One of the challenges of life is to preserve the best of our past while shedding the baggage that prevents us from leading a happy and fulfilling existence.
The same task applies to corporations. It is the one that executives and officers are facing now as they sort through the wreckage of Columbia/HCA Healthcare Corp. Work got under way late last month as Richard Scott and his top lieutenant, David Vandewater, resigned from the company they built.
Scott's critics must have been tempted to dance on his grave as news of the departures broke, and undoubtedly more than a few jigs were performed. But Scott galvanized the healthcare industry in a way few others have. He correctly perceived that hospitals could both deliver high-quality care and operate much more efficiently, and that the field was ripe for a much faster pace of consolidation. After the Columbia juggernaut got moving, no hospital executive could ever again enjoy a complacent attitude about financial performance or market share.
Unfortunately, the sound business principles that launched Columbia a decade ago evidently were compromised along the way. Acquisitions accelerated from quick to frenetic. Questionable ownership deals with physicians were common. The company ventured outside the hospital realm, pursuing dubious deals such as the aborted acquisition of Blue Cross and Blue Shield of Ohio.
Other warning signs of corporate cancer began to appear. Hardball business tactics. Extreme attention at headquarters to profits at individual facilities. Acquisitions that seemed geared more to stoking the revenue machine than creating value. A secretive and combative attitude toward outsiders, including the press.
When a massive Medicare billing investigation erupted, the company board concluded that Scott, who was long on vision but short on management experience, had to be jettisoned. Whether or not he was the cause of the company's dysfunction, he was its symbol and had to go.
Columbia's rehabilitation can't end there, of course. Industry veteran Thomas Frist Jr., M.D., who has taken the helm, has acknowledged that the company must get the government investigation behind it. The indictments announced last week underscore the urgency of resolving legal troubles. Frist has signaled he would like to borrow a page from Tenet Healthcare Corp.'s playbook. Jeffrey Barbakow figured that Tenet, born of the ashes of National Medical Enterprises, could only thrive by ending legal entanglements, settling fraud allegations and moving on.
Tenet also instituted a companywide compliance program, which it touts as one of the strongest corporate ethics programs in the nation. The government likely would insist on such an effort in any settlement with Columbia.
Columbia also must re-evaluate its business strategy. It must decide, among other things, whether it has strayed too far from its core business and whether the pace of hospital acquisitions should be slowed or redirected. It will confront the question of whether it should continue to fly solo or merge with another company.
The cost of settling with the government could soar toward a billion dollars. Reorganizing the company and rewriting its strategy could be a wrenching and expensive undertaking. But dramatic efforts must be made for Columbia to regain the best of its past and attain the best future possible.