostic testing facilities paid Aslanyan cash kickbacks that were disguised as rent payments to Aslanyan.

Aslanyan also profited from the scheme by selling fraudulent prescriptions and documents generated at his clinics to the owners and operators of fraudulent durable medical equipment (DME) supply companies, which used the prescriptions and documents to submit false claims to Medicare. Aslanyan also used the fraudulent prescriptions and documents to submit false claims to Medicare through his own fraudulent DME supply companies, Vila Medical Supply Inc. and Blanc Medical Supplies.

According to court documents, as a result of Aslanyan’s conduct, he and his co-conspirators submitted approximately $18.9 million in fraudulent claims to Medicare.

Currently, Aslanyan is serving a three-year state sentence for assault. On Jan. 9, 2012, Judge Marshall sentenced Vasquez to 60 months in prison for her role in the fraud scheme and ordered her to pay more than $6.2 million in restitution to Medicare. A second co-defendant, David James Garrison, a physician assistant who worked at the fraudulent medical clinics with Vasquez and Aslanyan, is scheduled for trial on Feb. 7, 2012. Defendants are presumed innocent until proven guilty at trial.

The sentence was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney André Birotte Jr. for the Central District of California; Glenn R. Ferry, Special Agent in Charge for the Los Angeles Region of the HHS Office of Inspector General (HHS-OIG); Steven Martinez, Assistant Director in Charge of the FBI’s Los Angeles Field Office; and Tony Sidley, Assistant Chief of the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse.
The case is being prosecuted by Trial Attorney Jonathan T. Baum of the Criminal Division’s Fraud Section. Former Special Trial Attorney Joseph Hudzik participated in the prosecution. The case is being investigated by the FBI. The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California.

Since their inception in March 2007, strike force operations in nine districts have charged more than 1,160 defendants who collectively have falsely billed the Medicare program for more than $2.9 billion. In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

To learn more about the Health Care Fraud Prevention & Enforcement Action Team, go to: www.stopmedicarefraud.gov.

FTC Terminates Employment Scam

News release from the FTC:

For Release: 01/31/2012

FTC Action Terminates Nationwide Employment Scam

Agency Cautions Consumers: Be Wary of Job Offers that Charge Fees

An operation that allegedly deceived consumers with bogus promises of nonexistent sales jobs will be banned from marketing any employment products or services under a settlement with the Federal Trade Commission.
The proposed settlement order against National Sales Group and other defendants resolves FTC charges filed as part of a crackdown on scammers who falsely promise employment opportunities to financially distressed consumers. According to the FTC's complaint, the defendants advertised on CareerBuilder.com and other online job boards, and their telemarketers falsely told consumers they recruited for Fortune 1000 employers and had a unique ability to get them interviewed and hired.

The FTC complaint alleged that the defendants charged fees, purportedly for background checks and other services, and often overcharged, taking $97 from consumers who had agreed to pay $29 or $38. The defendants also allegedly charged some consumers recurring fees of $13.71 or more per month without their consent. At the FTC's request, in February 2011, the court halted the allegedly illegal practices and froze the defendants' assets pending litigation.

Under the proposed settlement order, Anthony J. Newton, National Sales Group, and I Life Marketing LLC, also doing business as Executive Sales Network and Certified Sales Jobs, are banned from selling employment products or services. They and co-defendant Jeremy S. Cooley are permanently prohibited from misrepresenting material facts about any product or service, and from violating the FTC's Telemarketing Sales Rule, including misrepresenting the benefits of a good or service or misrepresenting that any person is affiliated with or endorsed by another person or government entity. The defendants also are barred from violating the Rule by billing consumers without their consent and failing, during calls, to clearly and promptly disclose the seller's identity, the call's purpose, and the nature of the goods or services.

The order also bars the defendants from selling or using customers' personal information, failing to properly dispose of customer information, and attempting to collect payments from past customers. In addition, the order imposes a $13 million judgment that will be suspended once Newton has paid $279,000, terminated a lease on a 2009 Mercedes-Benz, and surrendered his interest in a residence in Huntington Beach, California. The full judgment will be imposed immediately if the defendants are found to have misrepresented their financial condition.

The Commission vote approving the proposed consent order was 4-0. It is subject to court approval. The FTC filed the proposed consent order in the U.S. District Court for the Northern District of Illinois, Eastern Division.

For more information, read Job Hunting-Job Scams.

Nurse Pleads Guilty in Health Care Fraud Scheme

News release from the FBI:

Miami-Area Nurse Pleads Guilty in $25 Million Health Care Fraud Scheme

U.S. Department of Justice January 24, 2012

Office of Public Affairs (202) 514-2007/TDD (202) 514-1888

— filed under: Breaking News, Health Care Fraud, Press Release

WASHINGTON—A Miami-area nurse pleaded guilty today for his participation in a $25 million home health Medicare fraud scheme, the Department of Justice, the FBI and the Department of Health and Human Services (HHS) announced today.

Jorge Pineiro, 42, pleaded guilty before U.S. District Judge Joan A. Lenard in Miami to one count of conspiracy to commit health care fraud. Pineiro was originally charged in a February 2011 indictment.

According to plea documents, Pineiro was a registered nurse who worked for ABC Home Health Care Inc. and Florida Home Health Care Providers Inc., two Miami home health care agencies that purported to provide home health and therapy services to Medicare beneficiaries. Pineiro and his co-conspirators operated ABC and Florida Home Health for the purpose of billing Medicare for expensive services that were not medically necessary and/or were never provided. The medically unnecessary services were prescribed by doctors, including, but not limited to, Pineiro’s co-defendant, Dr. Jose Nunez.

According to court documents, beginning in approximately June 2008, and continuing until approximately March 2009, Pineiro and his co-defendant nurses falsified patient files for Medicare beneficiaries to make it appear that they qualified for home health care and therapy services. Pineiro knew that the beneficiaries did not actually qualify for and did not receive the services. Pineiro and his co-defendant nurses described in nursing notes and patient files symptoms that were non-existent, such as tremors, impaired vision, weak grip and inability to walk without assistance. They included these symptoms to make it appear that the patients were unable to self-inject insulin and were homebound, thus appearing to qualify for home health care benefits under Medicare.

Pineiro admitted that he knew these files were falsified so that Medicare could be billed for medically unnecessary therapy and home health-related services. As a result of Pineiro’s participation in the illegal scheme, the Medicare program was billed approximately $118,000 for purported home health care services that were not medically necessary and/or were never provided.

Pineiro also recruited Medicare beneficiaries who allowed Florida Home Health to bill Medicare for services that were medically unnecessary and/or never provided. Pineiro solicited and received kickbacks and bribes from the owners and operators of Florida Home Health in return for allowing the agency to bill Medicare on behalf of the patients he recruited. The patients that Pineiro recruited did not qualify for the services that were billed to the Medicare program. Pineiro knew that the patient files for his recruited patients were falsified to make it appear that the patients qualified for services from Florida Home Health.

Eighteen co-defendants, including Nunez, Licet Diaz, and Lisandra Alonso, have pleaded guilty for their roles in the fraud scheme. Nunez, Diaz, and Alonso were sentenced to 40 months, 87 months and 78 months in prison, respectively. Two remaining defendants, Dr. Francisco Gonzalez and Odalys Alvarez-Medina, are scheduled for trial on Feb. 14, 2012. An indictment is merely a charge, and defendants are presumed innocent until proven guilty.

Sentencing for Pineiro has been scheduled for April 9, 2012.

The charge of conspiracy to commit health care fraud carries a maximum prison sentence of 10 years. The defendant also faces fines and supervised release, as well as forfeiture of any property or proceeds derived from his criminal activities.

Today’s guilty plea was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; John V. Gillies, Special Agent in Charge of the FBI’s Miami Field Office; and Special Agent in Charge Christopher Dennis of the HHS Office of Inspector General (HHS-OIG), Office of Investigations Miami office.
This case is being prosecuted by Trial Attorney Joseph S. Beemsterboer of the Criminal Division’s Fraud Section. The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Miami.

Since their inception in March 2007, strike force operations in nine locations have obtained indictments of more than 1,160 individuals who collectively have falsely billed the Medicare program for more than $2.9 billion. In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.