Hospital Giant Plans Sweeping Overhaul in Midst of Probe

Columbia/HCA Healthcare Corp. on Thursday outlined a sweeping overhaul that would end some of the practices that led to a federal criminal probe, curb acquisitions and slow the company’s rapid growth.

The nation’s largest for-profit hospital chain plans to dump its home health-care business, eliminate bonuses to managers meeting monthly financial targets, open its books to investigators and keep a tighter rein on government reimbursements, said Thomas F. Frist Jr., Columbia’s chairman and chief executive.

The company plans to concentrate on the hospitals it now owns and end its aggressive acquisitions policy. Columbia said it didn’t yet have a buyer for the $1.2-billion home-health unit, which provides medical services at home after patients have left the hospital.

“I feel strongly that this meteoric pace that we were on, while maybe appropriate in the past, it’s far more appropriate now to take a pause, a deep breath and focus . . . on the systems in place,” Frist said.

Selling the home-health businesses and ending controversial practices would likely make Columbia less of a lightning rod for criticism in the industry. But it’s also likely to cut into the lucrative chain’s 13% to 15% annual profit growth, said Peter Emch, an analyst at Alex. Brown & Sons.

Nevertheless, investors may settle for long-term stability, he said.

“Investors at this point are looking for signs that the company has a way of putting the government investigation behind them and then trying to assess what the growth prospects of the company are,” Emch said.

The federal government’s probe, first brought to light March 19 with a search of Columbia’s El Paso facilities, involves whether Columbia overbilled the Medicare health-care program. The probe also concerns doctors’ practices and whether patients were inappropriately funneled through Columbia’s network of hospitals.

Columbia’s attorneys discussed the plans Wednesday with Justice Department officials. Justice spokeswoman Carole Florman declined to comment on the plan but said the department encourages providers to implement “meaningful corporate integrity programs.”

The changes do not mean the company is conceding it has done anything wrong, Frist said. The company has hired law and accounting firms to conduct an independent investigation but wanted to make changes first, said Jack Bovender, who became Columbia’s president on Monday.

“We need to move, and we need to move quickly to regain the confidence of patients, doctors [and the public],” Bovender said.

Frist stressed that the changes won’t mean an outright ban on acquisitions, and Columbia will continue to pursue those deals it already has started.

It was not immediately clear whether that includes pursuing reported merger discussions with Santa Barbara-based Tenet Healthcare Corp.

Shares of Nashville-based HCA fell 38 cents to close at $34 on the New York Stock Exchange.

In the last 10 years, Columbia has grown from two El Paso hospitals to 342 hospitals, 150 outpatient surgery centers and more than 570 home-health centers in 36 states, England, Switzerland and Spain.

Columbia’s home-health sites represented just about 5% of last year’s $20 billion in revenue. Per patient, they tend to be more profitable than the company’s 342 hospitals, because Medicare usually pays the amount charged by the company, whereas hospitals receive a lump-sum fee for treatment provided.

Finding a buyer for the home-health unit may not be easy, analysts said. Of the large home-health businesses, Apria Healthcare Group Inc. is up for sale. Olsten Corp., which provides some home-health services for Columbia, is facing government searches and litigation stemming from the probe.

Columbia’s home-health business could be sold to another company, broken up and sold, or spun off. Frist said no decision had been made, except that Columbia will have no interest in it.

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