Columbia/HCA Settles Fraud Charge

Columbia/HCA Healthcare Corp., the nation's largest hospital chain, has agreed to pay the government $745 million to settle allegations of billing fraud.

The settlement with the Justice Department is far less than the $1 billion or more analysts had been expecting.

The federal government's Medicare fraud probe targeting Nashville-based Columbia became public in 1997 with a series of raids on several hospitals.

In July 1999, two Columbia middle managers in Florida were convicted of conspiracy and defrauding government health insurance programs.

In connection with the settlement, Columbia/HCA said it plans to take an after-tax charge of about $498 million in the quarter ending June 30.

The investigation led to wholesale changes at Columbia/HCA. Since 1997, the company ousted its top executives, stopped an aggressive hospital acquisition program and began a major downsizing, trimming from a high of 345 to 220 hospitals.

"We are pleased to have reached an understanding on these issues and today's announcement signals that a significant step in this process is complete," said Thomas F. Frist, Jr., chairman and chief executive officer.

The Justice Department issued a brief statement Thursday confirming that it had reached a tentative agreement resolving a number but not all of the issues it has been investigating, and emphasized that the agreement still needed approval from several other federal agenices.

Investors were pleased by the news, pushing shares of Columbia up $2.25, or 8 percent to $30.50 on the New York Stock Exchange.

The settlement announced Thursday is subject to approval by other department officials and also needs court approval. The settlement also would not be final until all criminal investigations are resolved.

The company also says it has a deal with the Department of Health and Human Services that would allow it to keep treating Medicare patients.