Rick Scott’s HCA Fraud Settlement: $1.7 Billion in Three Parts

Rick Scott was chairman and CEO of Columbia/HCA Healthcare Corporation when the company committed the Medicare and Medicaid fraud that produced the largest healthcare fraud settlement in U.S. history at the time. The Rick Scott HCA fraud settlement ultimately totaled roughly $1.7 billion in criminal fines, civil penalties, and administrative payments, resolved in stages between 2000 and 2003. Scott was forced out as CEO in July 1997, nine days after federal agents raided about 35 company facilities. He was never personally charged with a crime and was never officially questioned as part of the criminal investigation.¹

Scott’s Position at Columbia/HCA

Scott founded Columbia Hospital Corporation in 1987. A 1994 merger with the Hospital Corporation of America produced Columbia/HCA Healthcare Corporation, the largest for-profit hospital chain in the country, with Scott as chairman and CEO overseeing hundreds of hospitals nationwide.

A lawyer later brought in to review compliance at the company, Jerre Frazier, said Columbia/HCA had no compliance department at all during Scott’s tenure. “I don’t think Rick Scott had given a thought about focusing on compliance,” Frazier said.²

What the Company Did

Federal investigators described the conduct as a “systematic effort to defraud government healthcare programs.”² The schemes fell into three main categories.

The first was upcoding: exaggerating patient diagnoses on Medicare claims to trigger higher reimbursement. Columbia/HCA admitted inflating the seriousness of conditions, particularly pneumonia diagnoses, to collect larger payments.³⁴

The second was cost-report fraud. Hospitals padded the annual expense reports they filed with Medicare, including costs that were not reimbursable, disguising advertising as patient-related “community education,” claiming inflated property taxes, and shifting expenses from flat-rate departments to departments reimbursed on cost. Confidential witnesses told investigators the company kept two sets of accounting books: one submitted to Medicare and a second, secret ledger tracking money set aside to repay the government if auditors caught the discrepancies.⁵⁶

The third was physician kickbacks. Columbia/HCA gave doctors below-market rent, free office refurbishments, paid consulting contracts, free vacations, discounted pharmaceuticals, and partnership stakes in company hospitals in exchange for patient referrals. Those arrangements violated the Medicare Anti-kickback Statute and the Stark laws, which bar physician self-referrals where a financial relationship exists.³⁴

The federal case was built on qui tam lawsuits filed by whistleblowers under the False Claims Act. James Alderson, a former chief financial officer at North Valley Hospital in Whitefish, Montana, filed the earliest of them in January 1993 after being fired for refusing to prepare two sets of cost reports. Nine qui tam suits were ultimately resolved in the settlement.⁷

The Raids and Scott’s Departure

The FBI began investigating Columbia/HCA in El Paso, Texas, in March 1997.⁵ The investigation widened dramatically on July 16, 1997, when federal agents executed search warrants at roughly 35 Columbia/HCA hospitals and business facilities across Florida, Texas, Tennessee, North Carolina, Utah, and Oklahoma. Agents also raided the Florida offices of Olsten Health Management, which managed 150 healthcare agencies for the company.⁸ The Washington Post called it “one of the largest health care fraud investigations ever.”⁹

Nine days after the July raids, the board of directors forced Scott to resign as chairman and CEO.¹⁰²¹¹ Scott later said he resigned because he believed the company should contest the charges while the board preferred to settle.

How the $1.7 Billion Breaks Down

The recovery came in three main pieces over roughly three years.

The 2000 Settlement: $840 Million

In December 2000, the company agreed to pay more than $840 million in combined criminal fines and civil penalties. Of that, $95.3 million represented criminal fines tied to guilty pleas by two subsidiaries, Columbia Homecare Group Inc. and Columbia Management Companies Inc.⁶ The pleas were entered in five federal court districts across Florida, Texas, Georgia, and Tennessee.¹² The remaining $745 million covered civil claims, including more than $403 million for upcoding, over $106 million for home health billing fraud, $90 million for hidden management fees at home health agencies, $50 million for disguising advertising as reimbursable community education, and over $95 million for unnecessary outpatient lab billing.

The 2003 Settlement: $631 Million

In June 2003, HCA agreed to pay an additional $631 million in civil penalties and damages to resolve the remaining allegations. The largest portions were $356 million for cost-report fraud and $225.5 million for claims generated through physician kickbacks. Smaller allocations covered wound-care billing, improper patient-transfer charges, inflated indigent-care costs, and home-office cost-shifting.⁷¹³

Administrative Settlement: $250 Million

A separate administrative agreement required HCA to pay $250 million to the Centers for Medicare and Medicaid Services to resolve overpayment claims and a backlog of unprocessed cost reports dating back to 1997.⁷

The whistleblowers who brought the qui tam lawsuits received a combined $151.6 million, the largest qui tam payout in history at the time. Alderson and John Schilling, a former HCA accountant, shared $100 million. Dr. James Thompson, a physician in Corpus Christi, Texas, received $41.5 million.⁷

Why Scott Was Never Charged

Columbia/HCA’s subsidiaries pleaded guilty to 14 felonies, but no senior executive was ever charged. The only individuals indicted were three mid-level managers tied to the company’s Florida operations: Robert Whiteside, a reimbursement director; Michael Neeb, chief financial officer for North Florida operations; and Jay Jarrell, CEO of Southwest Florida operations. They faced conspiracy, false-statement, and Medicare fraud charges over overstated expenses at Fawcett Memorial Hospital in Port Charlotte, Florida, with maximum exposure of 25 years in prison each.⁸

Federal investigators produced a 74-page document citing confidential witnesses who said Scott and company president David Vandewater were “briefed routinely on issues relating to Medicare reimbursement claims” that the government considered fraudulent.² Prosecutors never brought charges against either executive. Scott was never officially questioned in the criminal investigation.¹

The 75 Times Scott Took the Fifth

Scott invoked the Fifth Amendment 75 times during a July 2000 deposition, but the context is often misstated. That deposition was part of a civil breach-of-contract lawsuit brought by Nevada Communications Corp. against Columbia/HCA, not the federal fraud investigation. Scott’s attorney, Steven Steinbach, advised him to assert the privilege because of the “pendency of a number of criminal investigations relating to Columbia around the country.” Scott declined to answer even basic questions, such as whether he was employed, repeating a standard invocation.¹⁴¹

How Scott Has Explained It Since

Scott entered Florida politics in 2010, largely self-funding his campaign with the personal fortune he built at Columbia/HCA. He is currently the wealthiest member of the U.S. Senate.¹⁵ His account of the fraud case has shifted over the years.

In 2010 campaign ads, Scott said, “I was in charge and even questioned by authorities. But that’s not what matters. What matters is that the company made mistakes and as CEO I take responsibility and learn from it.”¹⁵ During a 2014 CNN debate, moderator Jake Tapper pressed him on what he was taking responsibility for. Scott replied, “I could have hired more auditors.”¹⁶ Whistleblower John Schilling, at a 2014 press conference, said there was “no doubt in my mind that Rick Scott was the leader of a criminal enterprise.”

More recently, Scott has framed the investigation as political retaliation. At a May 2024 appearance outside the Manhattan courthouse during Donald Trump’s hush-money trial, Scott drew a parallel between Trump’s prosecution and the federal case against his company. “I fought Hillarycare, and guess what happened when I fought Hillarycare? Justice came after me and attacked me and my company,” Scott said on Fox & Friends.¹⁷ The Miami Herald noted that this “political persecution” framing marks a shift from his earlier willingness to acknowledge mistakes.¹⁵

The case has not stopped Scott from winning elections. He won his 2010 and 2014 governor’s races by roughly one percentage point each, took a U.S. Senate seat in 2018, and was reelected in November 2024 by 13 points over Democrat Debbie Mucarsel-Powell — his most comfortable margin.¹⁸¹⁹

1
PolitiFact. Rick Scott Took the Fifth 75 Times
2
University of New Mexico. HCA and the Ethics of the Health Care Industry
3
U.S. Department of Justice. United States Files Suit in HCA Healthcare Fraud Case
4
National Center for Biotechnology Information. US Healthcare Company Agrees to Pay $840m for Fraud
5
Harbert College of Business, Auburn University. HCA: Learning From a Crisis
6
U.S. Department of Justice. Largest Health Care Fraud Case in US History Settled
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U.S. Department of Justice. Largest Health Care Fraud Case in US History Settled
8
Clinician.com. Columbia/HCA Problems Should Be a Warning
9
The Washington Post. Massive Fraud Investigation Centers on Columbia/HCA
10
The New York Times. Two Leaders Are Out at Health Giant as Inquiry Goes On
11
Sun-Sentinel. Gov. Rick Scott Took Responsibility? No, He Took $300 Million
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The New York Times. HCA to Pay $95 Million in Fraud Case
13
U.S. Department of Justice. HCA Inc. Settlement Agreement
14
FactCheck.org. Florida’s Medicare Fraud Flashback
15
Miami Herald. Rick Scott and the Medicare Fraud Case
16
Florida Phoenix. Sen. Rick Scott Again Maintains That Clinton DOJ Went After Me
17
New York Magazine. Rick Scott Tries to Copy Trump’s Claims of Persecution
18
Politico. Democrats: Medicare Fraud Is Fungus Scott Will Never Get Rid Of
19
Florida Phoenix. Rick Scott Wins Re-election to the US Senate