After eight years, an insider gets his reward

Thanks to whistleblower's efforts, US government reaps largest single cash award under False Claims Act

One of the hardest things for James Alderson to bear has been the isolation.

For five years, only a few people outside his family could know what he was up to - a situation that led Mr. Alderson and his wife, Connie, to gradually withdraw from social contact with neighbors. A gregarious woman who liked to host parties around the backyard barbecue, Mrs. Alderson grew hesitant even to borrow a cup of sugar, lest she be asked about their lives.

There was professional isolation, too - an increasing awareness that Alderson was being blackballed in his field, despite years of experience as an accountant and fiscal officer in healthcare administration. And there was financial hardship, as Alderson drained the family's savings to pay for his covert investigation.

Yet this father of two persevered, determined to show that two of the largest medical companies in the US had overbilled the federal government billions of dollars. Now it appears he is getting some vindication - and part of his life back.

Eight years after he initiated one of the largest whistleblower cases in US history, Alderson recently collected $12 million from the US government - a reward for his role in a case against the Quorum Health Group.

Many say it establishes him as the Erin Brockovich of the healthcare system, leaving him a hero in the eyes of citizens but the bane of his industry. Far more reward money is expected to be coming from a pending settlement with Hospital Corp. of America.

"I won't deny that money provided an incentive, but it was only part of the motivation," Alderson said during a recent visit to his hometown of Bozeman, where he was visiting his sister at the modest home he bought her with his new-found wealth. "This case would never have begun, had I not truly believed that they were wrong and I was right."

The two companies deny any wrongdoing.

Cash recoveries

Alderson's resolve is yielding the biggest single cash recovery ever for the US government - more than $800 million - under the False Claims Act. Under the law, individuals are permitted, even encouraged, to sue companies they believe are defrauding the government. More than 3,300 whistleblower suits have been filed since then, netting $4.2 billion in recovered money for the government.

In recent years, healthcare has replaced defense contracting as the industry most ripe for investigation. Last year, Donna Shalala, then secretary of Health and Human Services, announced that between 1996 and 1999, Medicare fraud dropped from an estimated $23 billion to $12 billion - a decline she attributed largely to a nationwide crackdown. What she didn't state was that the government's success in ferreting out fraud can be attributed in part to the toil of whistleblowers like Alderson.

Alderson's story began in 1990 at tiny North Valley Hospital in Whitefish, Mont. He'd had a 17-year association with the hospital and was its chief financial officer when Quorum, formerly a division of HCA, took over its management. Soon after, Alderson says, he discovered that Quorum was using a secret accounting method devised by HCA.

The companies kept two sets of records for reporting healthcare costs for Medicare patients - one an inflated ledger that was sent to the federal government for reimbursement, and another that detailed actual costs of hospital operations, according to the government's complaint.

The difference between the two at North Valley Hospital and hundreds of other healthcare facilities across the country has been estimated to be $1 billion or more, the government says.

Abruptly fired nine days after questioning these accounting methods, Alderson eventually brought a whistleblower lawsuit against Quorum and HCA. Quorum says it gave Alderson his pink slip for performance reasons. "When I first filed suit in 1993, I approached this with expectations that it would be a sprint to the finish line," says Alderson. "Instead, it turned into an exhausting marathon."

Before the US government would join the suit, federal lawyers said they needed evidence that the practices Alderson uncovered at North Valley were widespread. It fell largely to him to build the case, a task that consumed his time and his money.

Moreover, he couldn't explain to friends and neighbors what he was doing. Under the law, when cases are filed under seal, would-be whistleblowers cannot talk about the case until the Justice Department decides to intervene.

There aren't a lot of hospital-finance jobs in Whitefish, and the Aldersons left town, a few months after his 1990 firing, in search of work. Over five years, the family moved 11 times as Alderson tried to balance earning a paycheck with gathering evidence.

Wherever they went, the Aldersons tried to keep a low profile. Connie compares this time with being in the witness-protection program: "The only difference is that we weren't receiving any protection or money to keep us going."

Alderson's anonymity ended abruptly in 1998, when the US government, in deciding to join his lawsuit, made his case public and "60 Minutes" profiled him.

Slammed doors

Even now, though, he is a pariah in the healthcare industry. He says he recently sailed through interviews for a consultant's job for a large hospital in the Northwest, only to be rejected when an administrator, at the last minute, learned who he was.

"The gentleman just started in on me, telling me what a terrible person I was, saying I had given hospitals and the entire healthcare industry a black eye," Alderson says. "He ... made it clear I wasn't going to get the job that basically had been offered to me."

The government and Alderson got a major break in 1996, when another insider, John Schilling, told the FBI that his employer, Columbia-HCA, had falsified billing records in Florida. Raids on HCA facilities yielded 14,000 boxes of papers that helped federal prosecutors prevail in court, says Alderson attorney, Stephen Meagher.

Outcome of an odyssey

So far, more than $800 million in penalties has been meted out, mid-level executives have been sent to jail, and the industry has amended the way it reports healthcare costs, government officials say. HCA implemented a new cost reporting system that is being promoted as a model.

After Alderson and Mr. Schilling stepped forward, another two-dozen whistleblowers followed. Under the False Claims Act, they may be entitled to a percentage of the money recovered - and, in fact, Alderson is now fighting with the government over how much he should get.

"Any money that Alderson gets is much deserved," says US Rep. Peter Stark (D) of California, who has encouraged Medicare fraud probes.

"A lot of fraud cases begin when one person sets the wheels in motion," adds Sen. Charles Grassley (R) of Iowa, a False Claims Act champion. Sadly, "whistleblowers often jeopardize their livelihoods to do what's right."

This spring, lawyers for Alderson and the US Justice Department reached an $82.5 million settlement with Quorum, which continues to reject allegations that it did anything wrong.

HCA already has agreed to pay $840 million in civil and criminal penalties in related claims. It also denies improper conduct, but acknowledges it is negotiating with the government over two remaining issues. "This thing has evolved almost daily," says company spokesman Jeff Prescott in Nashville, Tenn. "Our comments have been on the issues, not on individual people, and they will continue to be."

For the Aldersons, who went to Mexico recently for their first real vacation in almost a decade, the plan is to use their money to pay off debts. "I can't believe it's almost over. But then again, it will never be over," Alderson says.

The False Claims Act

The law dates from the Civil War, when the Army sought to ferret out profiteers who supplied boxes of sawdust instead of guns or sold the same horses several times. It allowed citizens to sue on the government's behalf, and collect 50 percent of the amount the US recovered.

In 1943, Congress drastically reduced the amount whistleblowers could collect. The act fell into disuse.

Congress revived the False Claims Act in 1986, amid allegations that contractors were charging the US military $640 for a toilet seat and $430 for a hammer. It promises 15 to 30 percent of the government's recovery to whistleblowers who bring successful cases.

In the past 15 years, individuals have filed 3,300 suits, helping the government to recover about $4.2 billion from fraud cases. Whistleblowers themselves (and their lawyers) have collected $629 million.

(c) Copyright 2001. The Christian Science Monitor

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