But he was cautioned year after year that the financial incentives Columbia/HCA offered doctors could run afoul of a federal anti-kickback law that seeks to limit conflicts of interest in Medicare and Medicaid.
The warnings were contained in the company's annual public reports to stockholders that Scott, now the Republican candidate for Florida governor, signed as Columbia/HCA's president and chief executive officer.
The reports said the company believed it was complying with the spirit of the law. But as far back as 1994 -- three years before the FBI began scrutinizing the company -- Columbia/HCA acknowledged that it might not be following the letter of complex healthcare rules.
``Certain of the Company's current arrangements with physicians . . . risk scrutiny'' from investigators and ``may be subject to enforcement action,'' the 1994 report said -- a precaution echoed over the years in documents filed with the Securities and Exchange Commission.
Scott today says he doesn't remember the reports he signed, but that the warning language sounded like ``boilerplate, written by SEC lawyers just to cover all bases.'' Indeed, the precautions mirrored those issued by some other healthcare companies.
Before Columbia merged with Hospital Corporation of America (HCA), Columbia executives were warned as early as May 1988 that the payments to doctors may be illegal, according to a 2001 Justice Department lawsuit against Columbia/HCA.
When the corporate brass asked for a legal opinion, a lawyer said the payments could violate anti-kickback laws, according to the DOJ lawsuit.
``HCA executives, however, ignored counsel's advice and structured the transaction exactly as the lawyer warned them not to do,'' the suit says.
NEVER CHARGED
Asked about that warning this past week, Scott said: ``I don't know what the document said. I'm sure they used boilerplate that said something about they used all their efforts to comply with all the laws.''
Scott signed his last SEC report as a hospital executive on March 27, 1997 -- eight days after the FBI raided two El Paso, Texas, hospitals in what became the largest Medicare fraud case in U.S. history, spanning six states during a seven-year criminal probe. Scott resigned from Columbia/HCA four months later and he was never charged with a crime.
In the end, Columbia/HCA paid a record $1.7 billion in fines and pleaded guilty to 14 felony charges for a variety of transgressions. About $30 million in fines stemmed from illegal payments to doctors, a practice federal investigators traced back to El Paso, where Scott and a partner began Columbia in 1987 with the purchase of two distressed hospitals.
The payments in question -- alleged sham loans and stock deals -- are largely forbidden by federal anti-kickback laws, because the financial incentives can tempt doctors to refer Medicare patients to their own hospitals and labs. That can potentially stick taxpayers with bills for unnecessary treatment.
RAPID GROWTH
As part of its business strategy, Columbia offered ownership shares and other inducements to local doctors, hoping physicians would in turn send more patients to Columbia hospitals. This became one of Columbia's hallmarks, helping the company grow rapidly and ultimately take over the larger HCA in 1994.
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