Columbia/HCA was at the height of its reign in 1997 as America's leading provider of health care, owning and operating over 300 hospitals and healthcare facilities in the US and abroad. Columbia/HCA prevailed as the nation's ninth largest employer, with over 285,000 employees, and CEO Rick Scott had been named one of Time Magazine's 25 Most Influential People in America.

A lot can change in two years.

Today, Columbia/HCA remains the nation's largest hospital company, with revenues around $15 billion and 184,000 employees, but the company's image- and the national health care system- will never be the same. Nor will they forget the name of James Alderson, a small-town accountant employed by one of Columbia/HCA's hospitals in Montana. In 1989, while compiling the hospital's accounts for reimbursement from Medicare, Alderson was asked to create an altered version of the accounts. Refusing on ethical grounds, he was fired. Stunned, Alderson filed a wrongful termination suit against the hospital, an action that would eventually uncover one of the largest cases of fraud in health care history.

Climbing the corporate ladder

Columbia Hospital Corp. was founded in 1987 when lawyer Richard L. Scott and financier Richard Rainwater bought two hospitals in El Paso for $60 million. Implementing their business backgrounds, the partners sold 40% of the hospitals to local doctors in the hopes that ownership would inspire productivity. The "for-profit" model worked well for Columbia, and by 1990 the partners had purchased 11 more hospitals and taken the company public. Columbia grew as its ambitious partners bought more hospitals, acquiring another 73 in a merger with Galen Health Care in 1993. The following year, Columbia bought the Hospital Corporation of America (HCA) for $5.9 billion, adding 376 more hospitals to their rapidly expanding group. Led by Thomas Frist Jr., HCA was a successful hospital company that went public in 1992, but recent losses had made it an easy target for takeover.

The newly merged Columbia/HCA seemed unstoppable. In 1994 the corporation acquired Medical Care America, the country's largest operator of outpatient surgical centers. Next came the takeover of Health Trust, a $3.6 billion deal that gave Columbia/ HCA 117 more hospitals in the largest hospital merger in US history. A staggering 150 successive acquisitions followed in 1996, the same year that Columbia fell short of buying the insurer Blue Cross. While the loss of the Blue Cross deal was disappointing, it would soon prove a minor blow to Columbia/HCA, when in 1997 the FBI began a full-blown criminal investigation of the company.

Florida, fraud & the FBI

James Alderson's belief that he was wrongfully terminated led him to seek out Stephen Meagher, a former Federal prosecutor who specialized in false claim suits. Meagher took the case in 1995, after hearing about the hospital's scheme to cheat Medicare: several hospital executives would submit an inflated cost report, file a more conservative version, and pocket the difference in reimbursed income. Meagher moved the case to Florida, where the elderly population is traditionally sympathetic towards Medicare. By October 1998 the US government had officially joined the case as prosecutors, the FBI was investigating, and one third of Columbia's 308 hospitals were accused of filing false claims. Columbia's stock fell more than 40%, and CEO Rick Scott was fired, to be replaced by Thomas Frist Jr. Four executives were indicted on criminal fraud charges in January 1999, and in July 1999 a judge handed down two convictions, one aquittal, and a mixed verdict. Finally, in May 2000, Columbia/HCA agreed to pay the government a settlement fee of $745 million in attempt to end their three-year battle.

A brighter future and a new name