This week The New York Times concluded a rare look at the inner workings of the country’s biggest for-profit hospital chain. The two-part expose is significant, coming at a time when places of healing are rapidly organizing themselves into big conglomerates much like the automakers did decades ago. The story raises significant questions. The economic ones: Is this good for the bottom line? Does it raise or lower medical costs? And the medical one: Is this good for patients?
In a superb investigation, Reed Abelson and Julie Creswell detailed some pretty unsavory business practices used by the country’s largest for-profit hospital chain—HCA, the owner of 163 facilities in 20 states. After examining voluminous evidence from hearing transcripts, email correspondence, confidential memos, and reports from outside consultants, as well as many interviews, Abelson and Creswell concluded “unnecessary—even dangerous—procedures were taking place at some HCA hospitals, driving up costs and increasing profits.”
Part two of the story starts with a bang:
During the Great Recession, when many hospitals across the country were nearly brought to their knees by growing numbers of uninsured patients, one hospital system not only survived — it thrived..
In fact, profits at the health care industry giant HCA, which controls 163 hospitals from New Hampshire to California, have soared, far outpacing those of most of its competitors.
The big winners have been three private equity firms—including Bain Capital, co-founded by Mitt Romney, the Republican presidential candidate—that bought HCA in late 2006.
HCA’s robust profit growth has raised the value of the firms’ holdings to nearly three and a half times their initial investment in the $33 billion deal.
The financial performance has been so impressive that HCA has become a model for the industry. Its success inspired 35 buyouts of hospitals or chains of facilities in the last two and a half years by private equity firms eager to repeat that windfall
But there has been a cost. Going as far back as 2002 and as recently as 2010, Abelson and Creswell reported, some cardiologists at several HCA hospitals were performing unnecessary procedures—including invasive procedures like cardiac catheterization and heart stenting—thus driving up costs and increasing profits while putting patients at risk. “Rather than asking whether patients had been harmed or whether regulators needed to be contacted, hospital officials asked for information on how physicians’ activities affected the hospitals’ bottom line,” Abelson and Creswell reported. Cardiac procedures are among the most profitable for hospitals; facilities in the same cities often engage in a medical arms race for patients.
At Lawnwood Regional Medical Center in Ft. Pierce, FL, what the Times called “a financial juggernaut” for HCA, accounting for 35 percent of the hospital’s net profits, a 2009 business plan identified one cardiologist as the hospital’s most profitable doctor and described him as “Our leading EBITDA MD.” EBIDTA is earnings before interest, taxes, depreciation, and amortization, a measure of corporate earnings.
But a few months earlier an outside hospital reviewer had told Lawnwood execs that the same doctor was too quick to perform catheterization without first doing necessary stress tests to see if patients really needed the expensive, invasive procedure.
HCA has been in trouble before—when Rick Scott, now the governor of Florida, was in charge of the company, then known as Columbia/HCA. The father of former Sen. Majority Leader Bill Frist founded the company back in 1968. In the late 1990s, The Wall Street Journal reported the chain had begun looking at profitable diseases as “product lines,” and requiring hospital chief executives to meet ambitious goals—and sometimes beating their numbers by 15 to 20 percent each year. Eventually such pressures got the chain in trouble with the Feds; the FBI uncovered a Medicare billing fraud scheme. The chain settled with the government, paid a fine, and dismissed Scott, who was never accused of wrongdoing. Last year The Palm Beach Post discovered that Scott had used high pressure tactics at his chain of Soltanic Urgent Care clinics, which had just been sold to a private equity firm. The Post reported that the clinics with Scott in charge had used a bottom line, bonus-focused management that encouraged a culture of cheating. One doctor told state investigators “they care about how fast you see people.” He was later fired.