"We’ve seen this picture
before. Just connect the dots: If Mitt
Romney wins, the middle class
PolitiFact has investigated claims against
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
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
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
The government settled a second series of
similar claims with Columbia/HCA in 2002 for
an additional $881 million. The total fine:
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
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
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
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
The ad muddies that fact -- and it’s
misleading to say Romney served as
"director" of Damon Corp., not
Also, Columbia/HCA faced much larger fines
and penalties than Damon did -- $1.7 billion
versus $119 million.
The Priorities ad says Romney "was
director of a company that stole millions
from Medicare," comparing him with
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.