KPMG Settles Medicare Reimbursement Fraud Case for $9 Million

The accounting firm KPMG yesterday agreed to pay $9 million to settle a Justice Department lawsuit charging the firm with helping hospitals in Florida and Kentucky to defraud Medicare with "bogus expense claims," the New York Times reports. The suit alleged that KPMG submitted false Medicare claims between 1990 and 1993 on behalf of Basic American Medical and the Columbia Hospital Corporation, two "predecessor" firms to the for-profit hospital chain HCA-The Healthcare Company (Eichenwald, New York Times, 10/24). Former HCA reimbursement manager John Schilling filed the "whistle-blower" suit in Tampa, charging that KPMG "aided and abetted" HCA in "systematically defraud[ing] the United States" of millions of dollars. According to the lawsuit, unsealed in May 1999, KPMG helped HCA keep a second set of records, known as reserve reports, which included "many exaggerated and unallowable (reimbursement) claims." The lawsuit also alleged that KPMG "participated in a conspiracy to hide the errors that inflated reimbursements." The Justice Department claimed that the reserve reports were intended to "set aside" money to repay the government if unallowable costs were uncovered (Kaiser Daily Health Policy Report, 12/1/00). Robert McCallum, Jr., assistant attorney general in charge of the civil division, said, "This settlement demonstrates the United States' commitment to protecting federal funds from fraud and abuse and to holding accountable not only those who receive ill-gotten gains, but also those who facilitate the submission of false claims." KPMG, however, said it "had done nothing wrong." Company spokeperson George Ledwith said, "We have agreed to settle in order to avoid the cost of litigation and to put this decade-old matter behind us. We vigorously deny that we engaged in any wrongdoing" (New York Times, 10/24).