Central Florida's largest hospital operator sees the patient as profit center - to ill effect The day has come when somebody has to do in the hospital business what McDonald's has done in the fast-food business and what Wal-Mart has done in the retailing business. Richard Rainwater, co-founder,Columbia/ HCA Healthcare Corp. Do we have an obligation to provide health care for everybody? Where do we draw the line? Is any fast-food restaurant obligated to feed everyone who shows up? Richard Scott, co-founder, chairman, CEO and president, Columbia/ HCA Healthcare Corp. In the annals of modern American money-making, the conversion of publicly founded hospitals into investor-owned facilities has been a stunning business success story. Not-for-profit hospitals -- created and supported with taxes and charity -- are being delivered in to private hands at a swift pace in the '90s. Communities, which were once represented on the boards of the not-for-profits, must now look to Wall Street as the final arbiter of how local hospitals are run. The duty of the not-for-profits was to the patient; the duty of for-profits is to the shareholder. "Health care is a business like anything else," says hospital takeover artist Richard Rainwater. One company dominates the field of investor-owned hospitals. Columbia Hospital Corporation was founded in 1987 and bought its first hospitals in June 1988, in El Paso. Six years later, after a tidal wave of mergers and acquisitions, it had become Columbia/HCA Healthcare Corporation, headquartered in Nashville. Columbia now owns 348 hospitals in 38 states, and its management talks of soon owning 500 hospitals -- 10 percent of the nations total. At its current rate of 35 to 50 hospital takeovers a year, this bottom-line enterprise will be in every state of the Union in a few years. Columbia also owns hundreds of outpatient diagnostic and surgery centers, nursing homes, home care units, blood centers and psychiatric facilities. Add Columbia's growing interest in owning managed care systems, which control health care access, and every piece of the patient-for-profit puzzle is in place. Today Columbia/HCA, with some 285,000 employees, ranks as the ninth-largest non-government employer in the United States. The heaviest concentration of Columbia facilities is in Texas and the Southeast; in Florida Columbia owns more than one-quarter of the hospital beds. The company is the largest private employer in both states. The Northeast, long considered a bastion of not-for-profits, saw two Columbia deals cut in Massachusetts this year. In Ohio, Columbia's attempt to buy a majority stake in Blue Cross-Blue Shield for less than market value is being met with consumer protests and lawsuits. Also in Ohio, the Vatican pushed through the sale of a half-interest in its three-hospital Sisters of Charity St. Augustine Health System to Columbia over the protests of several high-ranking figures within the church's hierarchy, notably Joseph Cardinal Bernardin of Chicago. Whether you belong to an H.M.O., have commercial insurance, receive Medicaid or pay for health care out of your own pocket, you may very well end up in a Columbia facility. Columbia's co-founder, Richard Rainwater, 52, acquired a reputation for shrewd deal-making while helping oversee the assets of the Bass family of Texas, turning $50 million in 1970 into $5 billion by 1986. His most successful coup for the Basses was acquiring a minority stake in the Walt Disney Co., whose value mushroomed after Rainwater helped install a new management led by Michael Eisner. Rainwater's current interests include oil, gas, real estate -- and hospitals. This year he added a stake in Magellen Health Services -- the nation's largest chain of psychiatric hospitals -- to his Columbia holdings. Rainwater's net worth more than doubled from 1990 to 1995, exceeding $750 million. Columbia's chairman, president and CEO, Richard Scott, 43, is arguably the most powerful individual in the health care industry today. While bidding unsuccessfully in another hospital buy-out (for Hospital Corporation of America -- HCA -- with which Columbia merged in 1994), Scott met Rainwater, who was also looking to take over HCA. Each put up $125, 000 in 1987 to form Columbia. Scott's holdings in Columbia are today valued in the neighborhood of $350 million. The Frist family of Tennessee plays a major role in Columbia, too, with holdings approaching three-quarters of a billion dollars. Thomas Frist Jr., an M.D. whose doctoring was limited to two years as a flight surgeon in the Vietnam War, is the company's vice chairman. Frist is considered a pioneer in the privatization of health care, having co-founded HCA with his father in Nashville in 1968. A brother, Republican Sen. Bill Frist of Tennessee, also a doctor, created a stir in Washington last year when he appeared on television commercials in support of Republican-sponsored Medicare legislation. When HCA merged with Columbia two and a half years ago, Frist's HCA brought 96 hospitals to the deal. Columbia, now a $20 billion corporation, has seen its stock rise at twice the rate of the Standard & Poor's 500 since 1990. The company's profit goal -- 20 percent gross return on revenues -- is formidable. The New England Journal of Medicine reported in August that chief executives of the company's hospitals are summoned to Nash- ville when their institutions fall short of the 20 percent. With a hefty cash flow and a stock price on solid ground, Columbia continues to be in a position to meet its ambitious expansion plans. In its 1995 annul report the company touts its achievement in selling 100-year corporate bonds -- only four companies in 40 years have successfully floated such long-term issues. Columbia is planning a long reign. Good Samaritan Health System in San Jose, Calif., was heavily in debt when Columbia wasted no time making clear its expectations: The company intended to make a profit of $40 million in its first year there. Such a return would be very ambitious for any corporation; in the context of health care the implications were startling. It meant taking a substantial operation -- Good Samaritan includes four area hospitals, the region's largest home care agency, physician offices, clinics and family medicine centers -- that was very much in the red and turning a large profit, all in one year. And that meant, as nurses at Good Samaritan and elsewhere in the Columbia system discovered to their growing dismay, deep cuts in patient services. While many hospitals today are cutting back, most are not doing so just to make profits. Melinda Markowitz, Marilynne Kenefick and Dorrie Ward are registered nurses in the Good Summation Health System. All are members of the California Nurses Association, which negotiated a new contract with Columbia this past summer. (When Columbia purchased Good Samaritan it unilaterally terminated the nurses' contract. The overwhelming numbers of hospitals taken over by Columbia to date have been without unions.) Markowitz says that nurses are "stretched to the limit" by being assigned new and additional tasks. In surgical recovery, she notices that patients are not being assisted in walking after surgery, which is important to their recovery. According to Markowitz and her fellow nurses, there are delays of up to 45 minutes in providing medications and in other treatments. Kenefick, who also works in surgical recovery, says that she is not working up to nursing standards, such as the regular monitoring of vital signs. This monitoring and checking on those with physical restraints have been essential tasks in her 35 years as a nurse. "I can't do it all with 12 other patients assigned to me," says Kenefick. She says that since Columbia took over there have been "dust balls in the recovery room," part of the "filthy conditions" she is witnessing for the first time and that make patients vulnerable to infection. Kenefick is particularly disturbed by management telling nurses to administer cancer drugs, an area of expertise reserved for oncology nurses. For Ward, who has been a nurse at Good Samaritan for almost 20 years, the recovery room where she works is chronically understaffed. The surgical floor once had 22 nurses; nine have been cut or transferred, including six RNs. The elimination of overnight housekeeping has left the facility very dirty. "Quality and safety have been going down since a new staffing matrix went into effect on May 1," she says. She especially resents Columbia's open disregard for professional nursing standards in its demands for mandatory overtime. "People do get hurt. Medicine cannot be treated like a factory product," says Dr. Jamal Modir, a surgeon at Good Samaritan who has watched his hospital's conditions decline since Columbia's arrival. Dr. Modir has worked there for 23 years, served as chief of surgery and was a member of its governing board of doctors. He also owns a minority interest in a local surgical clinic bought by Columbia. Like the nurses, Dr. Modir is troubled that supplies are sparse and the quality of some items, such as surgical gloves, has declined. He says that his fellow surgeons doing orthopedic work have complained that they can no longer obtain the prostheses they are accustomed to using. "It seems that the economy has overshadowed surgical expeditiousness. There is an area beyond which no medicine ought to be jeopardized by business." To Dr. Modir the importance of having registered nurses -- as opposed to unlicensed assistants -- on staff cannot be overstated. "When I get a call from an assistant -- as opposed to an RN -- I have to ask myself, 'Can she recognize a crisis?'" Not-for-profit hospitals, like Good Samaritan before Columbia bought it, are in financial trouble and vulnerable to takeover precisely because they do not stand apart from the profit-making system that defines all economic activity in this country. They serve as conduits for the profit-making of medical technology manufacturers and pharmaceutical and supply companies, and for the excessive fees of doctors, especially surgeons. These profits and fees have been very high, as witnessed by health costs outpacing inflation. But not-for-profits continue to serve uninsured patients and take losses in providing vital services, including AIDS care, trauma units, neonatal intensive care, burn care and organ/transplant units. They customarily make up their losses with profits from other services, a process known as cross-subsidization. Not-for-profits also allocate scarce resources for research and teaching as part of their public health mission. In such an environment many struggle for survival, and some are now scurrying to merge and reduce costs. Mismanagement and exorbitant salaries for top executives have accelerated their demise. Another problem associated with not-for-profits, so-called overcapacity -- or unfilled beds -- has more to do with the fact that millions of Americans lack insurance than anything else. What Columbia brings to a deal with such struggling hospitals is cash to meet their debts. Many not-for-profits have little choice: The rise of managed care, cuts in Medicaid and other sources of cross-subsidies have reduced their income. Columbia's heralded "cost-effectiveness" -- the scale of its operations allows for reduced costs in purchasing medical equipment and supplies -- may lower the company's purchasing costs, but after shareholder dividends and increased advertising costs are factored in, average charges to patients remain very high. So much for being the Wal-Mart of health care. One Columbia-owned hospital in Georgia charges $14,582 for the average stay of a stroke victim; a similar public hospital charges just $6,735. In Virginia, where Columbia has a major hand in the private hospital sector, charges average 33 percent more. Furthermore, as the experience of Good Samaritan shows, quality goes down. To clear the path of physician resistance to a takeover bid, Columbia sometimes offers partnerships in the hospital to local doctors. (Columbia has also bought more than 1,400 medical practices.) Columbia's pitch to doctors does not go in for subtlety. Consider Columbia administrator Jon Trezona's letter of March 24, 1994, to surgeons in Fort Pierce, where one of the nine facilities that comprise Columbia's Central Florida division is located: "I feel you will become very excited about the Columbia/HCA investment opportunity. ... I pledge to you that Columbia/HCA will utilize all appropriate resources to insure the failure of any competing surgery center in our community." (Emphasis in original.) The potential for conflict of interest by participating physicians has not gone unnoticed. Florida state officials compiled a report in 1993 citing Columbia hospitals for "the possibility of cream skimming" -- the practice by which doctors keep in one hospital patients whose illnesses are billable and send to competing institutions those on whom they will lose money. In some areas where it has displaced not-for-profits, charitable care has become a thorny issue for Columbia. In Lee County -- a market hotly contested by Columbia -- Florida officials calculated that in 1994 the public hospital provided $13,120,559 in "charity/uncompensated care." The total for Columbia's three hospitals in the county: $1,037,404. In 1995 the U.S. Department of Health and Human Services levied a fine of $55,000 against Columbia's Blake Medical Center in Bradenton for denying two patients emergency care -- the highest single penalty for "patient dumping" ever paid by a hospital. This year in Tennessee a proposed law requiring hospitals to report the amount of community benefits they deliver, including charity, was opposed by Columbia. The bill was killed. Modern Health-care, chiding Time for its 1996 designation of Scott as one of America's 25 most influential citizens, wrote, "And nary a word about charity care was spoken." "There is a fundamental disjunction between what we need now and what the investor-owned health-care industry, by its nature, is prepared to do," says Dr. Arnold Relman, professor emeritus at Harvard Medical School and former editor of The New England Journal of Medicine. Relman, a harsh critic of Columbia, sees another vulnerability in the for-profit system. "The educational and research component is beginning to stagger," he warns. "The day of judgment is not far away." Columbia argues that the taxes it pays -- not-for-profits pay none -- more than compensate for any decline in charitable services. However, the added tax revenues do not translate directly into health care outlays. To offset anticipated declines in care for the poor, and to recapture tax and other public support given over years to not-for-profits, states often require suitors like Columbia to place a sum of money into a charitable foundation. In these situations Columbia has taken an adversarial approach, bargaining hard with state officials on the amount to be contributed and under what terms the newly acquired facility will operate. In a high-profile case involving a hospital in Destin, emergency care was eliminated after a Columbia takeover. The nearest emergency room -- located at another Columbia facility -- required a 45-minute drive during the resort town's busy season, according to the town's fire chief. In the litany of charges leveled against Columbia perhaps none are more disturbing than its attitude toward criticism. Take the case of Dr. John Donaldson. Lee County, where there are five hospital, is on the state's southwest coast, an area that includes the city of Fort Myers. In 1993 Columbia purchased two of those facilities: Southwest Florida Regional Medical Center and Gulf Coast Hospital. At the time Dr. Donaldson, the only pediatric ear, nose and throat specialist in southwest Florida, was on the staff of Lee Memorial Hospital, a highly regarded public facility that received no tax money and survived by careful management. For more than 50 years Lee Memorial has provided care to the poor, elderly and disabled, regardless of ability to pay. Like most doctors in the area, Dr. Donaldson joined the Columbia-sponsored Physician Hospital Organization, through which doctors receive referrals. When in 1993 Columbia entered into negotiations to provide health care for the county's employees -- a contract then held by Lee Memorial, and much valued because the employees made up the second-largest group of patients in the area -- Dr. Donaldson objected. To remove this patient base from Lee Memorial would hurt it. He saw this as unfair; after all, Lee Memorial provided 65 percent of hospital care to the county's indigent patients and on average charged less than the two local Columbia facilities. (In fact, this past May Florida's Attorney General, citing data that showed Columbia's charges were higher than Lee Memorial's, blocked the sale of another Lee County hospital to Columbia.) Dr. Donaldson wrote the physician in charge of Columbia's referral service, asking whether Columbia had been "entirely honest' in its contract negotiations with patient groups. "Have you disclosed the quality and level of service afforded in each of the various specialties? Gulf Coast Hospital Pediatrics is little more than a token service, lacking any sophistication required of Pediatric facilities in the 1990's." In a guest column that appeared in the local paper, Dr. Donaldson wrote: "For a hospital to merely put a few cartoons on brightly painted walls in order to name a unit 'Pediatrics' without making the necessary investment constitutes misrepresentation of carriers and patients." For voicing these opinions, Dr. Donaldson was forced by Columbia to resign from its Physician Hospital Organization. The chairman of the board of trustees of Columbia Gulf Coast, Dr. Robert Savona, acknowledges that at the time Dr. Donaldson made these accusations he was correct, but Dr. Savona insists that today the hospital provides outstanding pediatric services. However, a Gulf Coast ad features one specialist who actually lives two hours away and visits the hospital just twice a month. And there are reports that Gulf Coast patients in need of specialized care are transported 100 miles north to another Columbia facility rather than referred across town to Lee Memorial. No sense aiding the competition. The Columbia presence in Lee County is dwarfed by its holdings in the Tampa Bay area to the north, where it owns 14 hospitals and numerous support services. In the fall of 1995, Columbia officials met in secret with the trustees of Tampa General Hospital, the only public facility in the area, to discuss a sale. The St. Petersburg Times got wind of the clandestine meeting and vigorously objected in an editorial: "The trustees used a new legal loophole as their excuse for shutting out the public. ...The public already fears that the hospital may be sold or leased to a private company whose interests are tied more to profit than health. Closing the doors did nothing to ease those fears." Columbia promptly pulled all its advertising from the Times and banned the paper's sale on hospital premises. (Columbia officials declined to respond to the issues raised in this article.) Columbia's recent advertising blitz -- which at an estimated cost of more than $40 million is the most lavish yet in the health care field -- featured the slogan, "Health care has never worked like this before." California Rep. Peter Stark, who has closely monitored Columbia's activities from his seat on the House Ways and Means health subcommittee, agrees. In a speech before the American Medical Group Association in September he said, regarding Columbia's top executives, "Hopefully, they will all be in jail soon for the crimes that they have committed across the country." Making fat profits on hospitals at the expense of the poor and the sick may not be a prison offense in this country. What is a crime is the galloping privatization of the nation's health resources and the rise of a competitive health care system that has less and less to do with health and access to care and everything to do with money. Reprinted with permission from The Nation. Sidebar: Sidebar: Columbia/HCA Healthcare Corporation facilities in Central Florida Winter Park Memorial Hospital Columbia Park Medical Center Orlando Columbia Medical Center Osceola Columbia Medical Center Sanford Columbia Medical Center Daytona Columbia Medical Center Peninsula (Ormond Beach) Columbia's Central Florida division also includes one hospital each in Fort Pierce, Port St. Lucie and Okeechobee
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