When ethics fail

On March 19, 1997, I was in Washington, D.C., at an annual meeting of Columbia/HCA Healthcare Corp. executives when Rick Scott took the stage and told us the FBI had raided our El Paso, Texas, offices earlier that day.

Our CEO spoke with conviction, even defiance. The government had no case, he assured us. This was a temporary problem that would go away. Columbia/HCA was and would remain the biggest and best in the industry.

At the end of Mr. Scott's impassioned remarks, I jumped to my feet alongside my fellow executives as our applause filled the room. Like so many others that night, I drank the Kool-Aid.

Over the course of my 25-year career in healthcare, I've seen firsthand—not once, not twice, but three times—the crippling effect of ethics and compliance failures on organizations. I watched from the inside at Columbia/HCA as scandal brought a Goliath to its knees. Then, in 2004, as the newly appointed chief operating officer of a post-Richard Scrushy HealthSouth Corp., I joined a group of people working determinedly to resurrect a good company nearly destroyed by fraud.

Most recently, I've stepped in as president and CEO of Tennessee-based Wellmont Health System as the community organization has grappled with financial reporting delays and restatements.

In many respects, these companies couldn't be more different. The former Columbia/ HCA, now just HCA, and HealthSouth are multibillion-dollar operations with facilities across the nation. Wellmont, in contrast, is a regional hospital system with annual revenue of less than $1 billion.

Yet there are striking similarities in the circumstances that contributed to the compliance breakdown in all three. By examining these factors, it is my hope that other organizations can be certain they have the proper measures in place to prevent problems before they occur.

So, without further preamble, here are my lessons learned from three career “near-death experiences.”

First, know the warning signs. In the months and years leading up to their crises, Columbia/HCA, HealthSouth and Wellmont each became CEO-centric organizations. Strong leadership is vital to the success of any company, but unchecked power can be a breeding ground for problems. When I came to HealthSouth, for instance, new CEO Jay Grinney and I found a lavish executive suite—furnished with exotic, hand-carved furniture—that had been purposefully isolated from front-line employees. Absolute power corrupts absolutely.

There are other common signs of trouble. Accounting principles become suggestions, good news is accelerated, bad news is amortized and compromises soon create a toxic culture. So, too, can a singular focus on growth for growth's sake. When any organization is strategically out of balance, there is danger.

Second, understand the costs of unethical and illegal actions. Columbia/HCA paid $1.7 billion in civil and criminal penalties to the federal government. HealthSouth was de-listed from the New York Stock Exchange for three years and spent hundreds of millions of dollars to correct its mistakes. At Wellmont, audit delays and restatement, exacerbated by the global economic downturn, triggered higher interest rates on our organization's debt. And beyond the financial penalties is the hidden impact on morale and reputation—both organizational and personal.

Finally, if you suspect something is wrong within your company, take action. Listen to your gut instincts. Follow the chain of command and report your concerns. And, if necessary, be prepared to go further than that. If you believe material misconduct has occurred, you become complicit if you fail to report it. Ironically, many organizations that endure crises eventually reward those employees who bravely act in good faith.

With healthcare reform looming, the threat of reduced payments will almost certainly create circumstances in which some organizations believe it necessary to compromise their principles to survive. For that reason, it has never been more important for healthcare organizations to fully engage in compliance and transparency than it is right now.

Mike Snow is president and CEO of Wellmont Health System, Kingsport, Tenn.

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