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Will Columbia Settlement Start with "B" ?

Columbia/HCA CEO Thomas Frist, a surgeon who hasn’t used his scalpel since he left the Air Force 28 years ago, is ready to put Columbia/HCA under the knife in the New Year. "Fortune" this week quotes sources as saying Columbia could settle with the government and pay more than $1 billion to avoid going to court in the biggest federal investigation ever into health-care fraud. It could happen in the first half of 1998, sooner than most expected, the magazine says. As for the cost of the settlement, one source says, “The number will definitely have a ‘b’ in it. Because 'billion' sounds very punitive." Frist tells "Fortune" he isn’t sure about the timing, but the magazine says Columbia likely will begin negotiations with the government by spring. "We need to put the distraction of this investigation behind us as quickly as possible," Frist says. Then what? Fortune says Frist plans to spin off Columbia assets tax-free into four new public companies. One will comprise rural hospitals, two others will include incomplete networks of hospitals, rehab centers and outpatient surgery centers, and the fourth will be a chain of 35 ambulatory surgery outlets. That will leave Columbia with a big network of mostly urban medical facilities with annual revenues of $14 billion, $6 billion less than Columbia’s current haul. "His idea," the magazine says, "is that Columbia will be worth more in pieces than as a whole." Down the road, "Fortune" predicts that if Columbia’s stock continues to languish, a leveraged buyout is a good possibility. Frist got richer with an LBO before, taking HCA private after splitting it up. Three years later, he brought HCA public again and sold it to Columbia. "History has a strange way of repeating itself," Frist tells "Fortune".


'Living with scandal'

In a long Sunday piece, The New York Times (12/21) "Scandal" reports on Columbia's "attempted makeover of epic proportions." The article says, "... the world's largest health care company is trying to find a new name, a new structure and a new purpose, and none of it is coming easily." Columbia employees say they are hectored in public because they work for the company. Trudi Kirby, a nurse supervisor at Columbia Park Medical Center at Orlando, Fla.., says she no longer wears her Columbia T-shirts to the supermarket for fear a shopper will ridicule her. "You get this, 'Oh, you're the one who took all that money.' I can't make them realize that it's not me, it's not this hospital." At a meeting in Phoenix of 20 Columbia managers, everyone said they had been taunted by friends "about being a crook." Tourists came to the Columbia Grand Strand Regional Medical Center near Myrtle Beach, S.C., looking for "sinister things." Hospital administrator Doug White says, "We'd hear from a patient, 'I know why your squash isn't warm. You're run by the same people cheating Medicare.'" White was one of the first to strip the Columbia name from his hospital. "Yeah, we jumped at the opportunity with glee," he says. "I have people call and ask if my ties are now striped -- striped like prison clothes." The article says, "Ethical lapses are being deal with harshly. A new ethics hot line has been swamped with calls; there is a backlog of 100 awaiting investigation." Some employees are annoyed by the generous severance package given ousted CEO Rick Scott. "I sat there and watched that on television with my jaw on the floor," says Jennifer Clements, a nurse at Audubon Hospital at Louisville, Ky.

Probe finds Medicare problems

Federal investigators find widespread problems in the Medicare program that provides wheelchairs and other long-lasting equipment (Wall Street Journal 12/22). According to a report by the HHS inspector general, investigators find 41% of the suppliers inspected and 40% of the new applicants fail to meet at least one of the 11 required standards. Every 14 suppliers and one of every nine new applicants don't have a required physical address. In one case, a supplier in Brooklyn uses a laundromat for a mailing address. HHS Inspector General June Gibbs Brown says the process for approving new Medicare equipment suppliers "is unreliable for detecting unethical and improper practices of bogus suppliers."

Tough year for HMOs

HMO executives worry they may be losing their national mandate to change the health-care system (Wall Street Journal 12/22). Nearly every decision they make is attacked. Among the industry's stress points: "Health plans are raising premiums as much as 10% next year, saying they can't control medical costs as much as they thought. The increases could slow subscriber growth. Some consumers and doctors are grumbling that managed care has compromised quality or at least disrupted the way they want the medical system to work. At least 40 states have passed pro-consumer, anti-managed care regulations, and Congress is considering a wide-ranging bill to do the same. Medicare and Medicaid, the government's health programs for 60 million elderly and poor, are proving much less hospitable to managed care than industry officials had anticipated. HMOs rushed to sign up Medicare patients, only to discover that they geriatric market is a lot less lucrative than expected. And in the most embarrassing setback of all, some leading health plans have had to take big charges against earnings because they lost track of how much they owed to doctors and hospitals. Oxford had to set aside $200 million in extra reserves because it underestimated medical-care costs and has just written off $111 million in uncollected payments from customers." Even on Wall Street, where HMOs could always expect a sympathetic ear in the past, investors now have soured on the industry. Analyst Ken Abramowitz of Sanford C. Bernstein & Co. recommended as many as nine HMO stocks earlier this year. Now, he favors only one, United Healthcare. He says HMOs are stuck between "unrealistic payers and unrealistic consumers."

Medicare HMOs raising prices

Many Medicare HMOs are raising fees and cutting benefits. They blame rising drug costs and a cap set by Congress on next year's payments to them (New York Times 12/22). Some are charging monthly premiums for the first time. A few are eliminating some of the most popular features: free drugs, eyeglasses and dental care. While Medicare HMOs have tinkered with benefits in the past, the changes that are being announced amount to the first widespread cutbacks. They will take effect on Jan. 1. "If plans are making major reductions in benefits," or charging more for the same benefits, "that would be a reversal of the trends we have seen in the '90s," says Patricia Newman, director of the Medicare Policy Project at the Kaiser Family Foundation.



Parents fight insurer over son's treatment

The family of a 16-year-old boy suffering from mental illness are fighting to force a managed-care insurance company to pay for his hospital treatment (The Tennessean 12/19). "Does my son have to kill before he gets the help he needs?" asks Susan Conner, whose son Kelly is said to be violent. The child is at Tennessee Christian Medical Center in suburban Nashville, but his insurance company, Premier, wants the hospital to release him. But Jeff Wright, Premier's VP of clinical services, acknowledges he's never seen a three-day-old letter in which doctors say Kelly suffers from depression with suicidal and homicidal tendencies. "I have not seen that letter," Wright says. "That kind of miscommunication or rather a disconnect, rarely happens."


'New York Times' probes Columbia

The New York Times reported today that hospitals owned by Columbia/HCA, sometimes both before and after the company acquired them, used a variety of tactics to distort expense claims to increase federal reimbursement. "At times it was as simple as plugging in a number higher than the real one," says the Times (12/18, Eichenwald). "More frequently, the tactics were akin to illegally claiming a tax deduction by misrepresenting a family vacation as a business expense." The newspaper says it obtained confidential records kept by Columbia hospitals in five states. "The records show for the first time that certain hospitals camouflaged costs that were not reimbursable and then requested that government health programs pick up the tab," the paper says. "After the hospitals were sure the trick had gone undetected for two to three years and the risk of a full audit had passed, the money would be counted as profits." The Times also reports that outside accountants, including KPMG Peat Marwick, knew Columbia was deceiving the government. "In some instances, they clearly abetted the deception," the article says. KPMG says the firm is cooperating with the government and it's not targeted in the federal investigation into Columbia's practices. Hospital supervisors told employees to hide documents that showed how much the hospital was cheating. "At one Arkansas hospital, the records were ink-stamped: 'CONFIDENTIAL. Do not discuss or release to Medicare auditors,'" the newspaper reports. And the article says "misrepresentations of costs has occurred throughout the hospital industry," including at Columbia hospitals when they were owned by Hospital Corp. of America, Healthtrust and Basic American Medical. The Tennessean ran the story.

Vanderbilt to build new children's hospital

Vanderbilt University will build a new children's hospital on its medical center campus in Nashville and open it by 2001 (The Tennessean 12/18, Bell). The 200-bed hospital will cost up to $100 million to build. It will provide larger patient rooms, more pediatric operating rooms and more classroom space for sick children to go to school in the hospital.


PhyCor completes acquisition

PhyCor says it's completed its acquisition of certain assets of Northern California Medical Associates (company release). That's a multi-specialty physician clinic based at Santa Rosa, Calif. PhyCor also enters into a long-term deal with the 35-physician group associated with the clinic.

Jackson challenges Columbia in Chicago

Jesse Jackson jumps into the controversy surrounding Columbia's Michael Reese Medical Center, the Chicago Tribune reports (12/17, Graham). He speaks to "200 angry workers" during a two-hour strike there. He says his Rainbow Coalition has bought 1,000 shares of company stock, and he challenges Columbia not to sell the hospital for real estate development. He vows to go to Columbia shareholder meetings to demand information on any possible deals. Jackson tells the crowd he's asked for a meeting with CEO Thomas Frist to discuss the future of Michael Reese and warn the company against participating in a "land grab" by developers, who see the hospital grounds as prime property for condominiums. Jackson says he wants the hospital to stay open. It serves a predominantly poor population. "We want access to the records," Jackson says. "We certainly intend to be at the next shareholders meeting." The Tribune says Columbia did not return phone calls for comment. "As labor tensions escalate ... the company's image is coming under attack and community leaders are preparing for a fight," the article says. "Health care experts wondered by Columbia/HCA was allowing the labor conflict at Michael Reese to escalate, drawing critical attention to its troubled Chicago operations just as the company is trying to rebuild its reputation nationally." A "hospital industry source" says the conflict may scare away potential buyers for Michael Reese. "Michael Reese's most promising hope for a hospital partner in Chicago," the University of Chicago Health System, says it's not interested. Union leaders call on doctors to work with them to save the hospital. Physicians have approved a plan to buy the hospital. "We want to lead the campaign to return Michael Reese to a non-profit hospital," says SEIU Local 73 president Thomas Balanoff. "We say to doctors who are trying to buy this hospital, make us part of the deal." The union represents service, maintenance and business office staffers who've been working without a contract since Dec. 9. Contract talks end yesterday morning without progress and without a date for more discussions.


Union calls Columbia 'one-party state'

The Service Employees International Union (SEIU) Master Trust demands changes in the way Columbia elects its officers. The union files a resolution with Columbia to give all duly nominated candidates for director equal access to the proxy statement and proxy card of the company (union statement). The resolution, which would amend Columbia's bylaws, is binding if a majority of shareholders vote for it. "Currently, only candidates who have been nominated by the incumbent board of directors are listed in the annual proxy statement," the union says. "The fact that a shareholder may have nominated a candidate is not even disclosed, even though the proxy statement is paid for by the corporation at shareholders' expense." The union resolution says, "We do not believe that this is a good way for shareholders to elect corporate government. This corporation has become like a one-party state: the only 'election' is to vote for the party's slate. It is no answer for management to say that anyone who wants to become a director may try to win election by sending out his or her own proxy statement and proxy cards. This can be an extremely expensive process, more than any individual is willing to pay. There is no reason why some should be able to campaign at the corporation's expense and others left to their own resources." The SEIU Master Trust is an investment vehicle for the NIPF, which holds 27,500 Columbia shares.

Blues to cut pharmacy network

Blue Cross Blue Shield is cutting the size of its pharmacy network to save money. The insurance giant asks drug stores now under contract to bid to keep the Blues' services (The Tennessean 12/16, Carey). "If we can save $2 million by limiting the network, we can spend that money on things like immunization and mammograms," Blue Cross spokesman Ron Harr says. State lawmakers say they're concerned about the impact on Medicaid beneficiaries. "This will force people to transfer from a caregiver who knows them and their needs and history to someone who doesn't," says state Sen. Roy Herron, chairman of the Legislature's TennCare Oversight Committee.

Phoenix merges with Health Net

Phoenix Healthcare and Health Net complete their merger, even though banks refuse to finance it (The Tennessean 12/16, Bell). Phoenix chairman Sam Howard says the deal was financed by Phoenix, Baptist and St. Thomas hospitals and Tenet Healthcare, all of which now own pieces of the company. Phoenix and Health Net are losing money. Their merger creates the third-largest managed-care organization in TennCare, the state's Medicaid reform program.

INPHACT makes acquisition

INPHACT Radiology Services and Management, a Nashville-based provider of on-line radiology services for radiologists and health care facilities, acquires Novus Medical, a Bedford, Texas, provider of contract radiology and teleradiology services (company release). The acquisition marks INPHACT's first venture in the Southwest and includes contracts with six radiologists, three facilities and three HMOs in the region.

Cash advances for hospitals

IPN Network and NationsBank of Tennessee announce a new financing program for members of the Tennessee Hospital Association. The program provides hospitals with front-end cash advances for current receivables up to 60 days.

School may reject Columbia donation

Royal Palm Beach (Fla.) High School might reject a $100,000 donation from Columbia after learning the company is the target of a health-care fraud investigation, the Washington Post reports (12/13). Columbia offered to give the money to help build a football stadium. In return, the high school was going to name the stadium after Columbia's local hospital. "Even though most Palm Beach County School Board members said they support a corporate-named stadium to help pay construction costs, school officials said it needs to be reconsidered in light of the investigation into the health-care company," the Post says. Says assistant principal Diane Romon: "If it's fraudulent we shouldn't be doing business or taking any money from a company like this."

Clinton vows fraud crackdown

President Clinton used his weekly radio address to call on Congress to pass legislation barring doctors from charging more for drugs than they pay themselves. The president vows a renewed crackdown on the "unfair fraud tax" he said costs Medicare billions a year (AP 12/13). "Medicare is more than just a program. It reflects our values," Clinton said Saturday. "It's one way we honor parents and our grandparents and protect our families across the generations." He said Medicare fraud costs billions of dollars each year and undermines the nation's ability to care for those most in need. "Taxpayers deserve to expect that every cent of hard-earned money is spent on quality medical care for deserving patients," he said. Clinton said that clamping down on drug overcharges would save $700 million over five years. He said his proposal, to be included in his budget for the 1999 fiscal year, will "ensure that doctors are reimbursed no more and no less than the price they themselves pay for the medicines they give Medicare patients."


Columbia appoints ethics officers

The Wall Street Journal (12/12) reports Columbia is appointing special ethics and compliance officers at each of its 338 hospitals. That's according to a memorandum sent last week via e-mail to all the company's hospitals. The move is led by "the company's new ethics czar," Alan Yuspeh. WSJ says it's "part of a far-ranging effort by Columbia to extricate itself from the web of a massive federal Medicare fraud investigation, and comes even as the company's board met Thursday afternoon and moved unanimously to adopt a comprehensive new ethics code." Yuspeh tells WSJ the code will be unveiled in early March after the new compliance officers are trained. In the e-mail, Columbia tells hospitals that in choosing compliance officers, "attention should be given to the temperament of the individual and to the historic support he or she has shown for strong compliance and ethical conduct." The memo adds: "The practical reality is that some will have demonstrated more aptitude in this area than others." The hospitals have until Dec. 19 to make the appointments from their top managerial ranks. Columbia's board also formed a new committee on compliance and ethical issues headed by Sister Judith Ann Karam, a board member, Yuspeh tells WSJ.

Columbia leases two hospitals

The Tennessean, reporting on a company release, says Columbia is leasing Columbia Regional Hospital Jackson in Jackson, Tenn., and Columbia Volunteer General Hospital in Martin, Tenn., to Methodist Health Systems in Memphis. By leasing the hospitals, Columbia is "signaling its intent to get out of a market it never really cracked," says the paper (12/12, Bell & Wissner). "The announcement comes just one week after Columbia/HCA announced it would sell its Michael Reese and Grant hospitals in Chicago, causing some analysts to raise questions about whether the company intends to sell off assets piecemeal or stick to a plan of creating three new separate publicly traded companies out of hospitals it no longer wants." Analyst Peter Emch says, "Selling Grant and Michael Reese indicates everything is for sale in those units."

Report: Probes produce $7 B in savings

The government's Medicare fraud investigators produce $7.6 billion in savings and remove nearly 3,000 "unsuitable" health care providers from the system, according to a year-end report by the HHS inspector general (Gannett News Service, Detroit News 12/11). The savings include an unprecedented $1.2 billion recovered through beefed-up criminal and civil investigations of Medicare fraud and abuse made possible by laws Congress passed in 1996, according to a letter by IG June Gibbs Brown that accompanies the report. Brown says the report is the first comprehensive, statistically valid analysis of fee-for-service claims in Medicare's 32-year history. Those claims account for 90% of the $209 billion spent by the program. The report finds $23 billion -- 14% of Medicare's annual expenditure -- is lost to waste, fraud and abuse. Watch for congressional Democrats to publicize the new report. They hope to capitalize on the Medicare fraud issue in the next session. At a hearing last week, the General Accounting Office's top health care financing expert testified the Medicare program doesn't have enough money to combat fraud and waste. Between 1989 and 1996, the number of Medicare claims climbed 70% to 822 million while resources to review those claims increased less than 11%, said the GAO expert, William Scanlon. "More individuals are being served but a lack of controls means unscrupulous providers can submit claims and get paid," he said.

State's Medicaid program in trouble

The 10 private health plans in the state's Medicaid reform program combined to lose $21 million during the first six months of 1997, officials say (Nashville Banner 12/11, Snyder). And says Ruth Allen, an official of the Tennessee Association of HMOs: "I believe things are getting worse." She tells a legislative committee, "Continued viability of the TennCare program is at stake." TennCare, which replaced the state's Medicaid program in 1994, initially covered 800,000 Medicaid recipients and 400,000 previously uninsured people. In 1995, the state stopped letting the uninsured enroll. As a result, the percentage of TennCare recipients who have costly, chronic health conditions has increased sharply, health plan officials complain. Dr. Richard A. Carter, medical director of Access MedPlus, predicts "one or more" of the plans will go out of business unless something is done to "spread the risk" by enrolling more healthy people.

IPN makes pact with NationsBank

Nashville-based IPN Network enters agreement with NationsBank. Under the deal, NationsBank will give hospitals cash advances on their invoices while IPN collects the bills (The Tennessean 12/12). IPN, one of the nation's biggest handlers of business-office work for hospitals and physicians, also lays off 20 of its 800 workers in a reorganization.


Pneumonia cases jump at spinoff hospitals

Modern Healthcare (12/8 issue, Limbacher) examines a new report that suggests Columbia is spinning off hospitals that are in the most trouble with Medicare fraud investigators. The report reveals a "huge jump" in serious pneumonia cases billed to Medicare at the more than 100 hospitals to be spun off in Columbia's restructuring plan. Although saying "it's unclear whether there's a connection between what hospitals Columbia is spinning off and the fraud investigation," the article points out Medicare reimburses hospitals at a higher rate for severe cases of pneumonia. The government is investigating hospitals nationwide to determine whether they inappropriately switched billing codes on pneumonia cases to increase their reimbursements. Columbia wouldn't comment on the report by Data Advantage, a Louisville, Ky.-based research company. It says the number of complex pneumonia cases billed to Medicare by the spinoff hospitals rose nearly 32% to 9,508 last year from 7,212 in 1994. Over the same period, the number of simple pneumonia cases billed to Medicare by the same hospitals dropped 28% to 5,074 last year from 7,055 in 1994. "Nationally, the respiratory caseload trend followed Columbia's lead, but far less dramatically," Modern Healthcare says.

Not-for-profits seizing the day

While Columbia sits on the sidelines, the nation's 40 not-for-profit systems get aggressive, Modern Healthcare says in its cover story (12/8 issue). They have announced deals involving 50 hospitals since Rick Scott resigned as Columbia's CEO. "Despite Columbia's decision to alter its strategies and focus on existing operations, the not-for-profit sector isn't about to change its relatively new aggressive way," the article says. VHA, the largest alliance of not-for-profit hospitals, is forming a company to acquire not-for-profit facilities in New Mexico and Texas. A similar VHA venture stopped operations this year. In addition, Daughters of Charity National Health System completed a $1 billion bond offering in September. That's the largest bond offering by a not-for-profit health care system to date, according to Fitch Investors Service and Standard & Poor's. Says Daughters of Charity CEO Donald Brennan, "We don't see whatever changes might happen at Columbia as a reason for us to be less motivated for the future." He adds, "Those in not-for-profit health care may now see the opportunity to get stronger."

HCFA adds rules to home health

The Health Care Finance Administration is ending its six-month freeze on Medicare certification for new home health agencies, but the agency is intensifying scrutiny of the businesses (Modern Healthcare 12/8 issue). HCFA administrator Nancy-Ann Min DeParle says the agency will double the number of audits performed on home health payments next year. HCFA will require the agencies to pay for an outside financial audit every three years. Agencies also must reapply for certification in the Medicare program. HCFA is lifting the moratorium on new agencies in February, but only after implementing the new rules, officials say.

Dental centers expand into state

Castle Dental Centers, one of the country's biggest dental management companies, acquires two dental practices in Texas and Tennessee (company release.) They are expected to add $2.1 million to patient revenues next year, the company says. In Tennessee, Castle buys the practice of Dr. Frederick Cothren in Brentwood.


'A shell of its former self'

Reporting on the public backlash against for-profit medicine, the Wall Street Journal focuses on Columbia's Michael Reese Hospital in a lengthy page-one story (12/10, Lagnado). WSJ chronicles Michael Reese's decline, beginning in the late '80s before it was sold to Humana. Once one of the nation's premier charitable research and teaching hospitals, Michael Reese now is "a shell of its former self," the article says. Columbia announced last weekend it would sell the hospital.

'They were bottom-liners'

The Nashville Banner (12/9, Hallam) interviews Linda Fromm, the former HCA nursing administrator who filed the whistleblower and sex discrimination lawsuit against Columbia in Florida. At Lawnwood Regional Medical Center, where she worked, she says, "They touted quality, but the reality was, they were bottom-liners. It was the first time I worked for a facility where I wouldn't want to be a patient." She adds, "When building an addition, they didn't want to add more storage space. They just wanted beds. Get the bodies in, you know?"

America Service CEO returns to Columbia

America Service Group CEO Scott Mercy returns to Columbia as senior VP for Managed Care, a new position (company release 12/9). Columbia says Mercy, who worked at the company until 1996, will be responsible for oversight of managed care and physician services, including operation of physician practices, management service organizations and the Community Care Network. That's a workers' compensation and group health network and cost management company obtained by Columbia as part of its acquisition of Value Health. Nashville- based America Service Group is a provider of capitated health care services for correctional facilities. Mercy will leave for his new job after the completion of the recently announced merger of ASG with MedPartners at the start of the year.

AMA bans product endorsements

The American Medical Association's House of Delegates votes to ban the organization from endorsing any products it doesn't produce (AP, USA Today 12/10). "The AMA is against product endorsement and this organization has made a move to make sure everyone knows that," says Dr. Thomas Reardon, board of trustees chairman. Meeting in Dallas, the delegates also vote to appoint a committee to investigate how the AMA made its controversial deal to endorse Sunbeam's health products. They narrowly reject another
resolution calling for an outside expert to participate in the inquiry. Doctors who argue against an independent investigation say it would further damage the AMA's reputation. "I'm satisfied that there's no further information that would make an independent counsel necessary,'' Dr. John Fagg says. '' When you point fingers in this organization, let's point them forward."

Investors fret over PhyCor deal

Investors worry the PhyCor-MedPartners merger may fall apart. Portfolio managers representing big institutional investors holding stock in the two PPMs pepper Wall Street analysts with questions about the deal (The Tennessean 12/10). PhyCor CEO Joe Hutts insists he still expects to the merger to be completed by March. "We expect to do the transaction," he says. "We want to do the transaction. We think we will." He says both companies still are examining each other's books. "The truth is we've been very candid" about carefully conducting the examination, Hutts says. "PhyCor is a careful company, and that makes a lot of people nervous."

AHA protests 'outrageous' probes

The American Hospital Association organizes a nationwide lobbying campaign against the government's Medicare fraud crackdown. The group urges its members across the country to write their senators and representatives to protest the Justice Department's "intimidation and over-reaching." A letter from the AHA to members lays out the campaign. "All of us should have a 'zero tolerance' policy for truly illegal actions that rip off the taxpayer and make those who follow the rules look bad," says the letter obtained by NewSource. But the AHA adds "the government has gone too far with the Department of Justice's use of the False Claim Act in health care. The Justice Department is turning the errors spawned by the Medicare billing maze into high-profile prosecutions." Labeling the investigations "outrageous," the group calls for hospitals to join the lobbying effort. "We must fight back together," the letter says. "And we must enlist our senators and representatives in the battle."

Gore disappointed in AIDS decision

Vice President Gore says he's "extremely disappointed" that HHS decided against extending Medicaid coverage to people with HIV to provide them with AIDS-fighting drugs before they become ill (Associated Press, 12/10). Gore called for the initiative last spring, but HHS reported last week it was too expensive. "This administration understands the urgency of finding innovative ways to ensure that all people with HIV benefit from the promise of new and effective treatments,'' Gore says in a statement. He directs officials to keep looking for new strategies.

Renal acquires STAT

Nashville-based Renal Care Group completes its acquisition of the assets of STAT Healthcare for a combination of cash and stock. STAT operates 11 dialysis facilities in eastern Texas serving 850 patients and provides acute dialysis services to four hospitals. STAT also provides wound care services to 10 hospitals.


Feds seek $2 million from hospitals

The federal government seeks $2.2 million in settlements from 119 Tennessee hospitals (Nashville Banner 12/8, Hallam). But 101 of those hospitals are asked to pay fines of $1,000 or less, "making Tennessee one of the most error-free states investigated to date." The hospitals reportedly violate a rule against billing Medicare separately for procedures done within 72 hours of the patient's admission. The Tennessee Hospital Association meets with prosecutors and "we understand that these incidents were not fraud and abuse, but billing errors," says association president Craig Becker. Of the 21 states that have received letters so far, the average hospital settlement for Tennessee is the fifth-lowest at $18,488, Becker says.

Lawmakers endorse new women's center

Some state legislators push funding for a new Center of Excellence in Women's Health at the University of Tennessee-Memphis (Memphis Commercial Appeal 12/8, Locker). It would carry out its work through research, education, service delivery and outreach programs statewide. Its list of objectives include efforts to screen and detect breast, cervical and uterine cancer and osteoporosis among women with less access to health care, reducing teen pregnancy and domestic violence and increasing prenatal care. The proposal was developed by the university at the request of the legislature's Select Committee on Women's Health, which voted to endorse the concept. The proposal calls for spreading the $4.9 millon in startup costs over five years, with a $650,000 installment in the first year. But legislative approval next year isn't considered likely. The Tennessee Higher Education Commission, unaware of the project, already has submitted its appropriation request to Gov. Don Sundquist. Rep. Carol Chumney, D-Memphis, says the committee will press for the money. "We're going to give it our best shot. We know funding is tight, but we believe women's health needs to be a priority. We also believe it would produce savings - earlier detection of health problems and reducing teen pregnancy, for examples," she says.

Mental health centers join forces

Four community mental health centers band together for new strength in the managed care era. The new non-profit entity, called Centerstone Community Mental Health Centers, includes the Dede Wallace Center in Nashville and Pinnacle Health, which this year merged three other centers in Clarksville, Columbia and Tullahoma (Nashville Banner 12/8). "Our board members and staff feel that community mental health centers have made some of the greatest contributions to the care of the mentally ill in Middle Tennessee," says David Guth, Centerstone's president and chief executive officer of the Dede Wallace Center. "It's incumbent on us to survive in an era of managed care."

Doctors eye purchase

A physicians group looking to buy Columbia's eight Chicago hospitals steps up its efforts now that the company has put Michael Reese and Grant hospitals up for sale, according to the Chicago Sun-Times. "We think that something should happen in less than 30 days," Dr. Claudia Fegan says. "We think that the financial funding is there. It's just a question of what we can put together." The hospitals will be sold to one buyer, the company says. "I believe the sale of these fine facilities to a single buyer will best serve patients, the medical staff and the employees and ensure our commitment to serving Chicago," Michael Reese CEO F. Scott Winslow tells the Sun-Times. Service Employees International Union Local 73, which represents 400 Michael Reese workers in contract negotiations, says it will watch the sale closely. "They have left our workers in a very dangerous position,'' union president Thomas Balanoff says. "We will want to be involved in the decision [on a new owner] and will seek job security for our members."


Medicare overpays for drugs

Federal investigators discover the government last year made $447 million in excessive Medicare payments for prescription drugs (Wall Street Journal, 12/8). In a report, HHS Inspector General June Gibbs Brown urges HCFA to re-examine the way it pays for drugs, "with the goal of reducing payments as appropriate." Deputy IG George Grob says, "Medicare pays too much for these drugs. It pays more than just about anybody else, and it should get a much better price for these drugs." Medicare pays average wholesale prices as published in certain industry manuals. But the inspector general's report says physicians, pharmacies and other suppliers actually pay deeply discounted prices. The report focuses on 22 drugs costing Medicare $1.5 billion, or more than two-thirds of the program's drug spending last year. If Medicare had paid the lower prices, the total payments for the 22 drugs would have been reduced by 29%, or $447 million, the investigators says. This year, the Clinton administration proposed eliminating any markup by requiring physicians to bill the program only as much as they paid for the drugs. But a vigorous lobbying campaign by doctors, especially cancer specialists, killed that. Congress instead ended up directing Medicare to lower its reimbursement rate to 95% of the published average wholesale price, beginning in January. "We believe that the 95% reduction is not a large enough decrease and that further options to reduce reimbursement should be considered," the inspector general says in her report. HCFA administrator Nancy-Ann Min DeParle says she agrees with the IG's report but believes the changes ordered by Congress will correct much of the problem.

HCFA to lift home-care agency ban

The Health Care Finance Administration's Nancy Ann Min-DeParle says her agency will lift a moratorium on new home health agencies this February after six months (Modern Healthcare 12/5). But first, DeParle says HCFA will implement new rules requiring agencies to undergo outside audits and other conditions of participation. Beginning Jan. 1, all agencies will be required to post a surety bond under a new rule. A separate bond will be required for Medicaid.

Wichita workers defend Columbia hospital

Workers at Columbia's Wesley Medical Center protest an "unflattering portrait" of the hospital in USA Today, the Wichita Eagle reports (12/8, Lunday & Cox). "Hundreds of Wesley employees said the article hurt them personally. And they said it was inaccurate," the paper says. "I was very insulted," Wesley nurse Sharon Perez says. The article adds: "Dozens of employees scoffed at the newspaper's suggestion that the quality of care delivered by the hospital suffers because Wesley is owned by Columbia/HCA." The USA Today article (12/5, Lowry) says Columbia is battling a "patient backlash" in Wichita and leads with the case of Kathryn Rush. She was thrown headfirst from her horse in September. She had cracked ribs, a broken clavicle and fractured skull, but "as Rush waited for help, feeling her brain swell, she made a decision: She did not want to be treated at the hospital owned by Columbia/HCA Healthcare -- even though it was the only hospital where her health insurance would cover all costs," USA Today says. John Leifer, a health care consultant and former Columbia executive, says, "The viability of Wesley, which was once the flagship of the Columbia health care system, is threatened. Wichita is a pristine example of how Columbia corporate strategies are playing out. What is good for Wall Street isn't necessarily good for Main Street."


Billing firm sues Columbia for $2 billion

A Florida billing company sues Columbia for more than $2 billion, claiming a breach of contract, the St. Petersburg Times reports (12/5, Hundley). "Florida Software Systems, which relocated from Clearwater to Sarasota in October, said it agreed to provide Columbia electronic claims processing services at a significantly reduced rate in return for the exclusive right to process all insurance claims at all Columbia facilities," the newspaper says. "But the lawsuit alleges that Columbia has never given FSS its exclusive medical claims business. Instead, FSS was limited to processing claims for only Columbia's Florida facilities. And that work was reimbursed at a below-contract rate." Columbia spokesman Jeff Prescott declines comment on the the lawsuit, which was filed yesterday in U.S. District Court in Tampa. "Columbia just never permitted us to render the services agreed to in our contract," FSS lawyer John Blair says. Adds Blair: "We have some concerns that Columbia may have brought in other processing companies and given them our proprietary information. In that case, they would have violated our confidentiality agreement."

Tenet makes play in Massachusetts

Tenet Healthcare, the nation's No. 2 for-profit hospital provider, says it wants to buy one of Columbia's Massachusetts hospitals and promises local hospital boards a "compact with communities," the Boston Globe reports (12/5, Pham). "If the opportunity came up, and we had a chance to take over the operations of Metrowest, that is something we would like to do," Tenet senior VP Randolph Smith says. Columbia put Framingham's Metrowest Medical Center up for sale when it announced its restructuring plan last month, the Globe says. "The move was widely seen as Columbia's desire to retreat from Massachusetts," the paper says. "But Tenet, which owns St. Vincent's Hospital in Worcester and is bidding on HealthAlliance in Fitchburg and Leominster, is trying to succeed where Columbia may have failed. Taking a different tack from Columbia's hard-driving tactics, Tenet yesterday issued a 'compact with communities,' which it had floated to state Attorney General Scott Harshbarger and community advocates beforehand." In the compact, Tenet promises to put local trustees on the boards of its hospitals and to continue charity care at its hospitals. It also pledges to invite state enforcement of its agreements with hospitals.

AMA chief quits over Sunbeam flap

The American Medical Association's top executive has resigned three months after approving a controversial endorsement contract with Sunbeam. Dr. John Seward quits "instead of facing a potentially embarrassing move to oust him, which was gaining momentum" just before the AMA national governing board meets this weekend in Dallas (Chicago Tribune 12/5). In resigning, Seward says the Sunbeam contract "was a serious mistake" and adds "this happened on my watch, and I have always accepted that responsibility." This weekend, the AMA's 475-member House of Delegates was to consider a resolution censuring Seward and the AMA's 20-man board over the Sunbeam deal. A consumer group calls for more resignations. "Getting rid of Seward doesn't solve the AMA's many problems," says Dr. Sidney Wolfe, executive director of the Public Citizen's Health Research Group. "The board seems incapable of learning from the Sunbeam disaster." (New York Times 12/5). The AMA's leadership has recommended the organization again endorse corporate products in exchange for money. The AMA faces declining membership and revenues. It represented 75% of doctors in the 1960s. That number has fallen to just less than 40%.>


'All Shook Up'

Guess who they lampooned in this year's Financial Follies? Yes, ex-Columbia CEO Rick Scott was an irresistible target for the New York Financial Writers Association's musical review (Modern Healthcare 12/1). Scott's impersonator played as Elvis and performed to the tune of All Shook Up. Some highlights:

  • A-well-a Medicare was good to me
    Got rich-a when I shook that money tree
    I lived just as snug as a bug in a rug
    Because the books (Yeah) were all cooked up!
    Mm mm mm, oh oh, yeah yeah

    Now I lost my jo-ob and my Learjet, too
    I couldn't get hired at the Nashville Zoo
    Why did I think I could make this up?
    Well the books (Yeah) were all cooked up!
    Mm mm mm, oh oh, yeah yeah

State to offer home-based alternative

State officials hope to start a new home-based alternative to nursing home care by next July (Tennessean 12/4, Cheek). It's called PACE for Program of All-Inclusive Care for the Elderly, and only 15-30 people will be cared for initially. But public service lawyer Gordon Bonnyman applaudes the project because it could go statewide within the next three years. "It will be a down payment on what should become available statewide," he says. The state has been criticized by advocate groups for not offering more alternatives to nursing home care.

Corporate America watches IRS settlement

Consultants are divided over what Columbia's IRS settlement means for corporate America, the Wall Street Journal reports (12/4). Despite the settlement, the IRS presses similar "excess parachute payment" claims against three other companies that haven't yet been publicly identified, WSJ says. "The final settlement required the company to pay $150 million in interest and taxes related to a 1992 tax bill, but also allowed Columbia to obtain a credit against taxes, for final costs of $71 million, according to Milt Johnson, vice president for taxes at the Nashville, Tenn., hospital giant," WSJ reports. "In addition, the IRS dropped as part of the settlement individual claims against certain top executives of HCA -- several of whom are now leading Columbia -- for more than $110 million in additional taxes. These executives are now in the clear, including Columbia's chairman and chief executive, Dr. Thomas Frist Jr., who became the highest-paid U.S. executive in 1992 when he made about $125 million on his options, according to IRS documents."

Columbia hurts sector in surveyModern Healthcare (12/1 issue, Limbacher) blames "a reeling Columbia" for low aggregate earning for the health care provider and services industry in the third quarter. The article reports on an analysis conducted for the magazine by WDI Healthcare Markets Group. "A $214 million drop in Columbia earnings in the quarter held the gain in aggregate provider and services earnings to just 2.1% on a revenue increase of 19.6% for the quarter ended Sept. 30, according to the analysis ..." If Columbia is excluded from the survey of more than 900 public health companies in 35 markets, the provider and services group earnings climbed 19% on a revenue increase of 23% compared with a year ago. "Overall, health care companies posted a 13.4% gain in adjusted earnings on revenue growth of 16.3%.

Probe costs Columbia contract

Columbia's One Source Health Network lost a contract to care for Lee County, Fla., employees because of the Medicare fraud investigation, Modern Healthcare reports (12/1 issue, Japsen). Columbia bid $760,000 less than Lee Memorial Health System, the five-year contract's winner, but "some board members were concerned about some of the publicity" over the investigation, says Lee County Manager Donald Stillwell. Modern Healthcare says Lee Memorial executives acknowledge they probably won the contract because of the Columbia probe. In 1993, Columbia beat out the Fort Myers, Fla.-based Lee Memorial for a four-year deal after a bitter public debate.

Omega buys practice

Memphis-based Omega Health Systems completes its acquisition of a San Antonio ophthalmology practice and a 50% stake in an associated ambulatory surgery center (company release). Terms aren't disclosed. Omega signs a long-term agreements to manage the practice and surgery center, which had combined 1996 revenues of about $3.7 million. Omega Health Systems, which had revenues of $30.4 million in 1996, is an eye care services company.

Systems complete merger

Baptist Memorial Health Care and St. Joseph Hospital and Health Centers, both of Memphis, merge after two months of talks (Commercial Appeal 12/3). Also, nearby St. Jude Children's Research Hospital will acquire St. Joseph's building and land. Baptist will lease the facility from St. Jude for up to three years until renovations at Baptist Medical Center are complete. Baptist plans to file a certificate of need for a new medical center campus.


Columbia settles tax dispute

In a case closely watched by tax attorneys, Columbia agrees to pay $71 million to settle a long-running dispute with the IRS over deductions for executive pay, according to the New York Times (12/3, Eichenwald). The Times reports "people who have seen the settlement documents" say the IRS will drop its claim that pay associated with certain stock-option grants constituted excessive compensation and golden parachute payments. Before the settlement, the IRS was seeking $276 million in taxes and interest. The agency sought to disallow $525 million in deductions claimed in 1992 for executive compensation as a result of stock-option grants. The options were awarded in a 1989 leveraged buyout to more than 100 executives with HCA. The executives took big profits by 1992 when the options were exercise after a new public offering of HCA. Thomas Frist, then head of HCA and now CEO of Columbia, earned about $125 million from the options, the Times says. Another 17 top executives got millions of dollars each. In the settlement, the Times reports, "the two sides have agreed that the original $525 million deduction was not a golden parachute and did not constitute excessive pay. Thus, the agency will not pursue actions against individual executives on that issue."

Tennessee has cheapest health care

Visits to the doctor, dentist and hospital are less costly in Tennessee than other Southeastern states, a survey finds. A national survey by the American Chamber of Commerce Researchers association checks the cost of a hospital room, a doctor's office visit and a dental check-up in 314 metropolitan areas and then compares each area to the national average. The survey was reported in today's Wall Street Journal.

  • City, Hospital Room, Doctor's Visit, Dentist Visit, % of National Average
  • Memphis, $244.40, $52.75, $57.40, 97.6%;
  • Nashville, $273.20, $52,43, $56.20, 96.6%;
  • Knoxville, $353.80, $51.20, $52.40, 96.5%.

Charlotte was the most expensive Southeastern city at 103.8% of the national average.

Columbia cutting home health jobs

Columbia will lay off as many as 750 home health-care workers in Florida, the Orlando Sentinel reports (12/3). Most of the people targeted for layoffs are administrative employees who do clerical and support work, Columbia officials say. However, some nurses, therapists and home-health aides also will lose their jobs. The reduction, effective Jan. 2, could represent 14% of Columbia Home Care Group's 5,200 workers statewide. The home-care subsidiary, which is based in Dallas, has a nationwide work force of 65,000. Company officials say they don't know of layoffs outside Florida. "This is not a Columbia issue, it's a home health industry issue," Beth Tuttle, regional director of marketing and public affairs for Columbia's Southwest Florida division, tells the Sarasota Herald-Tribune (12/3). "The volume of patient visits has decreased, so we are limiting the use of home-health workers," Tuttle says, so patients will ask for fewer in-home visits from nurses and other workers. The future of Columbia Home Care has been unclear since the summer, when the company announced plans to sell the operation in the wake of the federal Medicare fraud investigation. A buyer has not been identified. Columbia says it'll help the affected employees find work. "We think more than half will be hired back into Columbia," company spokeswoman Emily Clemente says.

AmSurg debuts on Nasdaq

AmSurg, a spinoff of American Healthcorp, starts trading shares on the Nasdaq market today. AmSurg runs ambulatory surgery centers based in physician practices. The company has 35 centers with another 12 under development, including five operating centers in Tennessee. AmSurg's nine-months revenue for 1997 is $41.2 million, up 22% over its 1996 revenues. Earnings last year reached $2.6 million.


Columbia looks to image

The National Journal (11/29 issue) reports Columbia/HCA has hired the New York City-based PR firm of Burson-Marsteller "to spread the word that Columbia's changing." The company also retains the Smith-Free Group, a Washington lobbying firm. Columbia wants "to make sure that if there's a (congressional) hearing to beat up Columbia, that Columbia doesn't read about it in the newspaper first," a top health care lobbyist tells National Journal. Columbia spokesman Jeff Prescott says CEO Thomas Frist wants to create "a kinder and gentler" company.

Texas hospitals drop Columbia nameThe Dallas Morning News (12/2, Ornstein) reports "Columbia's 15 hospitals in North Texas will drop the Columbia name as part of a national campaign to improve the company's bruised image and return control to local markets." Regional spokeswoman Caren Krumerman says, "Changing hospital names is a complicated, lengthy process with many legal and communication issues. So we will take our time to ensure that any name changes to our facilities - however slight they may be - are done in an organized, effective manner." Some Columbia divisions in Florida, Georgia, Virginia and Tennessee drop the company name, too, the paper says."

GOP rules out taxes to save Medicare

President Clinton and Republican congressional leaders spar over the Medicare commission even before all the appointments are made. The GOP announces its eight members and immediately rules out one option for a Medicare cure -- a tax increase. There's also a squabble over who will chair the panel, and Clinton says he won't name his four members until it's settled. The Republicans' no-new-taxes cry could hamstring the commission, analysts say. Some already predict the panel won't fulfill its mandate to produce bipartisan proposals by March 1, 1999.

The appointments

Sen. Bill Frist joins Samuel Howard, president and CEO of the Phoenix Healthcare Corp. as Tennesseans on the Medicare commission. "I'm basically an advocate of free-market systems where private plans participate in the management of public programs," says Howard, whose company boasts 80,000 enrollees, mostly in Tennessee's Medicaid reform program (Tennessean 12/2). Lott appointed Frist. Also appointed by Lott: Sen. Phil Gramm, R-Texas; Illene Gordon, a longtime Lott staff assistant and Medicare beneficiary; and Deborah Steelman, a health policy expert and associate budget director under President Bush. Gingrich names Howard, plus Thomas, head of a Ways and Means subcommittee on health; Rep. Michael Bilirakis, R-Fla.; and Rep. Greg Ganske, R-Iowa. Senate Minority Leader Tom Daschle previously named Sen. Bob Kerrey, D-Neb., and Sen. Jay Rockefeller, D-W.Va., as his two appointees.


Province going public

Another Nashville-based hospital company, Province Healthcare, prepares to go public. The company eyes smaller, non-urban markets for acquisitions (Modern Healthcare 11/24 issue). "I think it's a very focused company," says Daniel Cain of Cain Brothers. Province owns eight acute-care hospitals with 570 licensed beds.

Groups want home care

Advocacy groups for the elderly will push state legislators for more home- and community-based care. A legislative committee has been holding hearings and plans to report its findings next month in time for the start of the 1998 session (Tennessean 12/1, Cheek). Tennessee now spends 98 percent of its Medicaid money for the elderly and disabled on nursing-home care and just 1% on home- and community-based services.

Mental health firms affiliate

Nashville's Dede Wallace Center affiliates with Pinnacle Health to create the largest provider of mental health services in Middle Tennessee (Tennessean 11/30, Bell). The affiliation creates a parent company to run four centers in Nashville, Clarksville, Columbia and Tullahoma starting today.

Meharry-Metro merger takes another step

Administrators at Metro General Hospital start moving into their new building today. The former Meharry-Hubbard Hospital is in the last phase of a two-year, $43 million renovation. It opens for business Jan. 27 (Tennessean 12/1, Fields). As part of a merger, Metro General will lease the hospital from Meharry Medical College for $4 million a year for 30 years. Metro General will manage the hospital while Meharry provides physicians and trains its students there.


Columbia vows to police itselfThe Wall Street Journal asks, "Can the scandal-ridden hospital industry get out of trouble by monitoring itself?" Columbia puts the idea to the test (11/26, Pasztor & Lagnado). "Damaged by allegations of Medicare fraud and under investigation by the Justice Department, the company last week quietly disseminated to managers a draft of a comprehensive new ethics code. Significantly, the code was written by Alan Yuspeh, a major architect of the voluntary-compliance efforts that helped beleaguered defense contractors overcome scandals in the 1980s centered on $600 toilet seats and $9,000 wrenches," WSJ says. Yuspeh says Columbia will send auditors to hospitals to make sure they are billing correctly for Medicare. "By late December, Columbia will also have formulated corporate policies in every area that has raised a red flag with the federal government, from coding and billing to physician relationships and Medicare cost reports," WSJ says. Yuspeh says Columbia will turn itself in when the company finds overbilling. "It is a fundamental element of self-governance, that where you have been overpaid, you correct the overpayment," he says. Columbia will unveil the ethics code early next year. "What I am doing here is obviously greatly informed by the experience of having worked with large defense contractors -- there are lessons from that experience I am trying to apply," Yuspeh says.

Indicted executives go to appeals court

The three indicted Columbia executives from Florida go to a federal appeals court to seek the removal of the judge from their case, the Tennessean reports (11/26, Bell & Wissner). The executives -- Jay Jarrell, Michael Neeb and Robert Whiteside -- say in their petition that they believe federal Judge Lee Gagliardi should not hear their fraud case because he and the lead prosecutor, Kathleen Haley, are under federal investigation for having secret out-of-court conversations about another case.

Prosecutor hits hospital association

A federal prosecutor criticizes the Tennessee Hospital Association for complaining about Medicare fraud investigations (Nashville Banner 11/25, Hallam). Jill Maccione, an assistant U.S. Attorney in Memphis, reacts to a news conference in which association president Craig Becker said Medicare regulations are too complicated to follow. "I heard about that," Maccione says. "'Well, welcome to the modern world of regulated industries. Imagine what bankers have to deal with."

Inphact deal could be worth $100 million

Inphact, the Nashville-based radiologist practice management company, has signed a national marketing agreement with GE estimated to be worth $100 million, the companies say. The agreement provides for Inphact to market GE radiology equipment to its clients and for GE to market Inphact's management services to its customers. Company spokesman Roy Vaughn told the Tennessean the deal should be worth about $50 million to Inphact. The two-year-old company provides service to doctors, clinics and hospitals in seven states.


Columbia settles fight over name

Columbia/HCA has agreed not to use its name in the New York area to settle a lawsuit by Columbia University, according to the Wall Street Journal (11/ 25). The company also agrees to limit advertising in the region. "The settlement capped a year-long legal battle waged by Columbia University medical school, a giant in academic medicine, to stop the Nashville, Tenn., for-profit behemoth from poaching on its venerable Ivy League name," WSJ says. "At the time, university officials argued that the Columbia name ranked 'with Harvard or Yale.'" Columbia says no money is exchanged in the settlement. "In recent months, as the company became the target of a massive Medicare investigation, it began to distance itself from the Columbia name and has dropped it from some of its hospitals and even from its corporate headquarters," WSJ says. "It has also tried to repair frayed relations with not-for-profits."

Tenet eyes Columbia hospitals

The Phoenix Business Journal (11/24, Gonzales) reports Tenet Healthcare is a likely buyer should Columbia sell its Arizona hospitals. "At present, there is no intent to sell off any of the hospitals or the new operating companies," says Denny Powell, CEO of 290-bed Columbia Medical Center Phoenix. But he adds: "I can't say they're not for sale. If Tenet would make an offer, Columbia has the fiduciary responsibility to its shareholders to review the offer."

Appointments due for Medicare commission

Doctors, consumer groups, hospitals and members of Congress are fighting to occupy the 17 seats on a new commission charged with overhauling Medicare (LA Times 11/25, Rubin). Among the likely appointees is the Senate's only doctor, Bill Frist, R-Tenn. A heart-transplant surgeon before entering politics, Frist's family founded what is now Columbia/HCA. His brother, Thomas Frist, is CEO of the company, now the focus of a massive Medicare fraud investigation. Appointments are to be made Monday. "The lobbying is intense, just intense," says Tricia Smith, lobbyist for the 32 million-member American Association of Retired Persons. "They've promised 167 more positions than there are under the law." The appointments are divided among congressional GOP leaders, who pick eight panel members; Democrats, who choose four, and President Clinton, who names four. The chairman will be chosen jointly. The White House can't decide how to fill its four slots. Clinton is considered likely to name Bruce Vladeck, who recently left his post as HCFA director. The president also looks at former House member Tom Downey, friend of Vice President Gore's. Dozens of members of Congress are jostling for spots, too. The more who are appointed, the greater the commission's influence. Two senators already have been named: Jay Rockefeller, D-W.Va., and Bob Kerrey, D-Neb., Others considered likely to land a seat include Reps. William Thomas, R-Calif., and Michael Bilirakis, R-Fla., and Sen. Phil Gramm, R-Texas.

American HomePatient stock falls

American HomePatient stock falls 14 percent when investors learn the government is auditing the company's Medicare and Medicaid billings. "It was not really until noontime that we realized what was going on," says compny senior VP Kathy Palmer. (Tennessean 11/25, Bell). She works the phone, reassuring investors, analysts and the media that the government audit is routine. The stock rallied afterward to close at $19.63. It had plunged as low as $18.50 yesterday. Equitable Securities analyst James Baker helped by upgrading American HomePatient's stock to strong buy. But earlier, he was the one spreading the news about the government audit. The Nashville-based company disclosed it in an SEC filing 10 days ago, but not many investors noticed at the time.

Physicians protest ad blitz

Managed-care companies stage an advertising blitz to attract enrollees in Tennessee's Medicaid reform program, TennCare (Memphis Commercial Appeal 11/24). The enrollees are in the middle of an annual monthlong time to choose a health plan for next year. Two physicians' associations object to the media campaign and buy their own ads to protest. In their ads, the medical societies of Memphis and Bluff City say money is better spent on patient care. "I find it ironic that the way they chose to get out the word on advertising is to use advertising," says Ken Renner, spokesman for Access MedPlus, an HMO with 100,000 TennCare-covered enrollees in Memphis. "They are illustrating themselves the reason why TennCare managed care companies and every other private business choose to advertise - it's the best way to get your message out."


'Nothing to cheer about'

In an editorial headlined "Columbia partnership nothing to cheer about," the Denver Business Journal (11/24) questions whether it's good news that the company is staying in Colorado. "There's been a lot of cheerleading in the press that suggests not being put on the Columbia/HCA block is beneficial to some of our leading hospitals," the editorial says. žBut being so closely tied to an ailing health-care giant could turn out to be a major liability for consumers, professionals and for employers who ultimately pay most of the health-care bills." The Business Journal says "it's not clear whether a reorganization into five divisions, and a possible name change, will result in more cost cuts or less effective management."

More on the spin-offsThe Business Journal of Charlotte (11/24, Smith) reports Columbia Davis Medical Center is among the hospitals to be spun off into subsidiary corporations. Employees have been told, and they're going to other hospitals in search of new jobs. Columbia spokesman Jeff Prescott tells the Business Journal that Columbia could spin off its entire Atlantic Group, which includes four other North Carolina hospitals.

Lawmakers eye Columbia tax breakThe Tennessean (11/23, Carey) says state legislators are watching Columbia's reorganization to see how it might affect Tennessee taxes. The state gave Columbia a 10-year, $90 million tax break to move its headquarters to Nashville. The law that granted the break said any company that owns or manages 10 or more for-profit hospitals could qualify for it. If Columbia spins off 11 of its Tennessee hospitals, as its reorganization plan now calls for doing, another for-profit company could meet the law's requirements, the paper says. "It is important that we make sure that the spirit of the agreement that caused the legislation to be enacted be upheld, says state Rep. Matt Kisber, chairman of the House Finance Committee.


Elderly watch for fraud

Federal prosecutors are enlisting elderly people as watchdogs against Medicare fraud in Tennessee. "You are our perfect eyes and ears," Assistant U.S. Attorney Jill Maccione tells a group of senior citizens in Nashville (Nashville Banner, 11/20). The American Association of Retired Persons organized the meeting. Says AARP board member Bea Braun: "Last year there were 700 million Medicare claims filed with the Health Care Financing Administration. There's no way HCFA can hire enough auditors to handle that volume. So you all have to be the auditors." The effort is part of Operation Restore Trust, a campaign by the government to root out fraud in home health agencies and nursing homes.

DeParle gives HCFA new status

Insiders say new Medicare / Medicaid chief and Tennessean Nancy-Ann Min DeParle should wield more clout on Capitol Hill than her predecessor, Bruce Vladeck (Modern Healthcare, 11/17). That's because DeParle comes with close ties to President Clinton. She previously served in White House Office of Management and Budget as director of health and personnel. Min DeParle received Senate confirmation last week as administrator of the Health Care Finance Administration. "This gives HCFA new stature on the hill," says lobbyist Frederick Graefe. "Congress knows she speaks with authority and can commit the administration to things." Vladeck agrees: "She has very well-established contacts both in the White House and on Capitol Hill, and that should make things easier for her."

Frist calms workers by video, Chicagoans threaten strike

Columbia / HCA CEO Thomas Frist seeks to calm patient and employee fears at two Daytona Beach-area hospitals, while confirming the company is making plans to divest the facilities, according to the Daytona Beach News-Journal (11/21). Most Florida hospitals will stay in the Columbia fold under its new restructuring. But company officials acknowledge the 214-bed Columbia-Daytona facility, formerly a Humana hospital, and the 119-bed Columbia-Peninsula hospital in Ormond Beach are part of the one-third of its overall holdings that may be spun off as separate companies, or sold. The News-Journal reports that hospital workers received their first briefing on the reorganization, and read materials and watched a video presentation by CEO Thomas Frist. "We can't say it's really business as usual," Emily Clemente, a Winter Park-based regional spokeswoman for the chain, tells the News-Journal. Meanwhile, about 400 service and office workers at Michael Reese hospital, one of eight Chicago-area hospitals the Columbia wants to spin off, have voted to strike. A 10-day strike notice sent to Michael Reese management last week by Service Employees International Union Local 73 expires at 6 a.m. Saturday, The Chicago Tribune reports today. At issue are job security, severance pay and wages.

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