Columbia/HCA submission
pages
Background--The
USA--Australia--Business
Practices--Mayne--Conclusion--References
The many extracts on these
pages are from copyright material. They are owned by the reference
given or its owner. They are reproduced here for educational purposes
and to stimulate public debate about the provision of health and aged
care. I consider this to be "fair use" in the common interest. They
should not be reproduced for commercial purposes. The material is
selective and I have not included denials and explanations. I am not
claiming that all of the allegations are true. The intention is to
show the general thrust of corporate practices as well as the nature
and extent of any allegations made.
The day has come when somebody has to do for the hospital business what McDonald's has done in the fast food business.
Richard Rainwater co-founder Columbia HealthcareDo we have an obligation to provide health care for everybody? Where do we draw the line? Is any fast-food restaurant obliged to feed everyone who shows up?
Richard Scott co-founder. CEO and president Columbia/HCA HealthcareFromQuoted in "The Patient as Profit Center : Hospital Inc. Comes to Town by Carl Ginsburg The Nation November 18, 1996
Now Frist has stepped forward as Columbia's savior, pledging to inculcate a new sense of corporate values that will transform the beast into a respectable member of the healthcare community.
If he is to succeed, Frist must complete three Herculean tasks: He must convince the industry that he is cut from different cloth than his predecessors; he must convince federal investigators that he is highly cooperative; and he must convince Wall Street that the company will maintain its vigor. COMMENTARY: PHOENIX OR BUZZARD?: WILL COLUMBIA REALLY END ITS PREDATORY WAYS? IF SO, WHAT WILL WALL STREET THINK? Modern Healthcare Sep. 8, 1997
This page describes Thomas Frist and Richard Scott the two founders and central players in the drama surrounding Columbia, HCA and the merged Columbia/HCA as revealed by the available material. It looks at their differences, the cultures they spawned and the way they behaved. The leaders of Columbia and HCA represent a contrast in personality types. The text tells the story and the press extracts provide detail and flavour.
CONTENTS
Health Corporation of America (HCA) was a
medical and political dynasty. It was founded in 1968 by Thomas Frist
Snr, a Republican senator and his son Thomas Frist Jnr. Both were
surgeons. Frist senior wanted hospitals in which he could operate.
Frist junior practised surgery briefly during the Vietnam War but
after this he concentrated on business, the business of HCA. There is
little doubt that HCA's business practices and their success in the
marketplace owe much to Thomas Frist Jnr. Frist senior's other son
William, a cardiothoracic surgeon followed in his fathers political
footsteps and is a US senator. The family were strong supporters of
the US free enterprise business ethic for health care. HCA had what
every other company paid millions to secure direct political
influence.
I do not have a great deal of information about Thomas Frist Jnr but
it is apparent that he was a shrewd and ruthless businessman. He did
what he thought was necessary for success. HCA was surrounded with
the same web of stories suggesting disturbing practices as other
companies. Its hospitals were involved in the psychiatric scandal in
the 1990's and it reached a fraud settlement in Texas. Its powerful
political connections seemed to provide some protection. The Day One
television program exposed its practices in Nevada in June 1993. The
program claimed that HCA were not prosecuted because of their
political influence. Frist declined to be interviewed for that
program.
Many of the fraudulent practices which characterised Columbia/HCA
originated in HCA, allegedly as far back as 1984.
While Frist was a ruthless and successful businessman he was
relatively low key. He maintained better relations with the
community. Standards of care seem to have been maintained.
The company is continuing a series of changes led by chairman and chief executive officer Thomas Frist. Columbia doctors and employees say Frist's low-key style differs dramatically from the bold and acquisition-minded strategy led by Richard Scott, who was ousted as CEO last month after federal agents raided dozens of Columbia hospitals, offices and affiliated businesses. Illinois Joins Columbia/HCA Probes The New York Times August 29, 1997
Like its competitors NME and Humana, HCA grew rapidly in the early years. At the end of the 1990's Frist decided to reduce its size by spinning off Quorum and Healthtrust as separate companies. Both took HCA's fraudulent business practices with them.
Columbia was founded by Richard Scott, a
lawyer, and Richard Rainwater a businessman. Neither had any medical
experience or knowledge. They put up US $125,000 each and bought 2
hospitals. Ten years later the company owned 340 hospitals and 570
home health care centres. It was worth US $20 billion. It had taken
over one large major competitor after another. By 1995 it was
gobbling up not for profit hospitals at an alarming rate. VandeWater
became Scotts right hand man.
Scott and Rainwater who had no prior health experience saw not for
profit community health care as an obsolete system. They knew that
they had the answer. They considered that health care should be
packaged like any other product and traded aggressively in the
marketplace. They modelled themselves on McDonald's and
Wal-Mart.
No other operator of hospitals has become so successful or so big so fast in the increasingly cost-conscious system of American medicine. At the heart of that achievement is an aggressively competitive vision of medical care, one that applies the practices of corporate America to an industry still dominated by not-for-profit institutions.
These practices include not only in-your-face marketing, but hospital takeovers, cost-cutting and layoffs, volume purchasing, complex pricing strategies and large monetary incentives for managers who meet financial targets.
-----------------------------
Columbia has used bare-knuckled competitive industry. Critics say the company can be unnecessarily ruthless and even petty when it does not get its way, from suing communities that reject its efforts to acquire hospitals to maintaining a skeletal hospital with only two inpatient beds, in order to avoid surrendering a valued operating license A Hospital Chain's Brass Knuckles, and the Backlash The New York Times May 11, 1997
The company held itself out as a model for the increasingly cost-conscious world of health care, applying the competitive and profit-driven practices of corporate America to an industry still dominated by not-for-profit institutions named for saints and samaritans.
As Scott acquired hospital companies far bigger than his own, his reputation grew to the point that last year he was named by Time magazine as one of the "Time 25," a list of exceptionally influential people. Two Leaders Step Down at Health-Care Giant The New York Times July 26, 1997
The executive, Richard L. Scott, has been the most visible proponent of the philosophy behind for-profit hospitals -- that healthy patients and healthy profits do not conflict. When Healing Collides With the Bottom Line The New York Times July 27, 1997
Scott, a lawyer with no health care experience before Columbia, talked of hospital care like a factory foreman, referring to diseases as "product lines.'' Whether "admitting patients or making a radio,'' he wrote, by eliminating errors "you dramatically reduce costs.''
"One of my favorite books is `Behind The Golden Arches,' the history of building McDonald's,'' he wrote. "McDonald's knows that ... great companies take these ideas and share them and implement them across their markets.''
In the spirit of McDonald's, Scott launched in a nationwide branding campaign designed to make Columbia's name equally prevalent, spending millions of dollars in advertising and adding ``Columbia'' to hospital titles. He wrote that hospitals, including Columbia, "have failed to differentiate themselves in the minds of patients, employers, insurance companies and the government.'' E-Mail Reveals Columbia-HCA Leader The New York Times September 10, 1997
Scott relied on incentives linked to profit and fired those who failed. Administrators were given considerable freedom provided they performed economically. This policy would have prodded staff to pursue the fraud more aggressively to earn their bonuses. Perhaps he had little knowledge of what was happening and preferred not to look. He did not believe the allegations.
The company intensely pressures managers to raise profits by cutting costs and increasing patient revenues. Administrators have been able to almost double their salaries through bonuses based almost entirely on meeting financial targets.
----------------------
Some doctors, nurses and administrators, angered by rapid staff cuts that raise profits, are questioning whether care is being compromised -- an accusation that the company sharply disputes.
----------------------
Then there is the threat of losing one's job. In 1995, 100 of about 350 Columbia hospital administrators were replaced, according to the Advisory Board, and while many were promoted or left voluntarily, the consulting company found, large numbers were "moved out" of the organization.
-------------------------
Colby, the former chief financial officer, described how Wall Street's expectations make their way to the local hospital. Columbia sets targets for yearly profit growth -- typically about 15 percent. Each of the company's regional managers must deliver his or her prescribed portion. Regional executives, in turn, give hospital administrators targets to meet.
When a hospital lags behind, administrators can be called to task, more than a dozen past and present company executives said. "The message was very clear that either you would achieve these goals or they would find someone who would achieve those goals," one former hospital administrator said.
---------------------------
"You have a highly decentralized system that grants a lot of autonomy to local and regional officers, and those officers have very significant monetary incentives tied to the net profitability of their markets," Leifer said. "I feel that this could be a prescription for disaster, because it can create tremendous temptation to make budget at times by inappropriate action." A Hospital Chain's Brass Knuckles, and the Backlash The New York Times May 11, 1997
HCA, which Frist headed before selling it to Columbia, reviewed hospital earnings quarterly, but Columbia took scrutiny to a new level. Administrators who missed monthly budgets had to write extensive reports explaining what happened and how they planned to boost profits.
The 10 lowest performers had to meet with Scott and senior managers.
"That was a party you never wanted to be invited to,'' said Steve Hoelscher, who headed a Columbia hospital in Georgia and now oversees a Tennessee nonprofit hospital. Columbia/HCA Profit Pressure BlamedThe New York Times September 7, 1997
Scott was obviously impressive and very
persuasive. Frist was impressed and agreed to merge HCA with Columbia
in 1994. Scott became chairman and CEO running the show. Frist was
eager to bow out in due course and became vice chairman.
Scott turned out to be arrogant and controlling. He brooked no
opposition and ignored advice.
"This was a situation in which the board was so dominated by the CEO that when the time came, nothing short of a resignation would do," said James Orlikoff, a Chicago-based governance consultant. BOARD GAMES: SUIT ACCUSES COLUMBIA DIRECTORS, EXECS OF INSIDER TRADING Modern Healthcare Aug. 4, 1997
Scott strongly opposed government regulation
and was scathing about the not for profit tax exempt system. Some of
his statements sound as bizarre as Andrew
Turner. His policies were very
profitable and Columbia/HCA's continued growth made it the darling of
the marketplace.
"I don't think regulators want a player like that in their market," said Zack Shafran, a portfolio manager at Waddell & Reed. "People are looking for a partnership."
Scott has spoken out against regulating health care, most recently saying he opposed federal bills setting minimum standards for emergency care. The executive has also said that government health insurance would be better run by managed-care companies. Hospital chain is rebuffed | Columbia/HCA's plan for acquisition fails Union-Tribune March 14, 1997
- - - the company's former management refused to use the name "not-for-profit hospitals" when speaking of its primary competition. Instead, while pointing up the amount of money Columbia pays in taxes, the executives referred to the not-for-profit hospitals as "the tax-exempt hospitals." Columbia/HCA Abandoning National Focus, Shaking Up Management The New York Times August 25, 1997
Scott saw that linking the medical
profession to the corporate mission was the key to success. The laws
against kickbacks must have seemed archaic to him. He tied doctors to
the company with lucrative partnerships and believed that these were
not illegal.
El Paso is where Columbia Chairman and Chief Executive Officer Richard Scott began the company nine years ago, purchasing two hospitals. And it's with those facilities that Nashville-based Columbia pioneered its strategy of selling ownership interests in some hospitals in key markets to physicians. FEDERAL AGENTS STRIKE AT COLUMBIA'S ROOTS Modern Healthcare March 24, 1997
Scott's aggression, ruthlessness and unprincipled pursuit of the not for profit hospitals alienated vast sections of the community, and the medical profession. Opposition increased rapidly and culminated in an analysis by Kuttner in the New England Medical Journal in June 1996 followed by a scathing television documentary on 60 Minutes in October 1996. Representative Pete Stark was a vocal critic particularly of the company's financial partnerships with doctors which Scott claimed did not breach the Stark laws prohibiting kickbacks.
Louisville did not take the rebuke lightly (when Columbia moved from Louisville to Nashville). John Ed Pearce, a former associate editor of Louisville's Courier-Journal, wrote a commentary for the paper in January 1995 in which he lambasted Scott's business tactics: "And lo the scribe warned the worshipers: `Be not hasty to crown Slick Rick your king. For his heart is on business and is hardened toward civic duties and such. He loves not your city but what he can get from it."' COLUMBIA CLEANS HOUSE IN KY. Modern Healthcare April 14, 1997
Cain, the investment banker, said that Scott had brought new life to for-profit hospital stocks, which were "languishing on Wall Street" when he bought his first hospitals in El Paso. "But he expanded in such an antagonistic style that the government, the payers, the physicians and the not-for-profit hospitals are completely focused on him as the Darth Vader of the industry," Cain said. Chief Seems Close to Quitting at Columbia The New York Times July 25, 1997
By mid-1995 Columbia was aggressively coveting hundreds of not-for-profit hospitals as a way to build delivery networks. But resentment, controversy, opposition and bad press seemed to follow Columbia and Scott most places they tried to tamper with local hospitals.
---------------------
Other words by Columbia's second-in-command, COO David Vandewater, also would reverberate through the industry, as when he told the Healthcare Forum Journal in a March 1995 interview that Columbia is "not in the healthcare business. We're in the sick-care business." THE RISE AND FALL: DESPITE YEARS OF WARNINGS FROM COLLEAGUES, THE AGGRESSIVE AND OFTEN ARROGANT LEADERSHIP OF RICHARD SCOTT WOULD LEAD TO COLUMBIA'S TURMOIL Modern Healthcare Sep. 8, 1997
Like most closed-minded people Scott shielded himself from criticism. He had a public relations team which put up a wall between him and the public.
Members of the board had become distressed with Scott's management style. In particular, Scott would seek advice only from those people who agreed with him, said people close to the company. Anyone who disagreed with his approach was tossed aside as an impediment to his brand of change. Two Leaders Step Down at Health-Care Giant The New York Times July 26, 1997
While Columbia adjusts its corporate growth strategy, journalists who cover the company contend it often displays a bunker mentality in dealing with the press. From local newspapers to national television news departments, reporters and editors complain of problems in trying to get information and access to top executives such as Richard Scott, chairman and chief executive officer.
"I have seldom seen a better orchestrated stonewall than that undertaken by Columbia/HCA," says news veteran Mike Wallace, who last fall reported a widely anticipated story on Columbia for CBS-TV's "60 Minutes."
------------------------------
"For a period of months, I was told the meeting was open and I could go there," Dalton says. "When I arrived, PR people from the national association said Rick Scott and his people refused to allow him to be interviewed by myself or anyone, and that we would be barred if we physically attempted to enter the conference room."
------------------------------
Richardson, 50, is considered very loyal to Scott. On the rare occasions Scott does interviews, they often are in a controlled environment with Richardson at his side. COLUMBIA ON MEDIA DEFENSE
Modern Healthcare April 14, 1997
Glass doors that required a special electronic pass for employees wanting to enter the corporate offices were installed on the fourth floor of Columbia's main corporate building. Not all employees had access, and those that didn't would have to be greeted by someone from the corporate offices to get inside. THE RISE AND FALL: DESPITE YEARS OF WARNINGS FROM COLLEAGUES, THE AGGRESSIVE AND OFTEN ARROGANT LEADERSHIP OF RICHARD SCOTT WOULD LEAD TO COLUMBIA'S TURMOIL Modern Healthcare Sep. 8, 1997
Success made Scott increasingly arrogant and increasingly blind to any criticisms or advice. Frist increasingly found his advice ignored. He was side lined. He was more and more alarmed at Scott's conduct as community anger and hostility built up against the company. He considered retiring. Quite early on Rainwater's wife warned Frist and Rainwater about what was happening but the company was making money and no one would act.
Ms. Moore resigned from the board in early 1996 because a Rainwater investment posed a conflict of interest, but kept up with the company.
She voiced concerns about the company's operations to Rainwater and Frist, then Columbia's vice chairman and largest individual shareholder. With rising stock prices, $20 billion in sales and profits increasing as much as 20 percent a year, they saw little reason to act.
--------------------------
Scott assured Ms. Moore the company had done nothing wrong. Shortly before Scott's forced resignation, she said he was "disdainful'' of the investigation.
Frist told the magazine Scott never acknowledged a letter Frist gave him after the El Paso raids possible solutions to Columbia's problems. He said he considered quitting, but stayed at Ms. Moore's urging.
"I didn't know what to do," Frist said. "It was the most perplexing thing in my career.'' Former Columbia/HCA Director Talks The New York Times August 26, 1997
When the FBI raided the company in March 1997 Scott was dismissive and arrogant and played down the problems. He was clearly out of touch and did not believe that the company had done anything wrong. He saw only his own point of view and rationalised his position. This was a company where 30 employees had commenced Qui tam court actions and which would eventually pay out US $1.7 billion.
Richard Scott, Columbia chairman and chief executive officer, told analysts during a conference call last week that the Nashville, Tenn.-based company viewed its encounters with attorneys general and state and federal lawmakers as a "positive" way to explain the company's strategy. Some analysts have been bracing their investors for increased national media scrutiny and investigations of Columbia's deals.
"If we do the right thing, we win," Scott told analysts. "They (investigators) feel very good about what we're doing, otherwise we wouldn't be (completing as many acquisitions). We have to give people a lot more information." SCOTT SEES SCRUTINY AS OPPORTUNITY Modern Healthcare November 11, 1996
In prepared statements, Columbia officials continued to say they are baffled at the reasons behind the March 19 raid and subsequent confirmation by HCFA Administrator Bruce Vladeck that the agency is investigating allegations of DRG "upcoding" at the company's hospitals.
"To ensure accurate Medicare coding, Columbia has invested heavily in coding systems and technology developed by a highly regarded technology company and in the training of employees responsible
for Medicare coding," Columbia said in a statement last week. "It has been and will continue to be Columbia's expectation that our employees will abide by the law. If we have made mistakes, it is our goal to find out what they are and to work to correct them." COLUMBIA'S STORM BUILDS: COMPANY HONCHOS TRY TO CALM WORKERS AS TROUBLES SWIRL Modern Healthcare April 7, 1997
Columbia executives dismiss criticism as anecdotal misinformation from disgruntled employees or others who do not understand the company. They say that while Columbia is aggressive, it plays fair.
Richard L. Scott, chief executive of Columbia, said his company was only responding to demands to curb runaway medical costs. "There's no way, as taxpayers, as employers, as employees, as individuals, people are going to pay what they paid in the past for health care," he said. "So if you say, 'O.K., that's true,' then we've got to change."
A result, the company proclaims in advertisements, is health care that "has never worked like this before." (Compare next paragraph)
----------------------
An analysis performed for The New York Times using the most recent data available, from 1995, shows that the median charge for a hospital stay at Columbia, before any discounts, was $2,300, or 35 percent higher per patient than the industry norm, when differences in regional wages for employees and the mix of cases are considered.
----------------------------
"Columbia has much higher prices and slightly lower costs," said William O. Cleverly, a professor of finance who runs the center. "The reason they make more money, the majority of it, is related to prices, not cost." A Hospital Chain's Brass Knuckles, and the Backlash The New York Times May 11, 1997
As Columbia/HCA Healthcare Corp. Chairman and Chief Executive Officer Richard Scott stands by his company's physician-ownership strategy, some of the company's supporters wonder if it's necessary.
In an exclusive interview with MODERN HEALTHCARE, Scott said patients would suffer if federal laws were changed to force his company to unravel what have become controversial physician partnerships. STAYING THE COURSE: SCOTT SAYS COLUMBIA WON'T ABANDON DOC PARTNERSHIPS Modern Healthcare May 26, 1997
According to people with knowledge of the discussions, Scott handled the concerns by assuring the directors that the government had nothing on the company, that there were no problems.
Indeed, Scott had handled previous federal investigations with a disdain that is remarkable for the head of a public company. When federal investigators in Tampa, Fla., asked for him to be interviewed regarding certain accusations during an investigation in 1995, not only did Scott not agree to the interview but neither he nor the company even replied to the repeated requests.
--------------------------
But again, when directors questioned Scott about the issues being raised in the articles, Scott dismissed them, people familiar with the discussions said. Two Leaders Step Down at Health-Care Giant The New York Times July 26, 1997
Even when the FBI raided 30 hospitals across
the USA in July 1997 he refused to accept the seriousness of the
situation and the board was forced to fire him. Frist then set out to
recover the situation.
The corporate roof began caving in on July 16, when federal agents served more than 30 warrants at current and former Columbia facilities in six states.
That evening, Scott appeared on the CNN national business program "Moneyline" and dismissed the company's problems as unimportant. He called federal investigations such as the one his company was undergoing "a matter of fact in healthcare today."
It was the most public example of Scott's arrogance and miscalculation. And it would be the last.
--------------------
The board moves. Early the week of July 21, it was clear to board members that Scott didn't understand. It was over, they told him. THE RISE AND FALL: DESPITE YEARS OF WARNINGS FROM COLLEAGUES, THE AGGRESSIVE AND OFTEN ARROGANT LEADERSHIP OF RICHARD SCOTT WOULD LEAD TO COLUMBIA'S TURMOIL Modern Healthcare Sep. 8, 1997
Richard Scott, once celebrated as a visionary reformer of the U.S. hospital industry but more recently criticized for his aggressive tactics, resigned under pressure as chairman and chief executive, as did his handpicked lieutenant, David Vandewater.
Indeed, in interviews on Friday, Frist went to great lengths to emphasize that the Columbia of old was dead, and what was emerging was a gentler company that intended to be less combative with the government, competitors, its employees and the press.
----------------------------
In particular, Frist said, he intended to repair Columbia's tattered image with investigators.
"I have to send a very strong message to Washington that the new CEO of this company is very serious about addressing the government's concerns, and understands the gravity of the situation," Frist said. "This has got to be on the top of the priority list."
---------------------------------
But most important, Frist said he was ending Columbia's practice of selling ownership stakes in its hospitals to its doctors. - - - -
"This is one that is a no-brainer," Frist said of the doctor partnerships in hospitals. "They're gone." Two Leaders Step Down at Health-Care Giant The New York Times July 26, 1997
"We need to get out of in-your-face branding," Frist said in a July 31 interview at Columbia's Nashville headquarters. "The industry is not ready for that." COLUMBIA MARKETING EXEC RICHARDSON RESIGNS Modern Healthcare Aug. 11, 1997
It is important to avoid the hype and look at
what really happened. Scott's aggressiveness, arrogance and closed
mindedness created a wave of anger against the company but he did not
mastermind the fraud. This was undoubtedly the trigger which caused
the media and the attorney generals to closely scrutinise the
company, and the public to rally against it. It was the trigger which
set off the scandal.
The actual fraud started long before Scott arrived on the scene in
HCA in the 1980's when Frist was running the company. The major
whistle blower cases were lodged against HCA in 1993 well before the
merger with Columbia. The federal investigations started at this
time. These practices continued after Columbia and HCA merged.
Scott had little knowledge of health care and his management centred
on profit and growth. Columbia's growth was from money raised in the
sharemarket and Scott knew that he must keep profits high to keep
their support. He expected every executive and every hospital to play
its part in this and he didn't care too much how it was done.
Much of the problem was Scott's tendency to surround himself with
people who agreed with him and did his bidding. The lawyers who
advised him that his dealings were legal and who drove his PACMAN
activities must have been well paid for their services. Frist
subsequently fired them.
Frist repeatedly warned Scott but he simply ignored all advice and
distanced himself from Frist. Frist was not warning him about the
fraud but the arrogance and aggression which was alienating the
community and turning it against the company. It was not
sustainable.
Members of the board had become distressed with Scott's management style. In particular, Scott would seek advice only from those people who agreed with him, said people close to the company. Anyone who disagreed with his approach was tossed aside as an impediment to his brand of change.
------------------------------------
One person cut out by Scott was Frist himself. After selling HCA to Columbia, Frist began hearing criticism of Columbia's business practices from people with whom he had worked for decades. The hospital partnerships, which Frist had long opposed, also made him chafe. But his attempts to speak to Scott, and persuade him to adjust his tactics, went nowhere.
--------------------------
Toward the end of last year, communications with Frist were essentially cut off -- a critical mistake, because the former HCA executive was a board member and one of the company's largest shareholders. Two Leaders Step Down at Health-Care Giant The New York Times July 26, 1997
He (Frist) said he had warned Scott earlier this year that Scott's aggressive style was becoming a liability.
For as far back as October 1995, Frist said, he was telling Scott to tone down the company's aggressive style. But Frist said the Columbia style under Scott and Vandewater lit a fire under a "highly fragmented not-for-profit sector to come together.
-------------------------
Frist said the company's national branding campaign, which he described as an "in-your-face" effort, was not going to work for the long haul. - - -
------------------------------------
"The industry we're in is a not-for-profit industry," Frist said. "I don't think (Scott) ever understood that."
Scott's "if you don't join me, I'll beat you" mentality doomed Columbia from ever building a strong, healthy foundation for long-term growth.FRIST: IT'S TIME FOR A CULTURE SHOCK Modern Healthcare Aug. 4, 1997
Thomas Frist Jr. had been trying for nearly two years to get Richard Scott to listen to his warnings about the unnerving arrogance emanating from the company's executive suite in Nashville.
---------------------------
After the FBI raided Columbia's operations in El Paso, Texas, on March 19 this year, it became apparent to Frist that Scott needed more than the verbal warnings and subtle hints.
In late March he handed Scott a lengthy letter outlining problems. Frist also offered solutions.
---------------------------
Numerous interviews by MODERN HEALTHCARE with current and former Columbia executives as well as outside observers show Scott disregarded advice and suggestions by others that might have kept him at the helm.
----------------------------
Ironically, Frist had intended to wind down his involvement at Columbia before the El Paso raids prompted him to take action. In fact, he told Scott in January of this year that he wanted out of involvement with the company altogether by the end of the year.
-------------------------
Scott proceeded to ignore Frist's letter, while simultaneously continuing a suicidal trifecta that would lead to his downfall. He angered his competitors, the media and the government, and in so doing he wrote his own obituary at the company he founded in 1988. THE RISE AND FALL: DESPITE YEARS OF WARNINGS FROM COLLEAGUES, THE AGGRESSIVE AND OFTEN ARROGANT LEADERSHIP OF RICHARD SCOTT WOULD LEAD TO COLUMBIA'S TURMOIL Modern Healthcare Sep. 8, 1997
The main fraud originated primarily at HCA under Frist. It continued in Quorum and Healthtrust which were spun off from HCA. Columbia later acquired Healthtrust. When the fraud scandal broke Frist shrewdly played the good guy with a kindly face who put it all right and the market welcomed him. The unpopular Scott got all the blame. Few would have read the long reports describing what actually happened. Being part of the social establishment and having friends in high places must have helped.
Like so many of the corporate founders Scott was different and eccentric, brilliant but so focussed and closed minded that he saw only what he wanted to see. He was driven and had a mission. Scott was was out of place in the social scene in which Frist and HCA's senior staff moved.
Scott, 44, is lean and driven, almost a personal model for his company. He typically begins his days with 5 a.m. workouts. He neither smokes nor drinks.
"I've never heard him use a four-letter word," said David Colby, a former chief financial officer with the company.
Scott grew up in Kansas City, Mo., where his father was a truck driver and his mother worked, among other jobs, as a clerk at J.C. Penney. While in college, he made his first foray into business with his mother and brother, buying and reviving two Kansas City doughnut shops. A Hospital Chain's Brass Knuckles, and the Backlash The New York Times May 11, 1997
People close to Scott characterized his downfall in terms suitable for a Greek tragedy, portraying him as a brilliant and incisive businessman who was undone by his fatal flaws. Those flaws, they said, included an arrogance and aggressiveness that permeated the company. Two Leaders Step Down at Health-Care Giant The New York Times July 26, 1997
Different styles. Frist and the others welcomed Scott and his family to Nashville with open arms. When Scott and his wife, Ann, arrived, Frist and his wife, Trish, threw them a party. It was a vivid example of lifestyle clashes between the two men.
Scott simply wasn't suited for the Nashville cocktail party circuit. Nor did he care much about it. Frist, on the other hand, was quite active in social and civic endeavors.
Scott was more reserved and because of his busy work schedule liked to spend his limited free time with family. While he was devoted to his wife and 11- and 13-year-old daughters, Allison and Jordan, Scott was competitive even at play.
-----------------------
People who knew Scott for many years before he came to Nashville say he simply didn't run in the same circles as his predecessors, who had led HCA for the past quarter-century and were established in the city's society scene.
"You could live in Nashville for 50 years and still be an outsider," says Joshua Nemzoff, a Florida native who once worked for Ernst & Young in Miami and now operates his own firm in Nashville. "It's a Frist town. It always will be." THE RISE AND FALL: DESPITE YEARS OF WARNINGS FROM COLLEAGUES, THE AGGRESSIVE AND OFTEN ARROGANT LEADERSHIP OF RICHARD SCOTT WOULD LEAD TO COLUMBIA'S TURMOIL Modern Healthcare Sep. 8, 1997
Scott was a prolific writer of emails, often at unearthly times. They tell us more of the man.
Richard Scott - - - urged his managers to mimic Winston Churchill: ``Never, never, never, never give up.''
Two weeks later, the Columbia/HCA Healthcare Corp. chief executive quoted Hannibal as he prepared to cross the Alps: ``We will either find a way or make one.''
--------------------------
The missives obtained by The Associated Press, some sent before 4:30 a.m. and after 8 p.m., reveal a man with marathon work habits, a fondness for how-to books and a philosophy culled from such varied thinkers as George Bernard Shaw, Martin Luther King Jr. and Fred Astaire.
"Everyone I've ever known who has talked about the man has used the terms brilliant, driven and bizarre,'' said Jeffery Alexander, a Boston health care lawyer whose clients have worked with Columbia. "He would come up with these philosophical pontifications that were just out of left field.''
------------------------
A thrifty visionary, Scott quoted Matsushita Electric head Konosuke Matsushita: ``Any waste, even of a sheet of paper, will increase the price of a product by that much.''
When not quoting from the likes of Calvin Coolidge, Woodrow Wilson, Eleanor Roosevelt and Abraham Lincoln, Scott pored through the real-life Horatio Alger stories that line bookstores' business shelves, sometimes adopting their theories as his own.
-------------------------
Scott used his frequent dispatches as public relations tools, urging managers to lobby legislators and employees to pitch the company to friends. E-Mail Reveals Columbia-HCA LeaderThe New York Times September 10, 1997
Scott surrounded himself with those who thought like him and dispensed with those who thought differently.
Scott's hard-charging style was evident throughout the company by the beginning of 1996.
If Scott came to work at 6 a.m., others would be there before him. It got to the point where senior executives would try to "out-Rick Rick."
Scott preoccupied himself with work and insisted on being involved in practically all senior management meetings. He would get excited when his senior subordinates would offer up unique deals. Rather than cordially squelch the excitement when the ideas were risky, Scott would turn them loose. THE RISE AND FALL: DESPITE YEARS OF WARNINGS FROM COLLEAGUES, THE AGGRESSIVE AND OFTEN ARROGANT LEADERSHIP OF RICHARD SCOTT WOULD LEAD TO COLUMBIA'S TURMOIL Modern Healthcare Sep. 8, 1997
The problem of course is that being ethical and providing care does not equate with profits. While Frist may save the company by presenting this new image, the hard realities of the health care marketplace will eventually catch up with his successor and the company may like Tenet revert to type. It is now being run by the original HCA staff, the company where the fraud started.
But if Frist honors his promise to transform Columbia into a kinder, more genteel organization, there is no way such earnings growth will continue. Once Columbia abandons aggressive acquisitions, market consolidation strategies, home health services, the economic integration of its physicians, and other practices, it simply won't yield the same kinds of returns to its investors. COMMENTARY: PHOENIX OR BUZZARD?: WILL COLUMBIA REALLY END ITS PREDATORY WAYS? IF SO, WHAT WILL WALL STREET THINK? Modern Healthcare Sep. 8, 1997
Columbia/HCA submission
pages
Background--The
USA--Australia--Business
Practices--Mayne--Conclusion--References
This page created August
2003 by Michael Wynne
