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 thrived.
Profits at health care industry giant HCA have soared, far outpacing those of most of its competitors.
HCA controls 163 hospitals from New Hampshire to California, including West Valley and the Eastern Idaho Regional Medical Center in Idaho Falls.
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.
HCAs robust profit growth has raised the value of the firms holdings to more than three 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 past few years by private equity firms eager to repeat that windfall.
HCAs emergence as a powerful leader in the hospital industry is all the more remarkable because only a decade ago the company was badly shaken by a wide-ranging Medicare fraud investigation that it eventually settled for more than $1.7 billion.
Among the secrets to HCAs success: It figured out how to get more revenue from private insurance companies, patients and Medicare by billing much more aggressively for its services than ever before; it found ways to reduce emergency room overcrowding and expenses; and it experimented with ways to reduce the cost of medical staff, a move that sometimes led to conflicts with doctors and nurses over concerns about patient care.
In late 2008, for instance, HCA changed the billing codes it assigned to sick and injured patients who came into the emergency rooms. Almost overnight, the numbers of patients who HCA said needed more care, which would be paid for at significantly higher levels by Medicare, surged.
HCA, which had lagged the industry for those high-paying categories, jumped ahead of its competitors and was reimbursed accordingly. The change, which HCAs executives said better reflected the service being provided, increased operating earnings by $100 million in the first quarter of 2009.
HOW HCA REDUCED MINOR ER USAGE
The hospital giant also adopted a policy meant to address an issue that bedevils hospitals nationwide reducing costs and overcrowding in its emergency rooms. For years, the hospital emergency room has been used by the uninsured as a de facto doctors office a place for even the most minor of ailments. But emergency care is expensive and has become increasingly burdensome to hospitals in the last decade because of the rising number of uninsured patients.
HCA decided not to treat patients who came in with nonurgent conditions a cold or the flu or even a sprained wrist unless those patients paid in advance. In a recent statement, HCA said that of the 6 million patients treated in its emergency rooms last year, 80,000, or about 1.3 percent, chose to seek alternative care options.
Many ERs in America, particularly in densely populated urban areas where most HCA-affiliated facilities are located, have adopted a variety of systems to determine whether a patient in fact needs emergency care, the statement said. About half our hospitals have done so. Typically, our affiliated hospitals have two caregivers usually a triage nurse and a physician make that determination. It should be noted other non-HCA affiliated hospitals are using similar processes to address ER issues.
As HCAs profits and influence grew, strains arose with doctors and nurses over whether the chains pursuit of profit came at the expense of patient care.
BEDSORES SUGGEST INADEQUATE STAFFING
HCA had put in place a flexible staffing system that allowed it to estimate the number of patients it would have each day in its hospitals and alter the number of nurses it needed accordingly.
Several nurses interviewed said they were concerned that the system sometimes had led to inadequate staffing in important areas like critical care. In one measure of adequate staffing the prevalence of bedsores in patients bedridden for long periods of time HCA clearly struggled. Some of its hospitals fended off lawsuits over the problem in recent years, and were admonished by regulators over staffing issues more than once.
Many doctors interviewed said they had felt increased pressure to focus on profits under the private equity ownership. Their profits are going through the roof, but, unfortunately, its occurring at the expense of patients, said Dr. Abraham Awwad, a kidney specialist in St. Petersburg, Fla., whose complaints over the safety of the dialysis programs at two HCA hospitals prompted state investigations.
One facility was fined $8,000 in 2008 and $14,000 last year for delaying the start of dialysis in patients, not administering physician-prescribed drugs and not documenting whether ordered tests had been performed.
QUALITY MEASURES SHOW IMPROVEMENT
HCA says that more than 80 percent of its hospitals ranked among the top 10 percent in the country for federal quality measures, compared with 13 percent in 2006 when it went private. Last year, the company provided a $2.68 billion provision for charity care. And under the control of its private equity owners, HCA has invested around $8 billion in its hospitals in the last five years, according to Securities and Exchange Commission findings.
You must know that we firmly believe that there is no sustainable business model as a health care delivery system that does not have at its core the provision of high-quality patient care and services, HCAs chief executive, Richard M. Bracken, wrote in an email to The New York Times last year.
Achieving a balance between profit and care is harder for investor-owned hospitals like HCA than for others, some experts say.
If you were a for-profit hospital with investors and shareholders, said Paul Levy, a former nonprofit hospital executive in Boston unaffiliated with HCA, there would be a natural tendency to be more aggressive and to seek more revenues.
Executives at profit-making hospitals are judged in greater measure by profitability than the administrators of nonprofit hospitals, he said.
Profit-making systems like HCA are often in a better position to invest in improving their hospitals and taking advantage of the latest in new technology. Their sheer size often allows them to negotiate lower prices for everything from X-ray machines to pharmaceuticals, which can, in theory at least, be passed onto consumers.
JUSTICE DEPARTMENT SEEKS INFORMATION
But some of HCAs tactics are now under scrutiny. Last week, HCA disclosed that the U.S. attorneys office in Miami has requested information about cardiac procedures at 10 of its hospitals in Florida and elsewhere.
HCAs cardiac business is extremely lucrative, and the Justice Department has requested reviews that HCA conducted that indicate some of the heart procedures at some of its hospitals might not have been necessary and resulted in unjustified reimbursements from Medicare and other insurers.
To analyze HCAs business model, The Times examined federal and state hospital records, lawsuits and regulatory investigations, and interviewed dozens of current and former doctors, nurses and administrators. It also carried out an extensive data analysis based on statistics from the Centers for Medicare and Medicaid Services, the Florida Agency for Health Care Administration and the American Hospital Directory, a private company that processes and resells federal health care data.
The Idaho Statesman contributed.