During the most troubling week in the nine-year history of their company, the two top executives at Columbia/HCA Healthcare Corp. hit the road in an effort to "calm the waters."
Richard Scott, chairman and chief executive officer, and David Vandewater, president and chief operating officer, met with some of their 285,000 employees last week.
The face time with workers comes in the wake of a raid by federal investigators on the company's facilities in El Paso, Texas, confirmation from a top government official that the company's Medicare billing practices are under investigation, an ongoing blitz of critical media reports on the company's business practices and a backlash from Wall Street analysts.
Also last week, a federal judge found the company guilty of unfair labor practices in connection with a union organizing effort at its facilities in Louisville, Ky. (See story, p. 4).
And the troubles are starting to affect the company's hospital acquisition efforts (See story, p. 14).
Meanwhile, Scott and Vandewater talked to the troops.
"They're meeting with employees and reinforcing the values of the company," said Thomas Frist Jr., M.D., vice chairman of Columbia's board, in an interview last week in Nashville. Frist spoke to MODERN HEALTHCARE at a quarterly forum on current healthcare topics sponsored by the Nashville Health Care Council.
Frist's comments to MODERN HEALTHCARE*and during the council event were the first public comments from Columbia's leadership that didn't come through a prepared statement.
Frist was the largest individual Columbia shareholder at the end of 1996 with 14.6 million shares, a 2.2% stake in the company, according to Columbia's 1996 proxy filed March 27 with the Securities and Exchange Commission. The proxy was made public last week and will be sent to shareholders this week (See box).
Other than communicating through company spokespeople, Columbia executives have been mum since the March 19 raid (March 24, p. 3).
"This is not the time for us at Columbia to be cute," Frist told the 300 healthcare executives at the forum. "Rick and David are out trying to calm the waters."
Scott had been scheduled to attend the event. Organizers said he canceled because of a "schedule conflict."
In prepared statements, Columbia officials continued to say they are baffled at the reasons behind the March 19 raid and subsequent confirmation by HCFA Administrator Bruce Vladeck that the agency is investigating allegations of DRG "upcoding" at the company's hospitals.
"To ensure accurate Medicare coding, Columbia has invested heavily in coding systems and technology developed by a highly regarded technology company and in the training of employees responsible for Medicare coding," Columbia said in a statement last week. "It has been and will continue to be Columbia's expectation that our employees will abide by the law. If we have made mistakes, it is our goal to find out what they are and to work to correct them."
In communications with Wall Street, however, the company has been a little more candid about the federal government's interest in the company's business practices.
For example, for the second consecutive year, the company disclosed in its 10K filing with the SEC that HHS' inspector general's office is examining Columbia's procedures for preparing cost reports for Medicare.
"The company is cooperating with the (inspector general) and has provided various information in order to explain the company's practices," Columbia said.
Columbia also disclosed in its 10K the legal risk associated with having physicians invest in hospitals and other businesses. Federal law bars any form of remuneration to induce the referral of Medicare or Medicaid patients, and many observers suspect the company's business deals with physicians are part of the ongoing federal investigation.
Columbia said it "believes the structure of its physician ownership is in compliance with current law. If the law is changed, we will change our structure accordingly."
But the 10K tells shareholders these deals face an unknown future.
"The company is unable to predict the effect of such regulations or whether other legislation or regulations at the federal or state level in any of these areas will be adopted, what form such legislation or regulations may take or their impact on the company," the 10K said.
Physician partnerships are a critical part of the Columbia philosophy. Physicians are offered an opportunity to invest in a Columbia subsidiary that runs the hospital but not in the entire company.
In August 1993, Scott said in an interview Columbia would seek physician investors in five markets, expanding on an idea that started in El Paso. Those efforts have since expanded to other markets including Huntsville, Ala., and New Orleans.
The company's two acute-care facilities in El Paso have enjoyed increasing profitability. (The company's other two El Paso facilities are specialty hospitals.)
At Columbia Medical Center-East, net income grew to $26.9 million in 1994 from $8.8 million in 1993. At Columbia Medical Center-West, net income grew to $11.6 million from just $121,374 over the same period, according to HCIA, a Baltimore-based healthcare information company.
Columbia said last week that "approximately 4% of the physicians" affiliated with Columbia hospitals have an ownership interest.
The 10K said Columbia "is continuing to enter new financial arrangements with physicians."
The company hasn't been shy about pushing the ownership deals, known as "physician syndications," but physicians in some markets have shunned Columbia's efforts.
In Chicago, several attempts were made in recent years to attract physician investors, but they haven't been successful.