| At the start of the year, Columbia/HCA Healthcare Corp. seemed to be on top of the world. It had planned to spend $90 million on its advertising campaign this year alone. During the past month, however, the campaign has been scrapped, and executives and public relations employees are hurriedly trying to salvage the company’s name and image.It all started with federal investigators searching Columbia facilities in El Paso, Texas, and later in six other states, and confiscating boxes of documents. Three hospital executives in Florida were indicted for allegedly defrauding the federal government; federal prosecutors named the company as the target of a criminal investigation. And in July came the resignation of Richard Scott, the CEO and chief architect of Columbia.The company began in 1987 when Scott, then a Dallas hospitals mergers and acquisitions lawyer, joined forces with Fort Worth investor Richard Rainwater. With each man pitching in $125,000, they bought two El Paso hospitals and began building their dream—a national, multiservice healthcare chain.Ten years later, and bolstered by Scott’s aggressive, bottom-line management style, Columbia has grown into a $20 billion healthcare system, the world’s largest. It owns 342 hospitals, 150 outpatient surgery centers, and more than 570 home health centers in 36 states, England, Spain, and Switzerland. The company employs about 290,000 people and owns 7 percent of America’s hospitals.But over the past year, things began to unravel. The federal searches of Columbia facilities began in March. Agents were looking for evidence of suspected fraud against Medicare, Medicaid, and the military healthcare system. Three mid-level Columbia managers were indicted in Fort Meyers, Fla., this summer for conspiring to inflate the amount of reimbursement Columbia’s Fawcett Memorial Hospital in Port Charlotte, Florida, was to receive from Medicare and the military healthcare program.Federal investigators continue to examine several other Columbia billing practices. Both the Department of Justice and Columbia refused to talk about the on-going investigations. But the Wall Street Journal has reported some of the things Columbia is being investigated for are ordering costly blood tests, receiving reimbursement from the federal government for advertising and marketing expenses, and billing separately for costs that are usually consolidated.Other concerns have been raised as well. During a hearing in Fort Meyers, assistant U.S. Attorney Kathleen Haley said company officials may have tried to destroy evidence relevant to the government’s investigation. “According to Ms. Haley, law-enforcement officials first became aware of a possible attempt to destroy evidence when, soon after Columbia businesses in El Paso were searched in March, a local citizen alerted law-enforcement officials to a ‘cache of Columbia documents in a garbage dumpster at a gas station several miles’ from the nearest Columbia facility,” the Journal reported Aug. 14. Columbia spokesperson Jeff Prescott refused to comment on the report.Thomas Frist Jr., MD, the vice chair of Columbia’s board, and other board members rallied for Scott’s resignation after 35 warrants were obtained to search facilities in seven states in July. On July 25 he received the resignation. Frist, who co-founded Hospital Corporation of America (HCA) with his physician father in 1968, stepped in as chairperson and CEO.Since then, Columbia has reportedly developed an “action plan” to sell its $1.2 billion Dallas-based home healthcare unit and to restructure its relationships with physicians. Columbia’s ties with physicians—such as the practice of offering to sell them financial stakes in hospitals—has been a hallmark of its business since the early days in El Paso. But now Columbia has reportedly decided to discontinue those sales and will establish tighter guidelines on physician transactions. Columbia executives stress that the creation of the action plan does not imply they found any wrongdoing or errors in their policies and procedures.Industry insiders speculate Columbia is also considering selling off other portions of its business. The newly appointed president, Jack Bovender Jr., denies the speculation. But insiders suspect the pending government fine, which could be between $1 billion and $2 billion, may be propelling the company to carve up some of its other operations.Columbia’s Prescott confirmed that the company is putting some expansion plans on hold pending a review process. Frist, whose style has been described as that of a country gentleman, has said Columbia will not fight to enter markets in which it faces community opposition.”Rick Scott created a public relations nightmare for himself. He created an image, which may or may not be fair, of a grand buccaneer,” said Paul Torrens, MD, MPH, professor of health services management at the UCLA School of Public Health. “His arrogance and disdain for concern for communities, which had been a part of health care, are appalling.”The appropriateness of his verbal swagger and finance-over-health care decision-making may be disputed, but it is hard to deny that Scott forever changed the way healthcare business is conducted in the United States. And it was Scott’s signature style—relentless, aggressive, bottom-line management—that contributed to Columbia’s financial success and ultimately his undoing.Health care has been historically an altruistic enterprise that was not subject to financial scrutiny or criticism, Torrens said. Faced with surplus hospital beds and increasing cost containment brought on by managed care in the late ’80s, many hospital chains were faltering financially.That instability gave way to merger mania in the ’90s—and Columbia seized the opportunity to acquire or merge with struggling hospitals in lucrative markets in states with favorable regulations. “Columbia/HCA is the Wal-Mart of health care,” Rainwater was quoted as saying in a 1995 article in The Healthcare Forum Journal.Columbia’s aggressive, take-no-prisoners approach began with its acquisition team. “Most hospital CEOs sell only one hospital in a career, if that—these guys [Columbia] buy three hospitals a month,” said a source in a confidential interview published in a 1995 Washington State Hospital Association report profiling Columbia. “The lawyers negotiating for Columbia had really done their homework—they showed up for the first meeting with all the appropriate paperwork and state forms completed and ready to sign,” said another confidential source involved in dealings with Columbia.When the 12 community members of a nonprofit hospital board in Canton, Ohio, balked at a joint venture with Columbia as part of a multi-hospital acquisition, they were removed from the board the day before the sale was announced. Their dismissal letters, however, did not arrive until the day after the announcement of the sale.Buyouts were frequently done with such speed that communities had no time to comment and no time to question whether their local nonprofit hospital’s charitable assets were being sold too cheaply.Once a hospital was acquired, Columbia aggressively cut costs, including supplies. Because of the volume of its purchasing power—Columbia is reported to be the largest purchaser of healthcare supplies in the world—the company was able to negotiate lower prices. The company often converted the contracts at a hospital it had acquired to the system-wide Columbia vendors or got equivalent prices from the existing vendors until the contracts expired.But in trimming the fat, did Columbia cut too close to the bone? After Columbia acquired Good Samaritan Health System in the San Jose, California, area, many nurses began complaining about the poor quality of some supplies. The nurses, who were in a collective bargaining dispute with Columbia, said surgical gloves were thinner and more likely to break, alcohol sponges were smaller, and the valve on new chest drainage tubes substituted by Columbia did not indicate whether the device was turned on or off.Prescott concedes there was criticism of the quality of some supplies at Good Samaritan and other hospitals, but says it was addressed through the Columbia system with the creation of expert panels. The panels—which he said can include healthcare providers, purchasing officers, and financial representatives—evaluate upcoming supply purchases and recommend which model or style to buy. However, Prescott said he didn’t know exactly who sits on the panels or how members are chosen.Employees with higher salaries, including nurses and therapists, were also frequent targets for cuts. Former employees accuse Columbia of staffing based solely on the number of patients without factoring in acuity. And nurse executives and other members of management were rewarded with “financial incentives” in exchange for meeting bottom-line goals.In response to such criticism, Columbia touts the quality of its care. For example, in 1995 it promoted the fact that 30 Columbia facilities were included among the top 100 hospitals as ranked by HCIA Inc. and William M. Mercer Inc. What Columbia failed to mention was that six of the eight criteria were financial, according to a New England Journal of Medicine article published Aug. 1, 1996. But Prescott says that doesn’t negate the hospitals’ high rankings and notes that financial criteria “may or may not measure quality.” | ||
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