The Legal & Regulatory Environment of Business

Punishment for RICO can be harsh. A conviction for a violation carries severe criminal penalties. The defendant must also forfeit any illegal proceeds. The government may seek a restraining order to prohibit loss of forfeitable assets until the case is settled. Any agency found in violation of RICO is liable for triple damages, costs, and attorney fees (Corey et al. , 1999, p. 243). HCA violated some, if not all of these provisions when they propositioned several physicians (associated with their hospitals) to file false Medicaid claims.

The hospital chain also established "an agreement" with the doctors by promising to pay them kickbacks for referring Medicaid patients to their hospitals. This agreement would have extended to all five of the hospital facilities HCA owns in Utah (Associated Press, 2004). The pros and cons of the RICO statute also depend on point of view. The pros are: a 20 year sentence for RICO is longer than most sentences for predicate offenses, "enterprise" allows presentation of a wider range of evidence and trials with multiple defendants, and forfeiture can be levied as a separate punishment.

The cons are: the threat of frozen assets can lead to false guilty pleas, triple damages for ordinary business transactions, and the prosecution of criminals may lead to "innocents" found guilty simply by association (Corey et al. , 1999, p. 240-243). Damages Damages awarded in cases are designed to compensate the plaintiff for losses or injuries. The purpose of the damages is to make the plaintiff whole again, at least financially. There are three major types of loss that relate to compensatory damages: 

Past and future economic loss (including property damage and loss of earning power) 3. Past and future pain and suffering (Corey et al. , 1999, p. 216). Calculation of damage awards creates significant problems. Juries frequently use state-adopted life expectancy tables and present-value discount tables to help them determine the amount of damages to award. But uncertainty about the life expectancy of the injuries and the impact of inflation often makes these tables misleading. Compensatory damages are not the only kind of damages.

There are also punitive damages. By awarding punitive damages, courts or juries punish defendants for committing intentional torts and for negligent behavior considered "gross" or "willful and wanton. " Increasingly, punitive damages are also awarded for dangerously negligent conduct that shows a conscious disregard for the interests of others (Corey et al. , 1999, p. 216-217). In the 2003 verdict involving HCA, the corporation was fined nearly $857,000 for filing false Medicaid reports and paying doctors kickbacks.

In their first offense in 2001, HCA agreed to pay $840 million in criminal fines, civil penalties, and damages for false billing practices (Murphy, 2001). The court leveled criminal and civil penalties on the company. The pros and cons concerning damages are numerous. Some of the pro issues are: the corporation is "paying" for their behavior, the victims can be compensated for their losses, and the government can recoup their expenses and not budget the taxpayers for their costs during the investigation.

The con issues considered are: the injured parties may never be fully compensated, the injured parties may have to seek further litigation to settle future losses, the corporation may not truly make amends and follow the "ethical path," and the corporation may not suffer for its behavior, but its "honest and unknowing" stockholders can. The company may carry liability insurance to compensate legal damages; as a result they may not encounter any losses at all (Corey et al. , 1999, p.217).

Conclusion According to the Centers for Medicare and Medicaid Services (CMS), national spending on health care has risen to more than $1 trillion each year. Spending in the Medicaid program has risen from $3. 9 billion in 1968 to more than $178 billion in 1998 (Centers for Medicare and Medicaid Services, 2004). The States are primarily responsible for policing fraud in the Medicaid program. HCA is getting a double dose of painful medication to remedy years of Medicaid fraud.

The Utah Attorney General's Office has received $856,961 from HCA for filing false Medicaid reports and paying physicians' kickbacks. The health care chain already paid Utah $1,383,507 in 2001 to settle fraud allegations. The State's total relief from HCA: $2,240,468 in state and federal funds (Murphy, 2004). They also agreed to pay an additional $840 million in criminal fines, civil penalties, and damages for false billing practices. This settlement with the Justice Department would end the government's seven-year investigation into healthcare fraud allegations against the company (Murphy, 2001).

"When people defraud Medicaid, they are really ripping off taxpayers," said Utah Attorney General Mark Shurtleff (Murphy, 2001). "This was an expensive lesson for HCA. Hopefully, other hospitals can learn from this settlement that taxpayers will not tolerate Medicaid fraud" said Wade Farraway, director of the Medicaid Fraud Unit at the Utah Attorney General's Office (Associated Press, 2004).


Associated Press. (2004, February, 10). HCA to pay Utah for filing false reports. The Tennessean, pp. E2. Centers for Medicare & Medicaid Services (CMS).(2004).  Medicaid alliance for program safeguards. Retrieved February 11, 2004, from http://www. cms. hhs. gov Corley, R. , Reed, O. , Shedd, P. , & Morehead, J. (1999).

The Legal & Regulatory Environment of Business (Eleventh Ed. ). Boston, MA: Irwin/McGraw-Hill. Retrieved January 15, 2004, from Custom Electronic Text for University of Phoenix: https://mycampus. phoenix. edu Kleiner, S. & Philip, E. (1999, summer). Health care fraud. American Criminal Law Review 36(3), 776-792. Retrieved February 12, 2004, from EBSCO host database.