With its announcement of an agreement to the biggest fraud settlement in history, the nation's largest hospital chain hopes to convince Wall Street, patients and the rest of the healthcare industry that it also has completed its cultural transformation as a company.
As far as Wall Street is concerned, HCA-The Healthcare Co. has succeeded, as evidenced by the market's barely noticeable reaction to the company's $840 million criminal and civil settlement. Although the market may have shrugged, HCA's travails with the government have had a profound and lasting impact not only on the company, but on the healthcare industry and its attention to ethics and compliance with the law.
Thomas Scully, president and chief executive officer of the Federation of American Hospitals, referred to the HCA settlement as "something HCA has to do to put this thing to bed, and something the (U.S.) Justice Department wanted to do before the end of its term."
But he acknowledged that the industry is vastly different from the mid-1990s because of the investigation.
"It clearly has enhanced the compliance activity among people throughout the industry," he said. "The high-profile case against Columbia scared everyone in the healthcare field into extremely aggressive compliance activities; some would argue it's scared them into underbilling."
It is difficult to find a major hospital company that does not have a compliance officer, some kind of ethics policy and manual, and even hotlines for employees to call to alert management to fraud.
The HCA of today is a far different company as a result.
HCA's management has deliberately separated itself from the activities that led up to the fraud investigations and last week's settlement.
For example, Thomas Frist Jr., the company's chairman and chief executive officer, was not at the Washington press conference announcing the settlement and he has repeatedly distanced himself--in demeanor, strategy and corporate policies--from his predecessor, Richard Scott, who resigned in 1997 shortly after the investigation became public.
Frist and his father together founded the original Hospital Corporation of America in Nashville in 1968, which Columbia Hospital Corp. bought in 1994. Frist took a back seat to Columbia's Scott, who was known for his hard-driving management style and for growing the company by gobbling up hospitals and branding them with the Columbia name.
That all changed after Scott stepped down and Frist moved back into the driver's seat. Today's HCA has 196 hospitals compared to the 341 it had in 1996 at the height of its empire. And under Frist's leadership, the company has stripped the "Columbia" moniker from the its hospitals around the country.
Last week's news release was headlined "HCA Signs Agreements in Columbia Investigation," as if one company was solving a separate company's problems. The move was a clear reference to putting aside the old Columbia ways.
"It's a key step in putting the Columbia investigation behind us, and it allows HCA to move on," said Victor Campbell, HCA's senior vice president. "I think the company has transformed itself in many ways."
Financially, the company has metamorphosed as well. HCA is a smaller and leaner company today than it was before the investigation, although still by far the largest in the industry. Analysts have said they are not concerned about the company's ability to come up with the money to pay for its $840 million settlement, which after a tax deduction on the civil portion will be far smaller.
A.J. Rice, senior healthcare services analyst at Merrill Lynch & Co. in New York, said the expectation of a criminal settlement had been anticipated by investors and therefore was built into the price of the company's shares, which barely moved on the news.
HCA stock closed at $38.54, down 22 cents, on Thursday when the settlement was announced. That compares to a 52-week high of $42.50 and a low of $18.75.
