Saturday, October 25th, 2014
Mostly True
Priorities USA Action
Says Mitt Romney "was director of a company that stole millions from Medicare."

Priorities USA Action on Wednesday, October 31st, 2012 in a campaign ad

Mitt Romney and Rick Scott both have Medicare fraud in their background, super PAC ad claims

The super PAC Priorities USA Action ran this ad in Florida during the final week of the campaign.

The super PAC supporting President Barack Obama made a final pitch to Florida voters before Election Day: a TV ad comparing Republican nominee Mitt Romney and Gov. Rick Scott.

Showing a picture of the two men locked in a handshake, the ad urges viewers to "connect the dots."

"Scott ran a company that paid a record fine for committing Medicare fraud, then as governor Scott cut millions from health care," a narrator says. "Romney was director of a company that stole millions from Medicare. Now Romney’s plan would end Medicare as we know it.

"We’ve seen this picture before. Just connect the dots: If Mitt Romney wins, the middle class loses."

PolitiFact has investigated claims against both Scott and Romney about Medicare fraud during their business careers. Here’s a look at what we found.

‘Scott ran a company that paid a record fine for committing Medicare fraud’

In the spring of 1987, Scott purchased two Texas hospitals to start a company first known as Columbia. He quickly grew the company by purchasing more hospitals to create a large and profitable network.

In 1994, Columbia purchased Tennessee-headquartered HCA and its 100 hospitals, and merged the companies. Columbia/HCA grew to more than 340 hospitals, 135 surgery centers and 550 home health locations, employing more than 285,000 people.

Scott resigned as chief executive officer in 1997, the year that federal agents went public with an investigation into the company, first seizing records from four El Paso-area hospitals and then expanding across the country.

In time, it became apparent that the investigation focused on whether Columbia/HCA bilked Medicare and Medicaid for tests that were not necessary or ordered by physicians, and for attaching false diagnosis codes to patient records to increase reimbursement to the hospitals.

Scott resigned as CEO in July, less than four months after the inquiry became public. Company executives said that if Scott had remained CEO, the entire chain could have been in jeopardy. At issue, Scott said, was that he wanted to fight the federal government accusations. The corporate board of the publicly traded company wanted to settle.

And settle Columbia/HCA did.

In December 2000, the U.S. Justice Department announced what it called the largest government fraud settlement in U.S. history when Columbia/HCA agreed to pay $840 million in criminal fines and civil damages and penalties. Among the revelations from the 2000 settlement, which all apply to when Scott was CEO, were that Columbia overbilled Medicare for unnecessary tests and false diagnosis codes.

The government settled a second series of similar claims with Columbia/HCA in 2002 for an additional $881 million. The total fine: $1.7 billion.

As part of the 2000 settlement, Columbia/HCA agreed to plead guilty to at least 14 corporate felonies. A corporate felony comes with financial penalties but not jail time, since a corporation can’t be sent to prison. Scott himself was never indicted.

‘Romney was director of a company that stole millions from Medicare’

Romney’s record at Bain Capital, the private equity firm he founded, came up frequently during the Republican primary. This claim refers to Bain’s history with a company charged with Medicare fraud in the 1990s.
   
The Boston media investigated the facts of the case when Romney ran for governor in 2002. It’s also addressed in The Real Romney, a biography by reporters with the Boston Globe.
   
The story begins in 1989, when Romney was the head of Bain Capital, which specialized in buying troubled companies, turning them around, and then selling them for a profit. That year, Bain invested in Damon Corp., a medical testing company based in Needham, Mass.
   
Bain took the company public in 1991, and Romney served on the company’s board of directors. In 1993, Bain orchestrated a sale of the company to Corning Inc., getting a handsome return on its investment and earning Romney himself $473,000, according to The Real Romney. After the sale, Corning closed the main facility in Needham, laying off 115 people.
   
In October 1996, federal prosecutors announced that Damon was agreeing to pay $119 million in both civil and criminal fines after pleading guilty to defrauding Medicare. The company was providing doctors with forms that didn’t make clear what tests included, so doctors were checking off additional tests that weren’t necessary, according to the Globe’s summary of the government’s case.
   
The overbilling went from 1988 through 1993, prosecutors said. "This is a case, pure and simple, of corporate greed run amok," U.S. Attorney Donald Stern said when the settlement was announced.

Romney was never implicated in the case. He claimed that he helped uncover the fraud, but Globe reporting put that claim into question. The Globe reported that court records showed fraudulent activity occurred under Bain’s watch, and that prosecutors gave the credit to Corning for stopping the fraud.

The Romney campaign, though, pointed us to Globe stories noting that Bain officials began investigating the billing practices when a competitor lab pleaded guilty to the same type of fraud. The campaign also emphasized that Bain was never a majority owner in Damon -- its ownership share peaked at 8 percent and was just 2.8 percent went the company sold to Corning.

Are Romney and Scott’s cases similar?

By telling viewers to "connect the dots" between Romney and Scott, the Priorities ad implies that the Medicare fraud cases in their pasts are parallel. But in some important ways, the cases are different.

Scott was the top boss at Columbia/HCA during the years prosecutors found fraudulent activity, and his role as the face of the company is undisputed.

Romney’s position at Damon Corp. is a different story. As a member of the board of directors, Romney had a part in overseeing the company’s general direction. That’s not like being the CEO, who directs day-to-day activities.

The ad muddies that fact -- and it’s misleading to say Romney served as "director" of Damon Corp., not "a director."

Also, Columbia/HCA faced much larger fines and penalties than Damon did -- $1.7 billion versus $119 million.

Our ruling

The Priorities ad says Romney "was director of a company that stole millions from Medicare," comparing him with Scott.

Scott’s hospital company, Columbia/HCA, pleaded guilty to criminal charges and paid a total of $1.7 billion in fines related to Medicare fraud. Even though Scott had resigned by the time the case settled, prosecutors said the widespread fraud occurred while he was at the helm.

But the fraud case at Damon Corp. doesn’t point straight to Romney. His firm bought the company that was later found guilty of fraud, but Romney was not running the show while crimes were being committed.

The statement is accurate but needs additional information. That fits our definition of Mostly True.