Not too long ago the prestigious New England Journal of Medicine carried a long, frank article warning of the voracious tactics and growing power of the world's largest hospital chain, Columbia/HCA.
And that same week, ads began appearing on TV, telling us what a wonderful idea CHCA was.You've probably seen the ads - warm fuzzies, with a chuckle: "Isn't it great that Columbia is more than just a hospital?" On the network news. On cable. Between speakers at the convention.
As described here recently, CHCA owns more than 340 hospitals in 38 states and hopes to add 30 or 40 more each year. Its favorite acquisitions are non-profit charitable or community hospitals whose assets accrued in a protected climate: tax-exempt, on free or public land, subsidized by caring givers, big and small.
CHCA, whose CEO says non-profits are parasites and have no right to exist, treats these community institutions the way any junk-bond merger-acquisition specialist treats a chain of department stores: lower overhead, cut staff and demand bulk discounts from suppliers. Squeeze the local competition with below-cost bids and a "one-stop shopping" complex of health care facilities.
"We want to be the Wal-Mart of the hospital business," says CEO Richard Scott.
When it bought a four-hospital chain in San Jose, Calif., CHCA wiped out or cut back 890 of the 4,500 full-time jobs. At a small East Florida hospital, it fired 42 and instituted "cross-training." For example, respiratory therapists were taught to draw blood, and nurse practitioners were assigned to take electrocardiograms.
CHCA spends $800 million a year with just one supplier - nearly 20 percent the supplier's U.S. sales. Of course they get a better price than the competition. Columbia can either squeeze out the competition of buy it and close it down. The Washington Post says the company has spent hundreds of millions on buying up facilities that it immediately closed down.
CHCA further hedges its investment by signing local doctors to exclusive contracts and letting them buy stock - thus limiting the flow of patients to competing hospitals - and raising conflict-of-interest questions.
Although Scott publicly says he wants 30 percent of each market, the Post says he told officials of one of his Virginia hospitals, "We have the goal of owning 100 percent of the market."
If you're looking at this as an investor, the picture is intriguing. According to Forbes, the business magazine, Scott was a Dallas lawyer "whose only previous business experience was running a couple of doughnut shops."
In 1987 he and a partner each put in $125,000 and borrowed $60 million to buy their first hospital. Each now has a $350 million piece of the company.
CHCA has more employees than GE or IBM and a market value equal to that of Eastman Kodak or Dow Chemical. Buying hospitals that were just breaking even, they turned them into a 20 percent operating margin - profit before interest, taxes, depreciation and amortization.
But if you're a patient or employee, your view is likely to be different. Many articles and e-mail notes from across the country raise serious questions about CHCA's commitment to quality health care and about its interest in the charity care for which many of their acquisitions were founded.
Dave Dillman, who has spent 26 years in the health care and medical device industry and now works for two non-profit systems, writes, "We are in a watershed moment in health care ... . The weight of charitable care could be fatal to not-for-profits, as companies like CHCA shift out from under their share of such care."
Jim Medley's e-mail note: "I can relate to everything you say, since I was the purchasing director for one of the community hospitals that Columbia targeted for takeover." Medley says Columbia actually used the hospital's employee pension fund as collateral to buy the institution. Then it told him to buy from cheaper suppliers ...
"The head nurse in ICU asked me, `If your own mother was in my care, would you want to use the low grade of catheter you're now buying'?"
After this and other indignities, Medley quit.
The image ads, which Medley sees in Newsweek, "are diametrically opposed to any real version of the truth."
CEO Scott seems to affirm this. He says he told the leaders of Congress, while lobbying against government limits on rising health costs: "I said you can't, and if you do, I will go build a hospital in Juarez, Mexico, in Tijuana, Mexico, in Bermuda ... . I'll Just take all those (patients and) all the jobs out of the country."
Scott's own mother, Esther, has said, "If Rick didn't win a game, he didn't enjoy it. He would quit playing if it wasn't going the way he wanted."