When healthcare executive Rick Scott recently ran for governor of Florida, his opponent Charlie Crist attacked him mercilessly over his status as former head of a then-corrupt healthcare organization named Columbia/HCA.
And he implied that Scott had dirty secrets to keep. Crist's ads noted, correctly if somewhat misleadingly, that Scott had taken the Fifth 75 times in an HCA-related deposition a few years ago, allegedly "to avoid jail." Despite these allegations, however, Scott still beat Crist for the governor's seat. And by this point, it doesn't seem likely that his remaining entanglements will slow down his business or political career.
The question is, how has Scott managed to keep his prospects intact despite being at the helm of a company involved in one of the biggest Medicare/Medicaid frauds in history? And what would happen to another healthcare CEO in Scott's position? This story takes a look at these question.
The mansion and the jail cell
This is a tale of two healthcare CEOs, one who went to jail, the other who went to the governor's mansion. Both ran companies brought down by accusations of massive financial fraud, but only one ended up taking any blame for the mess.
One, HealthSouth Corp.'s Richard Scrushy, was convicted of bribery and fraud charges and spent five years in jail. Meanwhile, Columbia/HCA Corp.'s Rick Scott, who also presided over a company famous for its level of corruption, sits close to the top of US political power as the Republican governor of Florida.
What's more, over the years since Columbia/HCA pleaded to 14 felonies and paid more than $2 billion in fines for Medicare and Medicaid fraud, kickbacks and illegal supplier deals, Scott has invested in several healthcare companies, including price transparency site Alijor.com, Pharmaca Integrative Pharmacies and urgent care chain Solantic. Scott didn't just avoid charges, he got back into the game.
By any standard, both HealthSouth and Columbia/HCA had spectacular flameouts.
In 2000, HCA (formerly Columbia/HCA) subsidiaries pled guilty to "substantial criminal conduct" including cost report fraud and physician kickbacks, and agreed to pay more than $840 million in criminal fines, civil restitution and penalties. It also agreed to pay a separate $250 million administrative fee to CMS. All told, when all penalties were assessed, HCA was on the hook for a staggering $1.7 billion, still the biggest such penalty ever.
Scott, who got off relatively lightly,* has never had much to say about his role in the historic misdoings at HCA, other than to assert that he didn't know financial and legal misdeeds were underway at his company and would have put a stop to them if "somebody told me something was wrong."
But as a Tampa Tribune piece notes, as far back as 1994 the company's annual reports noted that its financial arrangements, which included fairly obvious sweetheart deals with doctors, "might be subject to enforcement action." Scott has said that he dismissed the language as "boilerplate," a strange assertion coming from a CEO in a company treading dangerous ground (who also happens to be a health law attorney with enough sophistication to recognize what the warnings meant).
HealthSouth, at the time the largest US operator of rehab hospitals, began being investigated by SEC in 2003 for allegedly understating earnings by $2.5 billion. CEO Richard Scrushy did little to help himself win the battle for public opinion. For example, in that year he refused to testify before Congress about his dealings at HealthSouth, though he later agreed to appear. Also, his lifestyle didn't help. Among the charges were allegations that Scrushy had personally profited from a scheme to inflate earnings, using the funds to live a lavish lifestyle including a 92-foot yacht, paintings by Picasso and Renoir and a Lamborghini, according to the Washington Post.
Ultimately, Scrushy was acquitted of 36 charges brought against him by the SEC. But he was later convicted of bribery, conspiracy and mail fraud on charges related to his allegedly paying debts for then-Alabama Governor Don Siegelman in exchange for a seat on the state's Certificates of Need Review Board. What's more, despite being out of prison, he still has a $2.87-billion judgment from a civil suit by a HealthSouth shareholder hanging over his head.
To this day, Scrushy continues to insist on his innocence. That being said, last year he posted a statement on his site stating that while he didn't know the fraudulent activity was taking place, "I must take responsibility for it and I do."
Scrushy did not respond to a request for comment.
Winners and losers
Scrushy has continued to appeal his convictions, despite having already served his time in prison. Scott, for his part, dissembles or takes the Fifth when asked about HCA, but when forced into a corner, still insists he didn't know that criminal activity was going on. (Gov. Scott's press office never responded to requests for comment.)
Not surprisingly, the whistleblower who helped to expose HCA's fraudulent actions doesn't see things quite the same way. John Schilling, who was supervisor of reimbursement services for the southwest division of the hospital chain back in 1993, stumbled across the fact the company was preparing two sets of Medicare cost reports, one of which used aggressive figures intended for government inspection, and another, more accurate version, which was used for internal purposes.
Schilling ended up taking this and other alleged wrongdoing to the FBI and the Department of Justice. Could Scott have been completely unaware of such practices?
"You'd have to be an ignorant CEO if you didn't know...and Scott was a hands-on CEO," Schilling told Healthcare Dive. Schilling now runs Naples, FL-based EthicsSolutions, which works with whistleblowers, attorneys and the government on healthcare fraud cases.
So given that both men presided over their companies during a time when spectacular frauds came to light, why were the fates of these two men so different? No one can say for sure. Maybe the fact that Scott is an attorney allowed him to protect himself from prosecution more effectively. Or perhaps Scrushy's extravagant personal life and apparent arrogance made him a riper target for prosecution.
But from the outside, it looks like things could just as easily landed Scott in prison and Scrushy on top of the world.
* The language here has been amended to correct an indication that Scott faced no repercussions from the HCA investigation. Scott was pressured to resign from the company, with a generous compensation package, in 1997.