While it wasn't the first investor-owned hospital chain, the company now known as HCA probably did more to define the for-profit hospital industry than any other. As it grew to become the largest hospital chain in the country, others followed suit and consolidated into large systems. When the company was hit by FBI raids that led to Medicare fraud indictments and ultimately a $1.74 billion settlement, other hospital companies had to re-examine the way they were doing business, too.
Hospital Corporation of America was founded in 1968 in Nashville by Thomas Frist Jr., his father, Thomas Sr., and Jack Massey. Initially it was just one hospital and a related nursing home (See related story, p. 40). But by the end of 1969, the company operated 26 hospitals, was growing fast and had filed for an initial public offering of stock.
In the late '80s and early '90s, the company was taken private, spun off more than 100 rural hospitals and went public again. In 1994, it completed its fateful merger with Columbia Healthcare Corp., Fort Worth, Texas. The merged company, called Columbia/HCA Healthcare Corp., operated 192 hospitals. Tension soon developed between Frist Jr. and Richard Scott, the aggressive young corporate lawyer who had founded Columbia and was the new company's chairman and CEO.
In 1997, when the federal government's probe of the company's Medicare billing practices became public through a series of FBI raids, Scott resigned. At this point, the company had grown to operate nearly 350 hospitals. Frist revamped the board, established a corporate ethics and compliance program and began once again selling or spinning off hospitals. In December 2002, HCA announced it would settle remaining civil allegations with the feds.