Rick Scott Scandal: Columbia/HCA Fraud and the $1.7B Settlement

The Rick Scott Columbia/HCA scandal refers to the federal healthcare fraud case against the hospital company Scott built and ran as chairman and CEO. Columbia/HCA Healthcare Corporation eventually pleaded guilty to 14 corporate felonies and paid roughly $1.7 billion to settle criminal and civil claims that it had systematically defrauded Medicare, Medicaid, TRICARE, and the Federal Employees’ Health Benefits Program — the largest healthcare fraud recovery the U.S. government had ever obtained at the time.¹ Scott resigned nine days after FBI agents raided the company in July 1997. He was never personally charged with a crime and has said he did not know about the fraud.²

How Scott Built the Company

Richard L. Scott, a lawyer who specialized in hospital mergers, founded Columbia Hospital Corporation in 1987 by buying two struggling hospitals in El Paso, Texas.³ He then acquired hospitals at a pace that sometimes approached one a week.⁴ Columbia went from 12 hospitals in 1991 to absorbing Basic American Medical’s 8 hospitals in 1992, Galen Health Care’s 71 hospitals in 1993, and finally merging in 1994 with the Hospital Corporation of America to create Columbia/HCA, with Scott as chairman and CEO.⁵

By 1996 the company owned roughly 340 hospitals, 135 outpatient surgery centers, and 200 home health agencies in 38 states, and was the tenth-largest employer in the United States, with about $20 billion in assets and profits approaching $1 billion. Hospital chief executives had to hit a 20 percent gross return on revenues; those who missed were summoned to Nashville headquarters to explain themselves.⁵

A core part of the model was inviting doctors to buy ownership stakes in local hospital ventures, a practice regulators warned could violate the federal anti-kickback statute prohibiting payments to physicians in exchange for patient referrals.⁴ The company also offered doctors reduced or free rent, consulting fees, vacations, and low-cost pharmaceuticals to drive referrals. During Scott’s tenure the company had no formal compliance department. Attorney Jerre Frazier, who worked with the company, later said, “I don’t think Rick Scott had given a thought about focusing on compliance.”³

What the Fraud Involved

Federal investigators concluded Columbia/HCA had defrauded Medicare, Medicaid, TRICARE, and the federal employee health program through schemes stretching back to the late 1980s.¹

The most systematic piece involved the annual Medicare cost reports hospitals file to reconcile government payments. Whistleblowers described “two sets of books”: an internal, confidential cost report used by management and a separate version filed with regulators, with staff explicitly told to keep the internal records away from Medicare auditors. The company passed more than $100 million in non-allowable corporate reorganization costs to Medicare through those reports, and even billed personal expenses such as Kentucky Derby tickets as reimbursable costs.⁶

Prosecutors also documented:

Upcoding of patient records with false diagnoses to increase reimbursement, including a scheme built around fraudulent pneumonia diagnoses.⁷
Illegal payments to physicians through free rent, office refurbishments, consulting jobs, and partnership investments in exchange for referrals.⁸
Billing for laboratory tests that were medically unnecessary or never ordered by a physician, and for home health visits that were never performed.⁷
Marketing and advertising costs disguised as “community education,” and home health agency acquisition costs buried inside inflated management fees paid to third parties.⁷

Much of what investigators learned came from whistleblowers who filed nine False Claims Act suits and collectively received a record $151.6 million in awards.¹ John Schilling, a former Columbia reimbursement supervisor in west Florida, wore a wire for the FBI from 1996 through 2003 and provided information that helped support search warrants at 36 Columbia/HCA locations. Schilling has publicly said “fraud was in the DNA of Rick Scott’s company from the very beginning,” but also acknowledged he had no firsthand knowledge of Scott’s direct involvement and had only met him once or twice.⁹

The 1997 FBI Raids and Scott’s Resignation

The investigation became public on July 16, 1997, when FBI agents and other federal authorities searched roughly 35 Columbia/HCA hospitals and offices across seven states in one of the largest healthcare fraud raids ever conducted.¹⁰ In Florida alone, agents searched 20 facilities. Prosecutors said the seized documents revealed a “systemic corporate scheme” to defraud Medicare, with evidence of $800,000 in fictitious expenses traced to the Nashville headquarters.¹¹

Nine days later, on July 25, 1997, Scott resigned as chairman and CEO under pressure from the board.¹² Scott has said he left because the board wanted to settle with the government while he wanted to fight. His exit package included $5.1 million in cash severance, roughly $300 million in stock and options, and a consulting contract worth up to $950,000 per year for five years.¹³

Thomas Frist Jr., whose family had co-founded the original Hospital Corporation of America, replaced Scott and reversed course. He hired outside law firms to review company practices, pledged cooperation with federal authorities, and announced Columbia/HCA would stop selling ownership stakes to physicians and unwind existing partnerships. Frist told reporters it was “time for a different style.”¹⁴

Was Rick Scott Ever Charged?

Scott was never personally charged with any crime in connection with the Columbia/HCA fraud.² He has said he did not know about the fraudulent activity and would have stopped it if he had. During a 2014 gubernatorial debate, moderator Jake Tapper pressed him on what he was taking responsibility for. Scott replied, “I could have hired more auditors.”¹⁵

The piece of his personal conduct that opponents have used most aggressively is a July 27, 2000, deposition. In a civil suit brought by Nevada Communications Corp. alleging Columbia/HCA had breached a communications contract, Scott invoked his Fifth Amendment right against self-incrimination 75 times, declining to answer nearly every question, including basic ones about his employment history. His attorney, Steven Steinbach, described the strategy as a precaution given “the pendency of a number of criminal investigations relating to Columbia around the country.”¹⁶ The deposition itself was not part of the Medicare fraud case, and only one question during the entire proceeding touched on improper billing. Fact-checkers have called political ads that link the 75 invocations directly to Medicare fraud misleading on that ground.²

The $1.7 Billion Settlement and Guilty Pleas

The legal consequences for the company came in two waves. In December 2000, two subsidiaries — Columbia Homecare Group Inc. and Columbia Management Companies Inc. — pleaded guilty to felony charges across multiple federal districts. The charges included conspiracy to defraud the United States, violating the Medicare anti-kickback statute, fraudulent upcoding of pneumonia diagnoses, and making false statements on cost reports. Criminal fines totaled more than $95 million.⁷ In the same round, HCA agreed to pay about $745 million to resolve civil fraud claims.¹⁷

In 2003, HCA agreed to pay another $631 million in civil penalties and damages to resolve remaining False Claims Act allegations tied to cost-report fraud and physician kickbacks, plus $250 million in a separate administrative agreement with the Centers for Medicare and Medicaid Services. Combined, the recoveries exceeded $1.7 billion, which the Department of Justice called “the largest recovery ever reached by the government in a health care fraud investigation.”¹ In all, the company pleaded guilty to 14 corporate felonies.¹⁸

HCA also signed an eight-year Corporate Integrity Agreement with the Department of Health and Human Services, subjecting it to audits, compliance training, and oversight of coding, billing, and physician financial relationships through 2009.⁷ The company later created a Senior Vice President of Ethics, Compliance, and Corporate Responsibility, designated more than 500 facility-level compliance officers, and adopted a code of conduct and ethics hotline.³

The Scandal in Scott’s Political Career

When Scott ran for governor of Florida in 2010 as a wealthy political outsider, the fraud settlement became an immediate issue. His Republican primary opponent, Bill McCollum, and his Democratic general election opponent, Alex Sink, both attacked him over it.² Scott responded with television ads acknowledging wrongdoing at the company. “There’s no question that mistakes were made and as CEO, I have to accept responsibility for those mistakes,” he said. “I could have had more internal and external controls.”¹⁶ He won both the primary and the general election.

Democrats and their allies spent tens of millions of dollars attacking Scott over the fraud in the 2010 and 2014 gubernatorial races. Scott won both, but never received 49 percent or more of the vote in either general election.¹⁸

By the time Scott ran for U.S. Senate in 2018 against incumbent Bill Nelson, Democratic pollster John Anzalone described the scandal as “a fungus he’ll never get rid of,” telling Politico that focus groups showed voters treated it as a “character thing.” Scott’s tone shifted. “I refuse to apologize for my success,” he said.¹⁸ He won the seat by just over 10,000 votes out of more than 8.1 million cast.¹⁵

In his 2024 reelection race against Democrat Debbie Mucarsel-Powell, Scott recast the investigation as political retaliation. At a press conference outside Donald Trump’s Manhattan trial in May 2024, he called the Columbia/HCA case “political persecution” and tied it to his opposition to the Clinton healthcare reform proposal in the 1990s: “I fought Hillarycare, and guess what happened when I fought Hillarycare? Justice came after me and attacked me and my company.”¹⁹ Scott won reelection with 55.6 percent of the vote to Mucarsel-Powell’s 42.8 percent.²⁰

1
U.S. Department of Justice. Largest Health Care Fraud Case in U.S. History Settled
2
FactCheck.org. Florida’s Medicare Fraud Flashback
3
Harbert Center for Ethical Organizational Cultures. HCA and the Healthcare Industry
4
Health Affairs. The Rise and Fall of Columbia/HCA
5
New England Journal of Medicine. The Rise of Columbia/HCA
6
Phillips & Cohen. Record-Setting Medicare Fraud Settlement With HCA
7
U.S. Department of Justice. HCA Subsidiaries Plea Agreements
8
PMC/BMJ. HCA Plea Agreement
9
Tampa Bay Times. HCA Whistleblower Revives Claim That Scott Knew of Fraud
10
Washington Post. Massive Fraud Investigation Centers on Columbia/HCA
11
Los Angeles Times. Columbia/HCA Federal Investigation
12
New York Times. Two Leaders Are Out at Health Giant as Inquiry Goes On
13
Colodny Fass. Rick Scott and His Role in Columbia HCA Scandal
14
New York Times. Columbia/HCA Leadership Transition
15
Florida Phoenix. Sen. Rick Scott Again Maintains Clinton DOJ Went After Him
16
PolitiFact. Crist Says Scott Pleaded the Fifth 75 Times
17
U.S. Department of Justice. HCA Civil Settlement
18
Politico. Democrats Say Medicare Fraud Is Fungus Scott Will Never Get Rid Of
19
Miami Herald. Rick Scott Columbia/HCA Fraud
20
Washington Post. Florida Senate Election Results