Originally created 08/15/97

New lawsuit filed amid Columbia/HCA probe



ALBANY, N.Y. - As a federal judge kept evidence against Columbia/HCA Healthcare Corp. sealed for fear of jeopardizing a wide-ranging probe against the hospital chain, New York's comptroller filed a shareholders lawsuit against Columbia managers.

The revelations about the depth of the investigation depressed the stock of the nation's largest for-profit hospital chain by an additional 4 percent. The decline was prompted by news that prosecutors succeeded in keeping evidence against Columbia officials in Florida sealed after arguing that they needed to protect company employees and documents they hoped to use later in the probe.

Columbia shares tumbled $1.43 3/4 to $31.311/4 on the New York Stock Exchange. The plunge followed a nearly 4 percent decline on Wednesday, bringing the price well below its year-high of $44.871/2 to within pennies of its 52-week low of $31.

In the Florida hearing Wednesday, The Tampa Tribune and the St. Petersburg Times sought documents related to the arrest of three Columbia officials accused of overbilling the federal Medicare program.

U.S. Magistrate Tom McCoun ruled that unsealing court documents sought by newspapers could encourage the destruction of records and expose employees serving as informants.

"We absolutely do not condone any destruction of documents by anyone affiliated with this company," Vic Campbell, head of investor relations for Columbia/HCA, said Thursday.

Assistant U.S. Attorney Kathleen Haley argued against disclosure, saying other people were "culpable" and indicating there may be more indictments.

Columbia/HCA, which owns Columbia Augusta Medical Center, is the target of a sweeping federal investigation looking into whether it overbilled government health programs. Three company officials have been indicted and state officials in Florida, Alabama and Texas are conducting their own Medicaid fraud investigations.

Since federal agents raided more than 50 Columbia and affiliated sites in seven states last month seeking documents on alleged overbilling the company has been beset by investigations. Several federal agencies, three states and a group of private insurers are now probing Columbia on allegations of overbilling.

In New York shareholders' suit was on behalf of New York's more than $90 billion public employee pension fund by H. Carl McCall, its sole trustee. The suit, filed in U.S. District Court in Nashville, Tenn., said executives' mismanagement has devalued the 2.6 million shares of Columbia stock - valued at more than $86 million - held by state pensioners.

New York is the largest Columbia shareholder to take legal action against the Nashville, Tenn.-based corporation, the largest Medicare biller in the nation.

"The reckless mismanagement and abuse of control by certain officials of Columbia/HCA has resulted in one of the most extensive and widespread federal fraud investigations in history," McCall said. "The company and its shareholders should not have to pay the price for the fraudulent actions of these individuals."

Columbia spokesman Jeffrey Prescott declined comment.

Earlier this week, a U.S. attorney for the Middle District of Florida confirmed that Columbia itself was the focus of a criminal probe.

New York's action is a shareholders' derivative lawsuit, in which the company is a merely a nominal defendant. The defendants are eleven former and current directors and senior officials at Columbia. The lawsuit is intended to protect shareholders and the value of their stock, said McCall spokesman Steven Greenberg.

"We're not looking to get a dollar out of the company. We're looking to get more money put into the company," Greenberg said.

The lawsuit asks the court to order the executives to pay restitution and damages to Columbia and for them to be barred from receiving any employee benefits.

It also calls for Columbia to sever improper business relations with the defendants and for the company to implement procedures to monitor compliance with federal and state laws.

Columbia is the ninth largest employer the nation, operating more than 340 hospitals, 150 outpatient surgery centers and 570 home health care centers in 36 states, England, Switzerland and Spain. More than 40 percent of the company's revenues are from Medicare and Medicaid.