Washington

The Health Care Financing Administration twice extended the contract of a company implicated in the multimillion-dollar Columbia/HCA fraud case - and HCFA officials knew or should have known it, according to a report recently released by the General Accounting Office.

The report said that senior HCFA officials and the Health and Human Services' General Counsel office "were in a position to be generally aware" that former HCFA contractor KPMG contributed to its client's fraudulent activities.

KPMG, along with four other accounting firms, contracted with HCFA in September 1997 to perform audit services under HCFA's Audit Quality Review Program, which reviews the work of Medicare auditors to ensure they are appropriately detecting fraudulent activity. In May 1998, KPMG was implicated in the fraud case against its client Columbia/HCA. Columbia later paid $750 million to settle the civil fraud claims.

In September 1999, however, HCFA renewed KPMG's contract even though the company was found to "have contributed to its client's improper actions," the GAO said.

HCFA officials have not commented on the report, saying they are still reviewing it. However, citing a lack of funds to extend any of the contracts under its Audit Quality Review Program for 2001, HCFA declined to extend the contracts of either KPMG or the other four contractors.