The Devil (You Think) You Know

Meet Richard L. Scott. He is the multi-millionaire who is leading the assault against health care reform. The non-profit, Conservatives for Patients Rights, which Mr. Scott helped form and now leads, has been launching ads on TV, radio, and the internet in an attempt to derail universal health coverage, or anything which smells remotely like a public option. Scott initially put in $5 million of his own money and claimed the non-profit would spend as much as $20 million on the campaign.

To do this, they hired the PR firm Creative Response Concepts, who are best known for the Swift Boat ads aimed at presidential contender, John Kerry. The new ads feature Richard Scott, who explains all of the usual arguments against the evils of government-sponsored universal health care. This seems a bit unusual, considering Mr. Scott is not, and has never been, a doctor.

So, who is Richard Scott? And why is he so concerned for "patients rights"?

In 1987, Richard L. Scott founded the Columbia Hospital Corporation. Most of his prior experience had been as a merger and acquisitions lawyer, an expertise that was honed working deals for radio stations and fast-food chains. But then along came Richard Rainwater, a Texas financier, who enticed Scott with the large amounts that could be made with hospital acquisitions. Rainwater intended to do for hospitals "...what McDonalds has done in the food business and what Wal Mart has done in the retailing business." In essence, to grow so big that smaller competitors are put out of business and you become the only game in town. And of course, cutting costs. Not profits, mind you. Just costs.

But what began as an initial investment of $125,000 each and two small hospitals in El Paso, became (with the purchase of Hospital Corporation of America) the largest hospital company in the world, in less than a decade. A $20 billion company, with around 550 home health care offices, 350 hospitals, and many more medical-related businesses in 38 states.

As president of Columbia/HCA, Scott pursued an aggressive pattern of cost cutting that often left nurses and health care workers on the short end of efficiency, purchasing cheaper supplies, consolidating operations, and saddling a reduced workforce with increasing workloads and responsibilities. It also became a standard Columbia/HCA practice to purchase several hospitals in close proximity and then close one down, eliminating competition and driving up profits for those that remained. According to a Forbes magazine article in 2000: "Under former Chief Executive Richard Scott, (Columbia/HCA) bought hospitals by the bucketful and promised to squeeze blood from each one."

Scott also made a practice of selling doctors a stake in the hospitals, offering them partnerships in exchange for their referrals to the Columbia/HCA hospitals. Forbes reported: "In addition it gave doctors loans that were never expected to be paid back, free rent, free office furniture, and free drugs from hospital pharmacies."

When Columbia/HCA were preparing to merge with Health Trust Inc. (which owned eight hospitals in close proximity in Utah), Scott considered the advantages of the merger. "We anticipate annual savings of $125 million from cost reductions and improved efficiencies resulting from our consolidation ..." As we've learned from experience, however, "cost reductions" and "improved efficiencies" do not result in savings passed on to consumers. It simply means less quality for more money, and greater profits for shareholders.

It has become, unfortunately, the standard operating procedure for any and all large corporations, as they are beholden to the shareholders (of which CEOs are also substantial stakeholders), above all else. This is bad enough on the surface, and something we are all growing quite tired of. But for Richard Scott, as with many CEOs, shareholders and executives, a lot of money is rarely enough.

In 1997, Scott was fired by the Columbia/HCA board after the company had been found to be ripping off the Feds and state governments in bogus Medicare and Medicaid charges. In what was the largest fraud of its type in history, the company was forced to pay nearly $2 billion. Considering most penalties and fines amount to only a smaller portion of actual fraudulent monies, it leaves one to wonder at what must have been an enormous fraud on the taxpayers.

In government investigations over seven or more years, it was found that the company was not only committing the garden-variety frauds of unnecessary tests and procedures to raise billings. They were also engaged in practices which included such things as billing employee picnics, food for non-employees at company functions, and Christmas gifts as patient care expenditures. In addition, Columbia/HCA routinely shifted administrative costs into categories with higher reimbursement rates, such as capital improvements.

With fraudulent activities on a history making scale, did Richard Scott face any criminal penalties? In addition to his firing and the fines paid by Columbia/HCA, was there anything more? Well, yes.

Upon his departure, Scott was given a 5-year consulting contract with Columbia/HCA at $950,000 a year, plus $5.3 million in severance pay, plus $300 million in stock. (Crickets chirping.) Do you want me to repeat that? For his wrongdoing he received around $10 million in severance and $300 million in stock. Is it any wonder there is no disincentive for company execs to pursue wrongful behavior in their relentless pursuits of profits? The organized crime syndicates of old must be rolling over in their graves at the thought that so much criminal intent could go not only unpunished, but rewarded.

This is why our health care should not be subject to the private sector, whose sole responsibility - even proclaimed by the Supreme Court - is their fiduciary duty to shareholders (i.e.- maximizing shareholder equities). If it's all about the dollar (and it is), your health care and my own will always be no more than a market consideration, and a tool with which to generate the most wealth with little thought given to what is best for the patient.


As I wrote earlier, Richard Scott is now leading the assault on universal healthcare, or any other public option. He, naturally, represents our usual refrain of, "Follow the money!"

Much of this story can be found in Maggie Mahar's book, Money-Driven Medicine: The Real Reason Healthcare Costs So Much.

Additional information on Richard L. Scott and Columbia/HCA can be found at these sites: Healthbeat.org, Business Week (Aug. 4, 1997), Media Matters, and the New York Times (July 26, 1997).



NEXT UP: The Devil (You Think) You Know-Part 2