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HHS Says Two Chains Owe Money for Recaptured Pension Assets

January 24, 1990

WASHINGTON (AP) _ A government investigator says two national hospital chains owe the Medicare program $27.6 million for Medicare’s share of excess pension plan assets they took over.

Humana Corp. owes $23.5 million and Hospital Corp. of America owes $4.1 million, said a report by Richard Kusserow, inspector general of the Department of Health and Human Services.

″Medicare, which paid its pro rata share of the pension contributions, did not share equitably in the gains that resulted from pension plan terminations,″ the inspector general said.

Labor unions and their supporters in Congress contend the excess assets of terminated pension plans should go to the workers on whose behalf the plan was operated. But legally the money belongs to the plan sponsor.

Plans may accumulate excess assets for a variety of reasons, mostly through pessimistic assumptions about the financial performance of investments. For example, a plan may assume its assets will earn 6 percent per year but actually earn 8 percent.

When plans terminate, they must satisfy existing obligations, either by establishing new plans, paying cash to members or buying annuities for members. Both hospital companies established new plans.

The inspector general said 19 other hospital companies terminated pension plans before 1983, realizing $3.7 million in excess plan assets. Those actions were not further reviewed because of the small amounts involved.

HCA terminated its pension plan Dec. 30, 1982 and Humana Dec. 31, 1980.

The report said the two chains recovered pension fund assets totaling $90.7 million and those assets should have been applied to offset hospital costs, leaving less for Medicare to reimburse.

″However, HCA offset only $20.2 million against costs and Humana made no cost offset at all,″ the report said.

″For the $70.5 million not offset against costs by the two hospital chains, we estimate the Medicare program is due $22.1 million plus accumulated interest of $5.5 million,″ the report said.

In Louisville, Ky., Humana spokesman Charles Teeple said his company had not been notified of the HHS report. After receiving it, ″We will need to study and determine the course we will take,″ he said.

In Nashville, Tenn., HCA spokesman David McFadden said his company had not been notified of irregularities, and HCA’s payments contractor, Blue Cross- Blue Shield of Tennessee, had approved its handling of the pension assets. ″We believe that what is occurring here is that this is interpretation of rules after the fact,″ he said.

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