Most publicly traded hospital and healthcare companies met the Aug. 14 deadline set by the Securities and Exchange Com-mission requiring corporate chief executive officers and chief financial officers to certify the accuracy of their financial statements.
In the wake of almost daily news reports of financial scandals and accounting irregularities at companies such as Arthur Andersen, Enron and WorldCom, the SEC voted June 27 to require the CEOs and CFOs of 947 publicly traded companies with annual revenue of more than $1.2 billion to certify the reports they release to the organization. SEC Secretary Jonathan Katz then set a deadline of Aug. 14 for that requirement for most of those companies. At the time, Katz said the action would provide greater assurance to investors that the companies are not violating federal securities laws.
A handful of companies have not submitted the certifications yet, mostly large retail chains and technology, energy and telecommunications corporations.
Only one major hospital or post-acute company that was subject to the requirement failed to turn in the required certification by the SEC deadline, Mariner Health Care in Atlanta. Mariner spokeswoman Melody Chatelle said the company, which recently emerged from bankruptcy reorganization, filed for a five-day extension and plans to file on Aug. 19.
After the June 27 announcement, there was speculation some healthcare companies, such as Nashville-based HCA and Santa Barbara, Calif.-based Tenet Healthcare Corp., might have difficulty certifying financial statements. Both have paid out settlements for whistleblower and shareholder lawsuits, and similar cases are pending.
But the CEOs and CFOs of HCA and Tenet joined their counterparts at Community Health Systems and Province Healthcare Corp., Brentwood. Tenn.; Health Management Associates, Naples, Fla.; and Triad Hospitals, Dallas, in certifying their SEC reports.
Mark Kimbrough, HCA's vice president of investor relations, said in the past five years HCA has been scrutinized as much as anybody in the country. "So we've already implemented many of the recommendations from the SEC," Kimbrough said. "We feel good about the processes we already had in place and signed the certifications without qualifications."
Kimbrough conceded HCA did not reserve for the eight still unresolved civil whistleblower fraud lawsuits alleging more than $600 million in Medicare overpayments. "From an accounting point of view, you don't reserve until you have the parameters of what you consider the range of the final settlement might be, and at this point we don't know," he said. "We are negotiating that with the government."
He said HCA did reserve $250 million for a tentative settlement with the Centers for Medicare and Medicaid Services and said that agreement awaits approval by the U.S. Justice Department. Also last week, HCA said in its second-quarter SEC report that it learned last month that employees at two of its United Kingdom hospitals made payments totaling $20,000 to a referring physician in an Eastern European country. An unspecified number of employees have been suspended while HCA investigates the payments, which may have violated the company's code of conduct, the U.S. Foreign Corrupt Practices Act and other laws, HCA said. Government officials in the United States and the United Kingdom were notified of the potential wrongdoing, the company said.
Even Universal Health Services-which had retained auditor Arthur Andersen since the company's inception in 1978-filed its certifications before the deadline. "The SEC requirement posed no problems for us," said CFO Kirk Gorman, whose company, based in King of Prussia, Pa., has switched to KPMG as its external auditor.
Post-acute and long-term-care giants Beverly Enterprises, Fort Smith, Ark.; Genesis Health Ventures, Kennett Square, Pa.; HealthSouth Corp., Birmingham, Ala.; and Kindred Healthcare, Louisville, Ky., submitted reports by the deadline. Some companies-such as Cardinal Health, Dublin, Ohio, a supplier, distributor and service provider for healthcare providers-face a later deadline because their fiscal years ended June 30.
Kenneth Vianale, a Boca Raton, Fla., lawyer at the firm Milberg, Weiss, Bershad, Hynes & Lerach who represents shareholders in a suit against HCA, was not comforted by the certifications of financial statements from corporate officers.
"The notion that their personal signatures are somehow going to lower the amount of corporate fraud is an illusion," Vianale said. "In my view it's a cosmetic attempt to smooth over investor concerns. These people are often the very ones who are committing the fraud or are at least aware of it. I don't subscribe to the notion that having to certify SEC reports is going to deter a corporate executive's own human greed."
-With Vince Galloro