Rick Scott Fraud Settlement: The $1.7 Billion Columbia/HCA Case

Columbia/HCA Healthcare Corporation, the hospital chain Rick Scott built and ran as chairman and CEO, paid roughly $1.7 billion in criminal fines, civil penalties, and settlements to resolve what the U.S. Department of Justice called the most comprehensive healthcare fraud investigation it had ever undertaken.¹ The Rick Scott HCA fraud settlement was resolved in two main pieces, one in 2000 and one in 2003, and covered schemes against Medicare, Medicaid, and the military’s TRICARE program that stretched back to the late 1980s. Scott was forced out as CEO days after federal agents raided the company in July 1997, but he was never personally charged with a crime.²

What Columbia/HCA Was Accused of Doing

The fraud fell into a handful of overlapping schemes. Hospitals submitted false year-end cost reports to inflate their Medicare reimbursements, claiming non-reimbursable expenses like interest, depreciation, inflated property taxes, and even Kentucky Derby tickets.³ To hide the practice from auditors, the company kept dual accounting systems: a real set of “reserve cost reports” for internal use and a second set filed with the government.⁴

Columbia/HCA also paid doctors to send patients its way, offering free or below-market office rent, consulting fees, vacations, income guarantees, and equity stakes in local hospitals in violation of the federal anti-kickback statute.⁵ In El Paso alone, the referral scheme generated more than $103 million in Medicare business. Hospital staff exaggerated the severity of diagnoses on Medicare claims to trigger higher reimbursements, a practice known as upcoding. And the company billed for treatments that never happened, lab tests that were never ordered, home health services for ineligible patients, and marketing expenses disguised as “community education.”⁶

On July 16, 1997, federal agents from the FBI, HHS, the Defense Criminal Investigative Services, and the Postal Inspection Service executed about 35 search warrants at Columbia/HCA facilities in seven states.⁴ Twenty of those warrants were served in Florida.⁷

How the $1.7 Billion Breaks Down

The settlement came in two stages.

The 2000 Criminal and Civil Resolution

On December 14, 2000, HCA subsidiaries pleaded guilty and the company agreed to pay more than $840 million in combined criminal fines, civil penalties, and damages, including $95.3 million in criminal fines.⁶ Columbia Management Companies Inc. pleaded guilty to eight counts of making false statements on Medicare cost reports, drawing a $22.6 million fine, and to one count of conspiracy to pay physician kickbacks, drawing a $30 million fine.¹ Columbia Homecare Group Inc. pleaded guilty to conspiracy and anti-kickback violations in Florida, Georgia, and Texas. HCA also entered into an eight-year Corporate Integrity Agreement with the HHS Office of the Inspector General.

The 2003 Civil Settlement

On June 26, 2003, the DOJ closed the investigation with a second agreement. HCA paid an additional $631 million to resolve civil False Claims Act allegations from nine whistleblower lawsuits pending in the U.S. District Court for the District of Columbia, plus a separate $250 million payment to the Centers for Medicare and Medicaid Services to resolve cost-report overpayment claims and $17.5 million for state Medicaid losses.¹ Combined with the 2000 resolution, the total recovery reached roughly $1.7 billion — the largest healthcare fraud recovery in U.S. history at the time.

Scott’s Role and His Forced Resignation

Scott founded the Columbia Hospital Corporation in the late 1980s by buying two struggling hospitals in El Paso, Texas.⁸ After a 1994 merger with the Hospital Corporation of America, he ran Columbia/HCA as chairman and CEO. By 1996 the company controlled 340 hospitals, 135 outpatient surgery centers, and 200 home health agencies across 38 states.⁹

Within days of the July 1997 raids, the board forced Scott to resign. His last day was July 25, 1997.¹⁰⁵¹¹ The company agreed to cover his health insurance, office space, and legal fees unless he was found guilty of wrongdoing.

A 74-page document prepared by federal investigators cited confidential witnesses who said Scott and company president David Vandewater “were briefed routinely on issues relating to Medicare reimbursement claims that the government had charged were fraudulent.” A lawyer hired to review Columbia/HCA’s compliance program, Jerre Frazier, said the company lacked a dedicated compliance department during Scott’s tenure and that “I don’t think Rick Scott had given a thought about focusing on compliance.”⁵

Why Scott Was Never Charged, and the Fifth Amendment Deposition

No criminal charge against Scott personally ever came out of the investigation. Two mid-level executives were indicted by a federal grand jury for conspiring to overbill Medicare, and HCA subsidiaries — not Scott — pleaded guilty in 2000.⁷

On July 27, 2000, Scott invoked his Fifth Amendment right against self-incrimination 75 times during a deposition. The deposition itself was not part of the federal fraud case; it was taken in a civil breach-of-contract lawsuit brought by Nevada Communications Corp.¹² Scott’s attorney told him to assert the privilege because of the “pendency of a number of criminal investigations relating to Columbia around the country.” Most questions in the deposition concerned the contract dispute, though at least one touched on “Columbia’s improper billing practices.”¹³

The Whistleblowers Behind the Case

The case was driven by qui tam lawsuits filed under the False Claims Act, which lets private citizens sue on the government’s behalf and collect a share of any recovery. Relators in the HCA case ultimately shared $151.6 million, the largest whistleblower payout in history at the time.¹

The most consequential whistleblower was James Alderson, chief financial officer at North Valley Hospital in Whitefish, Montana. In 1990, he refused a directive from the hospital’s management company, Quorum Health Resources, to prepare two sets of cost reports, and he was fired.¹⁴ Alderson filed his qui tam suit in 1993 in a federal courthouse in Butte; it remained sealed until 1998 while the government investigated. He and fellow whistleblower John Schilling shared a $100 million award for exposing the cost-report fraud.¹

Dr. James Thompson, a physician in Corpus Christi, Texas, filed a separate suit in 1995 alleging that Columbia/HCA offered doctors equity stakes, below-market rent, consulting fees, and paid vacations to induce Medicare referrals.¹⁵ Thompson received $41.5 million, the largest individual whistleblower award in the case.¹

How the Settlement Has Followed Scott’s Political Career

Scott entered politics in 2010 and won the Florida governor’s race by 1.2 percentage points.¹⁶ The Columbia/HCA settlement has been an issue in every campaign since. In 2010, opponents spent tens of millions of dollars attacking him over it.¹⁷ In 2014, opponent Charlie Crist ran ads featuring whistleblower John Schilling, who said “fraud was in the DNA of Rick Scott’s company.”¹⁸ Pressed at a 2014 debate by CNN’s Jake Tapper on his claim of having “taken responsibility,” Scott responded: “I could have hired more auditors.”

The wealth Scott accumulated at Columbia/HCA has let him self-fund his campaigns to the tune of $106.5 million, including $20.6 million on his 2018 Senate run, which he won by about 10,000 votes out of 8.1 million cast.¹⁷¹⁶

His account of the case has shifted over time. In a 2010 ad, Scott acknowledged that “the company made mistakes” and said he had taken responsibility as CEO.¹⁹ He also said he had no personal knowledge of the fraudulent practices and that he refused to apologize for his success.¹⁷ By 2024, he was describing the investigation as political retaliation, telling Fox News: “I fought Hillarycare, and guess what happened when I fought Hillarycare? Justice came after me and attacked me and my company.”¹⁶ Scott won reelection to the Senate in November 2024 by 13 points over Democratic challenger Debbie Mucarsel-Powell.²⁰

1
U.S. Department of Justice. Largest Health Care Fraud Case in U.S. History Settled
2
Britannica. Rick Scott
3
Phillips & Cohen LLP. Record-Setting Medicare Fraud Settlement With HCA
4
The New York Times. Agents Search Columbia/HCA Offices in Several States
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Harbert College of Business, Auburn University. Columbia/HCA Healthcare
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U.S. Department of Justice. HCA to Pay $840 Million in Criminal Fines and Civil Damages and Penalties
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Los Angeles Times. Columbia/HCA Federal Investigation
8
Harbert College of Business, Auburn University. HCA and the Ethics of the Healthcare Industry
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New England Journal of Medicine. The Rise of Columbia/HCA
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Journal Record. Former Columbia/HCA Official Gains $9.9 Million in Severances
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Sun-Sentinel. Gov. Rick Scott Took Responsibility? No, He Took $300 Million
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PolitiFact. Rick Scott Took the 5th 75 Times
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FactCheck.org. Florida’s Medicare Fraud Flashback
14
Montana State University. Jim Alderson, a Whistleblower’s Odyssey
15
Justia. US Ex Rel. Thompson v. Columbia/HCA Healthcare
16
Florida Phoenix. Sen. Rick Scott Again Maintains That Clinton DOJ Went After Me
17
Politico. Democrats: Medicare Fraud Is Fungus Scott Will Never Get Rid Of
18
Miami Herald. Rick Scott and the Columbia/HCA Legacy
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The Telegraph. Rick Scott: Biggest Medical Fraud and the Senate
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Florida Phoenix. Rick Scott Wins Re-Election to the U.S. Senate