James F. Alderson, a client of Phillips & Cohen, was a financial officer with a Montana hospital when he was told that the hospital’s management company routinely filed fraudulent cost reports with Medicare.
He was fired after he refused to file “aggressive” claims that the company knew were not reimbursable. His False Claims Act lawsuit against that company — Quorum Health Resources Inc. — and HCA (then known as Columbia/HCA Healthcare Corp.) helped lead to the largest government investigation of Medicare fraud ever. Quorum paid $85.7 million to settle the whistleblower lawsuit in 2001. A judge awarded Alderson 24 percent of the recovery. HCA later paid $631 million to settle three qui tam lawsuits, including Alderson’s and one brought by John Schilling, another whistleblower represented by Phillips & Cohen. Alderson and Schilling shared a $100 million award for their efforts and the work of their attorneys on the case.
Below is an excerpt from a story about Alderson by Kurt Eichenwald that appeared in The New York Times on Oct. 18, 1998. Investigative news show “60 Minutes” also did a story about Alderson and the allegations against the hospital chain.
He blew the whistle, and health giants quaked
James F. Alderson maneuvered his nine-year-old Ford Tempo through the snow, parking beside the Federal courthouse in Butte, Mont. Mr. Alderson, a small-town hospital accountant, left the heat on, telling his wife, Connie, to wait in the car. He was sure it would only take a moment to file his lawsuit on behalf of the United States, charging four giant hospital companies with fraud.
For years before that January morning in 1993, Mr. Alderson stewed with the belief that the companies — the huge Hospital Corporation of America and three of its corporate spinoffs — had cheated the government with bogus expense claims. While working at a Montana hospital run by one of those companies, Mr. Alderson himself had been asked to create a second set of books recording different expenses than those reported to the government. He had refused, saying it was unethical.
Then his world fell apart. Mr. Alderson was forced out of his job. No longer able to afford the comfortable life of his resort hometown of Whitefish, his family moved to a cramped apartment in rural Montana. Some college savings for his two teen-age children were eaten up. His career in hospital financial management seemed to be dwindling to an uncertain end.
Yet, he could not let go of his anger at the hospital giants for actions he felt sure were illegal. So when a friend described the Federal whistle-blower law that allows private citizens to file fraud actions on behalf of the United States, Mr. Alderson decided to act, drafting his own lawsuit against the companies and then making this drive to Butte to file it under seal in court.
. . . The filing of his lawsuit — known as a qui tam, or false claims, case — was the flash point for an almost six-year legal battle, one that led to criminal and civil investigations that have rocked the entire hospital industry.
Those efforts culminated this month with the unsealing of Mr. Alderson’s lawsuit and the announcement by the government that it was joining him as a plaintiff against the Columbia/HCA Healthcare Corporation and the Quorum Health Group — the corporate defendants that emerged from years of industry consolidation.
Lost amid the tumult was the story of Mr. Alderson, now 52.
. . . “Here, a discovery made by one man at a small rural hospital ultimately unraveled a nationwide, systemwide scheme,” Stephen Meagher, a former prosecutor [now with Phillips & Cohen LLP] who was eventually hired by Mr. Alderson to handle the case. “It shows how one person can truly make a difference.”
To read the entire story, which provides details of James Alderson’s pursuit of the case, his difficulty convincing the government to join the lawsuit and the role Phillips & Cohen played in “putting new life in the case,” see “He blew the whistle, and health giants quaked.”
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