Y2K turned out to be a year of big deals, big breakups and big surprises.
Some former Allegheny Health, Education and Research Foundation executives were arrested, and Columbia/HCA Healthcare Corp. reached a multimillion-dollar fraud settlement with the federal government. All year, providers battled Washington for more Medicare funds.
The much-feared Y2K bug, by the way, was vanquished before the year ever started. It turned out to be the least of the healthcare industry's problems.
* Patrick Hays resigns as chief executive officer of the national Blue Cross and Blue Shield Association.
* Fresenius and its U.S. subsidiary Fresenius Medical Care North America agree to pay $486 million to settle a host of Medicare fraud charges, including $101 million in criminal fines.
* Beverly Enterprises pays $175 million in fraud case. The agreement with the federal government includes a $5 million criminal fine and a $170 million civil settlement, the largest settlement ever paid to date by a nursing home company. The company is forced to sell part of its operations.
* Healtheon/Web MD acquires Medical Manager Corp. and Internet subsidiary CareInsite for stock valued at $2.1 billion. The deal was completed in September.
* The board of Hartford, Conn.-based Aetna, which operates the country's largest health insurance business with 21 million members, ousts Chairman, President and CEO Richard Huber amid rising costs and a barrage of class-action lawsuits. He is replaced by longtime board member and Wall Street veteran William Donaldson.
* Paracelsus Healthcare Corp., Houston, defaults on a $16.3 million interest payment on $325 million in debt. The company files for bankruptcy seven months later.
* Healthcare consumers testify before Congress that the National Practitioner Data Bank needs to be revamped and opened to the public. Legislation to do that is introduced in September, but it fails to pass in committee.
* Medibuy.com buys Premier hospital alliance's online supply purchasing unit for an undisclosed amount of stock.
* Facing a $20 million reduction in its budget, the American Medical Association lays off 80 employees. The AMA also discontinues its much-ballyhooed program to accredit physicians based on their clinical performance. The American Medical Accreditation Program fell victim to lack of interest from hospitals and to AMA budget-cutters.
* Federal government says bankrupt nursing home operator Vencor, Louisville, Ky., owes it $1.3 billion in Medicare fraud and nonfraudulent overpayments.
* Aetna splits its healthcare and financial/international operations into two companies.
* Allegheny Health, Education and Research Foundation executives are arrested. Former CEO Sherif Abdelhak, former Chief Financial Officer David McConnell (both pictured below) and former general counsel Nancy Wynstra are charged with multiple felony and misdemeanor counts of theft and conspiracy arising from their tenure at the Pittsburgh-based system.
* Abbott Laboratories, Baxter International, General Electric Co., Johnson & Johnson and Medtronic-five of the biggest suppliers to hospitals-and other providers band together to create an online exchange to simplify product ordering and to electronically process transactions.
* Unity Health, St. Louis, agrees to let St. Anthony's Medical Center, one of its three founding hospitals, break off from the Roman Catholic system effective June 30. St. Luke's Hospital is the second facility to follow suit in November, dissolving Unity.
* New American Healthcare Corp. files for Chapter 11 bankruptcy. The Nashville-based company divests all of its eight hospitals by September.
* The Catholic Health Association, St. Louis, agrees to support a national mandatory reporting system to identify and eliminate medical errors.
* Healthcare providers can be subject to as much as a $10,000 fine per false claim rather than the previous maximum of $2,000 under new civil fraud regulations issued by HHS' inspector general's office.
* For the first time in the history of not-for-profit healthcare, the Securities and Exchange Commission charges four former executives of Allegheny Health, Education and Research Foundation with falsifying financial statements to conceal the health system's deteriorating financial condition before its 1998 bankruptcy.
* Columbia/HCA Healthcare Corp. announces it has reached a tentative $745 million agreement with the U.S. Justice Department to settle fraud allegations. It also changes its name to HCA-The Healthcare Co. to escape the image of the company that was tarnished by the federal investigation. In December HCA settles criminal charges for $95 million.
* Five hospital groups ask HCFA for a one-month delay in the July 1 implementation of the Medicare outpatient prospective payment system, saying the agency is unprepared. HCFA agrees in June to delay until Aug. 1 the start of the new PPS.
* Universal Health Services emerges as the largest buyer in a bankruptcy court auction of psychiatric hospitals operated by Charter Behavioral Health Systems. The King of Prussia, Pa.-based hospital chain bought 11 of the hospitals, making it the nation's largest provider of inpatient mental health services.
* Scott Mercy, chairman and CEO of LifePoint Hospitals, Nashville, dies when a single-engine plane he was flying crashes in Smyrna, Tenn. He was 38.
* The Senate votes 51-48 to reject a Democratic-sponsored patients' bill of rights.
* A three-judge federal appeals court in Denver tosses out the judge's acquittal of one of the Kansas City Medicare kickback defendants and reinstates the jury's guilty verdict. Dennis McClatchey, former chief operating officer of Baptist Medical Center in Kansas City, Mo., was convicted by the jury in April 1999 of bribery for referrals of Medicare patients and was later acquitted by the judge.
* President Clinton proposes a package of Medicare payment increases to healthcare providers to offer relief from the Balanced Budget Act of 1997. The proposal is worth $40 billion during the next 10 years. Hospitals would get the lion's share, $10 billion.
* Capping a year of upheaval at the nation's largest Medicare HMO, PacifiCare Health Systems, Santa Ana, Calif., names Robert O'Leary its new president and CEO effective July. O'Leary was former chairman of the San Diego-based Premier hospital alliance. He resigns three months later. Howard Phanstiel, PacifiCare's CFO, is named interim CEO.
* A federal appellate court upholds a Texas law that allows patients to sue managed-care plans for malpractice, but it strikes down the state's independent review process for patient disputes with insurers.
* The Penn State Geisinger Health System merger dismantles. The breakup is one of several high-profile hospital system dismantlements this year as some merged hospitals learn that the bigger-is-better strategy that dominated the industry in the mid-1990s doesn't work for everyone.
* Seven leading HMOs announce plans to exit major Medicare markets, uprooting more than 700,000 beneficiaries.
* Despite heavy opposition from many sectors of the healthcare industry, the House passes landmark legislation that would give competing physicians an exemption from federal antitrust laws to allow them to collectively bargain with health plans. Doctors celebrate the 276-136 vote, calling it "a milestone victory." However, the bill fails to even be introduced in the Senate and dies.
* The House passes 217-214 Republican-sponsored prescription drug legislation. It encourages the sale of private-sector insurance policies to cover Medicare beneficiaries' drug costs. Clinton threatens to veto the bill. By mid-December, the Senate hasn't yet voted on the bill.
* A federal judge signs an order dissolving the joint operating company created by the only two acute-care hospitals in Poughkeepsie, N.Y., as punishment for using the company to engage in anticompetitive behavior.
* HCFA rejects five hospital groups' request to delay implementation of the new outpatient prospective payment system. The groups feared they were likely to make billing errors as they learn the billing system, and that such errors might be perceived as fraud. To allay their fears, HCFA offers a refresher course on HHS' inspector general's Medicare fraud policy.
* Two Florida hospital systems will pay fines totaling almost $500,000 for sharing sensitive pricing and managed-care information in violation of a 1994 antitrust settlement. The fines resolve what federal and state antitrust enforcers called "repeated and widespread violations" of the consent decree that allowed for creation of the four-hospital Morton Plant Mease Health Care in Dunedin, Fla.
* Two prestigious academic medical centers opt out of the Medicare managed-care business. Nashville's Vanderbilt University, which operates the not-for-profit, 576-bed Vanderbilt University Medical Center, announces it will discontinue its Health 1-2-3 Platinum plan by year-end. Durham, N.C.-based Duke University Health System sells its WellPath Community Health Plans to Coventry Health Care for $25.5 million.
* San Diego-based Medibuy.com announces it will buy Nashville-based empactHealth.com, the e-commerce provider created by HCA-The Healthcare Co. Terms were undisclosed. The deal is designed to create an electronic marketplace for the huge hospital chain and one of the largest alliances of not-for-profit hospitals.
* One of four Oklahoma City hospitals that was implicated in the death of an emergency patient settles charges that it refused to accept the patient's transfer in violation of the federal patient-dumping law. The matter is the first known example of federal health officials going after multiple hospitals accused of refusing to treat the same patient.
* Quorum Health Group, which is in the midst of a federal whistleblower investigation into its Medicare cost-reporting practices, announces it has hired New York investment bank Goldman, Sachs & Co. to act as its financial adviser in a quest for a possible merger, sale or recapitalization. Two months later, Triad Hospitals, Dallas, signs an agreement to buy the Brentwood, Tenn.-based company for $2.4 billion in cash, stock and debt assumption. The deal would double Triad's size.
* For the first time in a decade, annual revenue for the Joint Commission on Accreditation of Healthcare Organizations decreased. The Oakbrook Terrace, Ill.-based organization generated $117.9 million in revenue in 1999, down about $4.9 million, or 4%, from $122.8 million in 1998.
* Hospital executive John Rowe, M.D., is named president and CEO of Aetna.
* HCFA Administrator Nancy-Ann Min DeParle announces that she will step down effective Oct. 1 to take a fellowship with Harvard University's Kennedy School of Government, Cambridge, Mass.
* California becomes the first state to pass a law ordering HMOs to provide AIDS specialists for patients with HIV.
* HCFA agrees to delay until January 2001 the imposition of new guidelines determining whether off-campus hospital-owned clinics will receive the same Medicare payments as hospital outpatient departments.
* Two former executives of McKesson HBOC are indicted in what is called one of the largest financial reporting frauds in U.S. history. The government accused Albert Bergonzi and Jay Gilbertson, former HBO & Co. co-president and co-chief operating officer, of falsely inflating company revenue from 1997 to 1999 by hundreds of millions of dollars. Each are arraigned in October and plead not guilty to 17 counts of securities fraud.
* The JCAHO, the National Committee for Quality Assurance and the AMA announce that they will phase out their joint Performance Measurement Coordinating Council because they can do a better job without it.
* The House passes $32.6 billion in increased spending in the next five years for Medicare, Medicaid and the State Children's Health Insurance Program.
* For the first time since the U.S. Census Bureau began counting the uninsured in 1987, the number of uninsured drops by 1.7 million people to 42.6 million last year from 44.3 million in 1998, a decline of 3.8%. InterStudy reports that total enrollment in HMOs dropped last year for the first time since the company began tracking HMO figures in 1973. Total enrollment fell by 400,000 to 80.9 million on Jan. 1, 2000, from 81.3 million on Jan. 1, 1999, a drop of 0.5%.
* WebMD Co-CEO Jeffrey Arnold resigns after the company reported a net loss of $518.3 million for the second quarter ended June 30. Martin Wygod, formerly the CEO of Medical Manager Corp., remains as CEO. In November, WedMD reports a nine-month net loss of $1.7 billion.
* Quorum Health Group announces it has settled two whistleblower lawsuits with the U.S. Justice Department to resolve alleged Medicare cost-reporting fraud for $95.5 million. The announcement comes two weeks before Triad signs a definitive agreement to buy Quorum. The sale is expected to be completed in the first half of 2001.
* The prestigious Menninger Clinic in Topeka, Kan., is reported to be moving to Houston, despite $100 million in incentives offered by Kansas Gov. Bill Graves to stay.
* Credit-rating agency Standard & Poor's projects a positive outlook for not-for-profit hospitals. The agency expects that not-for-profits will show better operating results in 2000 and 2001.
* The JCAHO says it will temporarily lift requirements of its beleaguered Oryx initiative for organizations pursuing accreditation for the first time.
* The loss of healthcare figures Senate Finance Committee Chairman William Roth (R-Del.), Sen. Spencer Abraham (R-Mich.) and the retirement of Sen. Daniel Patrick Moynihan (D-N.Y.) could mean trouble for hospitals and other providers that are asking for rollbacks to the payment-growth restraints enacted under the 1997 federal balanced budget law. Sen. Charles Grassley (R-Iowa) is likely to become finance chairman.
* Though the outcome of the presidential election remains nebulous, Al Gore and George W. Bush base their healthcare policies on those of their respective parties. Bush favors a free-market approach and Gore prefers the incrementalism that has been Clinton's approach since the failure of healthcare reform during his first term. Thirty-six days after the election and intensive challenges from the Gore team to contest the certification of Florida votes, Bush emerges as the president-elect.
* The AHA reports that nearly half the nation's hospitals didn't make enough money last year to maintain their operations and stay competitive. The aggregate hospital margin sinks to 4.7%, the lowest level since 1994.
* Aetna completes the $7.7 billion sale of its financial/international unit to Dutch insurer ING Group. It officially spins off its domestic healthcare operations to shareholders.
* The U.S. Justice Department joins a civil whistleblower fraud lawsuit against healthcare accounting icon KPMG, sending a strong signal to industry accountants that they may be held legally liable for the Medicare billing work they do for clients. The suit accuses KPMG's Florida office of helping five Florida hospitals falsify Medicare cost reports that they allegedly used to illegally inflate their payments from Medicare.
* California hospitals will get nearly $700 million in additional Medicaid payments in the next four years under a legal settlement with the state, but the hospitals say it's still not enough to pull them out of their ongoing financial slump. The settlement resolves three lawsuits filed from 1990 to 1992 alleging that outpatient payments from Medi-Cal, the state's Medicaid program, were insufficient to cover costs.