As recently as last spring, it looked like the Columbia/HCA Healthcare Corporation was on a roll that would never stop. The nation's largest for-profit hospital chain, which controls one third of the hospitals in metro Denver, was racking up record profits and acquiring community hospitals at a feverish pace.
Now Columbia's good luck has come to an end. The chain is weathering the biggest crisis in its decade-long history and faces surprising new local competition from a group of dissatisfied doctors at Columbia's Rose Medical Center. The uproar at the national level has also prompted a round of musical chairs in Columbia's local offices.
The bad news for Columbia has come fast and furious this summer:
* The federal government formally announced it is investigating Columbia for Medicare fraud, and federal agents raided Columbia facilities in seven states (but not in Colorado). Potential fines against the chain--which operates 342 hospitals and had revenues of $20 billion last year--could hit $1 billion. Columbia's stock price took a major dive as word of the investigation leaked out.
* Three Columbia executives in Florida have been indicted by a federal grand jury on charges that they inflated Medicare reimbursement claims. If convicted, the three could face more than $1 million in fines and prison terms of up to 25 years. the Wall Street Journal reported last week that federal prosecutors in Florida have evidence that Columbia charged the government for advertising and marketing expenses as well as for the cost of running hospital gift shops and cafeterias.
* Columbia CEO and founder Rick Scott resigned in the wake of the federal raids. Scott personally negotiated the purchase of several Denver hospitals by Columbia.
* Several of Scott's majordomos also stepped down, including Jamie Hopping, the Dallas-based district manager who oversaw Columbia's Denver hospitals and earned a reputation as a fiscal dragon lady with a devotion to Columbia's company-wide goal of 20 percent profit margins.
* The departures of Scott and Hopping prompted a change of leadership in the executive suite at Columbia/HealthONE, the joint venture that supervises six Denver hospitals. Local CEO Jeff Dorsey resigned last spring and took a job heading up the Colorado's Ocean Journey aquarium. Earlier this week Dorsey announced he was returning to his old job, saying the departures of Scott and Hopping made him feel comfortable working at Columbia again.
* A group of 95 doctors with longtime links to Columbia Rose Medical Center in Denver announced they were leaving Rose and forming their own medical group, Precedent Health Management.
Many of those doctors are highly critical of the way Columbia has run Rose since buying the hospital in 1995.
"My sense working at Columbia was the emphasis switched from patient care to the bottom line," says Dr. Jeffrey Mishell, Rose's former medical director and a co-founder of Precedent. "The directives came down from above: 'You have to show so much profit this quarter.'"
Mishell says he and other Rose doctors also began to hear complaints from patients about service at the hospital. "People in the community tell me the place is dirty," he says, "and there's deferred maintenance, paint peeling off the walls and linens unchanged."
His misgivings about Columbia's management are shared by Dr. Richard Abrams, another longtime Rose physician who is now serving as chairman of Precedent. "In order for Columbia to meet its financial goals, they had to cut costs," he says. "That means cutting important management and nursing staff. That can't help but compromise the quality of patient care. When there are several call buttons pressed at once, a nurse can only answer one at a time."
Like Mishell, Abrams says he has heard complaints from patients about their stay at Rose. "It's not the doctors who see dirty bathrooms and eat cold food," he adds.
Both Abrams and Mishell say they didn't see any examples of patients' medical treatment being affected by Columbia's cost-cutting, but they were troubled enough by Columbia's management to decide to launch their own medical group. "You must be willing to subordinate profits to the well-being of patients," says Abrams.
But Richard Anderson, chairman of the Columbia/HealthONE board that oversees Rose, says he hasn't seen any evidence that patient complaints have risen since Columbia took over. "The level of complaints since Columbia has been here has not accelerated," he says. "We have a huge organization, and things can go wrong, but I have full faith in the employees at Rose."
Besides Rose, Columbia owns or operates five other local hospitals: Presbyterian/St. Luke's, Swedish, Aurora Presbyterian, Aurora Regional and North Suburban. Even before the recent federal investigation, Columbia had become controversial in health-care circles for its aggressive pursuit of profits ("Roll On, Columbia," April 24).
Now the company is desperately trying to conduct damage control. Columbia's former vice chairman, Dr. Thomas Frist Jr., took over last month as CEO after Scott resigned. Frist, a pioneer of for-profit medicine who co-founded HCA before selling the company to Columbia in 1994, has taken several steps to revive the firm's damaged reputation. He has ended cash bonuses for managers whose divisions meet profit goals and has promised to open all of Columbia's books to government investigators.
"I've had several conversations with Dr. Frist, and his timely response is appropriate," says Anderson.
Frist has made it clear in public comments that he believes Scott and his management team went too far in their push for profits, and Anderson echoes the new company line. "Scott may have become overly aggressive and tried to apply nationwide financial objectives to every market," says Anderson.
He adds that Columbia/HealthONE employees won't miss Hopping, who sat on the Columbia/ HealthONE board and visited Denver monthly. "The employees feel Jamie Hopping's resignation was a good thing," says Anderson.
So far, according to Anderson, no federal agents have come knocking on the doors of any of Columbia/HealthONE's local hospitals.
While many wonder if the federal investigation into Medicare fraud will extend into Colorado, Abrams is quick to note that he never saw any examples of fraud at Rose. "I didn't see evidence of any false charges or fraud in their dealings with patients," he says.
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But he and the other Rose doctors were unhappy enough with Columbia's takeover of Rose to form their own medical group. Precedent recently agreed to buy the former Mercy Medical Center and plans to reopen it by early next year. Precedent--whose motto is "Health care with a conscience"--will mainly provide outpatient services at the former hospital and still plans to use Rose for its acute inpatient admissions.
Forming Precedent, says Abrams, is part of a return to his medical roots and the desire to treat patients without worrying about costs and profit margins.
"This is a different business than manufacturing," he says. "This is a business that involves people's lives and well-being. There are times when you have to make decisions that aren't necessarily profitable ones."
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