JULY/AUGUST 1997 · VOLUME 18 · NUMBERS 7 & 8
T H E F R O N T
Federal prosecutors are trying to establish if Columbia hospitals illegally inflated cost reports to get more reimbursement from Medicare and Medicaid. The investigation is also targeting lab-billing at Columbia hospitals.
The ever-expanding probe has cost the jobs of both the company's founder and chief executive officer, Richard L. Scott, and chair and chief operations officer David T. Vandewater.
On July 30, the U.S. district court in Florida issued an indictment against three Columbia executives, relating to alleged overbilling of Medicare.
Four Columbia employees have been subpoenaed to testify before a Federal grand jury in Florida. The four are reported to be managers from Orlando who prepared cost reports to the government about hospital expenses and obtained reimbursement from Medicare. It is not known if they are among those indicted.
The searches involved Florida, Tennessee, Georgia, Texas, Utah, North Carolina and Oklahoma. Some 20 of the search warrants were executed in Florida alone, where Columbia has major home-health operations.
Attorneys general in Texas and Alabama have launched separate, parallel investigations. Shareholders have also filed a battery of lawsuits.
It appears that in some of the facilities, staff were keeping two separate sets of cost reports and work sheets, one for in-company use and one for remittances to the government, the New York Times reported.
Carole Florman, a Justice Department spokesperson, says all affidavits relating to the investigation are sealed and will not confirm the types of documents seized or the volume.
Justice Department officials say the process could take many months to complete. More search warrants are likely, along with subpoenas and grand jury subpoenas. The first indictments could be handed up as soon as the next few months.
Columbia/HCA spokesperson Eve Hutcherson declines to comment on the investigation. "We don't have anything new to report," she said.
In a July 18 statement, the Tennessee-based giant acknowledged that the search was focused on its laboratory billing and home-health care operations. The company denies any wrongdoing.
TURMOIL AT COLUMBIA
With only $125,000 of his own money and $61 million in borrowings in 1988, company founder Richard L. Scott, a former attorney, took Columbia from two hospitals in Texas to more than 340 in the United States, Britain and Switzerland. Through feverishly purchasing non-profit facilities, one after the other, Columbia now has, in addition to the hospital empire, 147 outpatient surgery centers and approximately 550 home-health agencies and a host of other medical facilities. In total, it employs 285,000 workers.
The company has come in for stinging criticism from unions and consumer activists for driving down costs and standards of care in an effort to increase profits.
The Service Employees International Union (SEIU), the largest health care union in the United States, has been in a public dogfight with Columbia for years. The current flashpoint is Columbia's Las Vegas hospital, where SEIU has been organizing for the past several years.
The union has also helped block Columbia's takeover of Blue Cross Blue Shield in Ohio, and similar purchases in Michigan and Rhode Island.
"The fact that they've done the kinds of things that led to scrutiny over possible criminal behavior comes as no surprise," says Steve Askin, SEIU's assistant research director. "Columbia/HCA has been the first to do the worst in terms of pushing the envelope to increase profits while reducing the quality of health care."
With the fraud probe gathering pace, Columbia is undergoing growing turmoil.
Under mounting pressure from the company's board of directors, Scott and his top lieutenant, David T. Vandewater, announced their resignation July 25. A company statement said they "emphasized that throughout their tenure they have acted honorably and in the best interests of the company."
Meanwhile, Tenet, the number two hospital chain is actively negotiating to merge with Columbia. Such a merger would produce a health-care leviathan with a $31.5 billion market value.
In a strange irony, Tenet, when it was known as National Medical Enterprises, was the target of the previous largest investigation involving possible health-care fraud back in the late 1980s. Confronting $1 billion in civil fraud claims, and a nationwide billing-fraud investigation, the company settled in 1994 for more than $380 million.
Tenet's record since the settlement has not been squeaky clean. In July of this year, in a separate case, a Tenet unit agreed to pay the United States more than $12 million to resolve allegations that several of its hospital defrauded Medicare through illegal contracts and kickbacks.
The Columbia and Tenet cases are the visible signs of a pervasive fraud problem in the health care industry. In a survey released in June, the Washington-based Health Insurance Association of America, which represents private health providers, found that provider fraud accounted for 77.9 per cent of all suspected fraud cases. Consumer fraud came in a distant second at 19.6 percent. "Depending on the estimating organization, health care fraud ranges from 3 percent to 25 percent of all claim dollars paid," observed Thomas D. Musco, Kathleen Fyffe and Shannon Pohlman, authors of a study for the HIAA, released in June. "Today, 10 percent would approach $100 billion."
In July, inspectors at the Department of Health and Human Services, which oversees Medicare and Medicaid billing, estimated that waste, fraud and abuse cost taxpayers $28.6 billion annually.
INFACT, a Boston-based corporate watchdog, says the drive for profit is the underlying cause of the disease in U.S. health care.
The fraud probe comes as no surprise to INFACT research director Lucinda Wykle. After studying Columbia for the past year, she found a behemoth that strives for 20 percent profit margins annually, slashes worker levels and cuts costs and corners. But lower company costs often do not translate into lower consumer prices, she says. "The evidence demonstrates that it is driving up health care costs. They are seeking to eliminate as much competition as possible," she says.
Wykle frowns at the possible mega-merger between Columbia and Tenet. "It would further consolidate the drive for for-profit health care," she says, the root of the growing fraud problem.
-- John Bermingham
In 1994 alone, 14 NRIE workers in their twenties and thirties died of what are believed to be occupational diseases; 11 of these workers were employees at electronics factories. Since 1994, the death toll has continued to mount.
Academics, environmentalists and village people believe the cause of deaths to be the accumulation of toxic metals, such as manganese, lead and aluminum, in the workers' bodies.
Established in 1985 by the Industrial Estate Authority of Thailand (IEAT), the NRIE has more than 60 joint-venture factories with around 16,000 workers. Approximately 10,000 are women, and most of them are in the 20-to-30 age range. About 20 factories in the NRIE produce electronics components; 16 of these are joint ventures with Japanese firms while the other four are joint ventures with U.S., Swiss, Korean and Thai investors. Total foreign investment in the NRIE is estimated at more than $340 million.
A ROTTEN SMELL
Following public controversy over the mysterious deaths, Thailand's Public Health Ministry appointed a committee which concluded after a year-long study that the victims died of AIDS-related complications. IEAT officials as well as the companies in the industrial estate refused to comment to Multinational Monitor on the deaths, though they have publicly denied that hazardous working conditions are responsible for the workers' ill health and instead emphasize the AIDS theory.
"The Thai public has been purposely mislead and the true cause of environmentalism has been damaged" by allegation of toxic workplace poisoning, wrote representatives of various NRIE companies in a 1994 letter to Thailand's English-language newspaper, The Bangkok Post. "Much needed attention to the very real specter of AIDS in the industrial estate has been carelessly and speciously diverted."
Outside of industry circles, however, there is widespread disdain for the AIDS theory. "Government agencies, including the Industrial Estate Authority of Thailand (IEAT) have no evidence confirming the cause of death was AIDS," says Dr. Uthaiwan Kanchanakamol, a professor at Chiang Mai University and a member of the Lamphun Provincial Environment Committee (LPEC).
"The country has few doctors who have the expertise to diagnose occupational health hazards as the cause of death; moreover, none of them are in the North," says Kanchanakamol. "From the condition of the victims' bodies, I believe it was not AIDS. They appear like the symptoms of illness from the accumulation of heavy metal."
Suspicions that toxic chemicals are responsible for the deaths are fueled by ongoing cases of worker death and illness that appear unrelated to AIDS. The latest victim was Sopa Kaewwong, 33 years old, who died of kidney failure in April. Sopa worked in an electronics production area of the estate for six years, cleaning chemical dust every day. "She always said the workplace smelled so bad, she could hardly breathe," says her husband Chaiyuth. "And she had chronic headaches all the time."
Most workers in the electronics production factories are exposed to metal substances for more than eight hours a day. In many factories, workers are required to work at least one hour of overtime each day, with some workers averaging as much as three hours overtime daily. The additional working hours mean added accumulation of toxic substances in workers' bodies.
The levels of exposure are dramatic. A female worker who earns less than a dollar a day working on a processing line which uses lead and other chemicals says the factory in which she works "has a bad smell. At first, it was very hard for me to endure smelling it all day long. The pot of boiled lead in which we have to immerse chips with our fingers has an especially bad smell. The workers on the line have masks, but the surroundings still smell."
If it is shown that the workers died and became ill from metal poisoning, the factories will have to pay large sums in compensation to the victims' families. But there are numerous obstacles workers must overcome. Doctors in the state-run hospitals have attributed many of the highly publicized deaths to general illness. Generally, these doctors are ignorant of occupational diseases and are eager to avoid the burden of investigation which would follow an attribution of death to industrial hazards.
One worker made a bold attempt in 1994 to overcome the obstacles to holding employers accountable for hazardous working conditions. In a landmark Thai court case on industrial pollution and hazardous working conditions, Mayuree Tewiya, 32, a former worker at Electro Ceramics (Thailand) Co., a Japanese joint venture producing alumina ceramics, sued Electro Ceramics for compensation of $240,000, charging that her four years of work at the company's Lamphun factory caused her to contract alumina toxin disease, a chronic illness. Mayuree began a production line job in 1989 that involved wiping away alumina dust from the electronic boards. "We had to use our thumbs to wipe off the alumina dust. It always burned and sometimes our thumbs bled," she says.
In October 1993, one month after she left her job at Electro Ceramics, doctors at Chiang Mai's MacCormick Hospital concluded that Mayuree's sickness resulted from "alumina poisoning" and began giving her detoxification drugs. She felt better but did not fully recover.
Mayuree's illness was caused by the gradual accumulation of the chemical in her body, says Dr. Oraphun Methadilogkul, a toxicologist and expert on occupational diseases who treated Mayuree. "The amount of alumina in her body finally accumulated to the point that it started to harm her brain and nervous system."
Mayuree says she followed all safety instructions at the factory. "All the workers in my section had to put on earplugs, which were not very helpful, as well as the cloth mask provided by the factory."
The factory provided a medical unit in accordance with Thailand's factory laws. "But the medical unit is like a decorating accessory," she says. "We were not allowed to talk much to the nurse. Sick workers who want to rest can't stay there very long since the nurse would wake them up to work, otherwise the factory [management] would be angry."
"The company said it would pay me a sum of money, should I call it quits by stating that my case is not work-related," she says. "Some officials even tried to intimidate me." She declined the company's offer.
After three years and more than $12,000 in legal expenses, the Central Labour Court earlier this year dismissed the case on the grounds that Mayuree failed to prove alumina dust caused her illness.
THAI CORPORATE WELFARE
Local villagers have also complained about the NRIE's industrial pollution. NRIE factories produce 1,000 tons of toxic waste every year which is not properly treated; some of it is dumped about five kilometers from the NRIE around a reservoir and a road. The waste reeks of noxious smells from burning. Even as workers and villagers bear the costs of industrial development, the polluting companies are heavily subsidized, charge non-governmental groups such as the Bangkok-based Coordinating Committee Against Toxic Chemicals. Government-provided supports to the industrial estate companies include roads, cheap water and discounted electricity; and companies are exempted from minimum wage payments and worker rights regulations. -- Noel Rajesh
Noel Rajesh is a researcher with Towards Ecological Recovery and Regional Alliance (TERRA) in Bangkok, Thailand.