Deconstructing The Columbia/HCA Investigation

Every issue raised by the current investigation into the business practices of Columbia/HCA serves as a signpost for the progress and problems inherent in market-driven health care reform. Actions against Columbia/HCA by regulators reveal deeply rooted resistance to the profit-motivated reforms embodied in the company’s philosophy: the public’s reluctance to accept necessary reductions in excess hospital capacity; the legal and cultural obstacles to the overdue alignment of physician and hospital economic interests; and the myriad reimbursement and accounting problems involved in the vertical integration of health care delivery. The investigation also underscores the antiquation of the reimbursement mechanisms and control systems in place for financing the delivery of care to Medicare beneficiaries. W hat the federal government may lack in tact it more than compensates for with its knack for symbolism. In March 1997, when investigators from the U.S. Department of Health and Human Services (HHS) Office of Inspector General embarked on what would mushroom into a widespread investigation into the business practices of Columbia/HCA, they did so by raiding for evidence the once beleaguered hospitals in El Paso that marked the formation of what grew into the largest health care company in the United States. This was followed by similar raids at Columbia/HCA facilities around the country, the indictment of executives, and accusations of systemic fraud and financial conflict of interest. The investigation has resulted in the ouster of the company’s founder, Richard Scott; the potential for recordbreaking fines that obervers expect to exceed one billion dollars; and a financial tailspin for the company that has gutted its stock price and forced it to auction off crucial pieces of what it had built in less than a decade. In the investigation, the federal government has broadly and publicly challenged the company’s core business philosophy and practices under Scott. The company has proved supremely successful at making money by consolidating facilities within local health care markets, developing vertical systems of care, and compelling the formation of similar systems throughout the country. Its methods have brought upon it the wrath of not-forprofit community hospitals, labor and local activists, and states’ attorneys general. On its march to market dominance, Columbia/HCA introduced market-driven strategies designed specifically to capitalize upon, by resolving, a number of key health system problems set in motion long before they manifested themselves in the cost crises of the 1980s. These problems are rooted in policy decisions of the 1950s and 1960s, when government mandates to build more hospitals, train more physicians, and fund open-ended care for the poor and elderly unleashed forces that grossly distorted the relationship be8 COLUMBIA