U.S. Steps Up Probe of Columbia / HCA

Shares of Columbia/HCA Healthcare Corp. plunged nearly 4% on Wednesday in heavy trading on reports of more troubles for the hospital chain as the government intensifies its industrywide health-care fraud investigation.

Justice Department spokeswoman Carole Florman confirmed Wednesday that federal prosecutor Kathleen Haley has named the Nashville-based company itself--in addition to individual employees--as a target of the probe.

Haley made the statement in court July 30, adding that she might try to bar the company from paying the defendants’ legal bills.

“She stated at that time that there may be a time when Columbia’s paying of the legal bills of the defendants may be a conflict of interest,” said Sam Armstrong, assistant U.S. attorney in Tampa, Fla.

News that Columbia itself was a target was first reported Wednesday in the Wall Street Journal.

Columbia shares plunged $1.31 to close at $32.75 on the New York Stock Exchange.

Many investors have abandoned Columbia. Its shares are down 27% from its 52-week high of $44.88, reached Feb. 18. But Morgan Stanley analyst Todd Richter considers the stock a bargain at such low prices.

“I’m maintaining a strong ‘buy’ rating on the stock,” he said.

Scrutiny of Columbia/HCA has broadened beyond the government investigation.

On Tuesday, the National Assn. of Securities Dealers, which regulates brokers, spoke to at least one Florida health-care executive about whether Columbia accurately informed doctors who invested in the Florida hospitals where they worked about costs at the sites.

Two of three Columbia/HCA executives indicted in Florida for allegedly overstating Medicare costs were also in charge of informing investors about costs.

As inquiries into Columbia increase, so does the government’s investigation of the entire health- care industry. Federal investigations and prosecutions of health- care fraud more than tripled in the last four years, according to a Justice Department report released Wednesday. Civil investigations grew almost tenfold.

The number of FBI health-care fraud investigations rose from 657 in fiscal year 1992 to 2,200 in fiscal year 1996, which ended last fall. Federal prosecutions also increased from 83 cases and 116 defendants to 246 cases and 450 defendants during the same period.

Convictions by guilty pleas or verdicts rose from 90 defendants to 307 in that period.

Civil health-care fraud investigations by the Justice Department soared from 270 in 1992 to 2,488 in 1996.

“We have tried to put additional resources into it, and we will have more resources available to pursue it, to identify it and to take appropriate action,” Atty. Gen. Janet Reno told her weekly news conference.