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HCA Investigations No Harm to its Finances

 |  By jfellows@healthleadersmedia.com  
   September 21, 2012

Despite what has been a more than month-long string of bad press for HCA, Inc., the financial performance of the nation's largest for-profit hospital operator hasn't weakened.

The latest blow came from the U.S. Department of Justice on Wednesday detailing the terms of a $16.5 million whistleblower suit against the industry giant. Still, HCA's stock price closed up 8 cents at $32.75 a share and its profits are robust, according to the company's latest quarterly report.

Healthcare industry analyst Sheryl Skolnick, PhD, of CRT Capital Group, says the hospital chain is weathering a tough investigative environment because of its size.

"To say that there's no financial impact? Sure, there is, but the company is so large and well capitalized that you don't see it. A smaller company might be more obvious," says Skolnick.

The DOJ agreement announced Wednesday says HCA agreed to settle allegations that two of its subsidiaries paid remuneration and other financial benefits to a doctors group in exchange for patient referrals.

In 2007, the DOJ alleges, HCA Physician Services (HCAPS) in Nashville leased space from Diagnostic Associates of Chattanooga, a physician's group, above fair market value, as an incentive to generate patient referrals to its Nashville location and to Parkridge Medical Center in Chattanooga, also a subsidiary of HCA.

Bill Killian, the U.S. Attorney for the Eastern District of Tennessee said in a statement, "Physicians should make decisions regarding referrals to health care facilities based on what is in the best interest of patients without being induced by payments from hospitals competing for their business."

HCA's Parkridge Medical Center is the third Chattanooga-area hospital since 2005 to get caught up in the DOJ's crackdown on healthcare fraud. In August, Memorial Health Care System agreed to a $1.3 million settlement for alleged kickbacks. In 2005, Erlanger Health System settled with the DOJ for $40 million.

As with most healthcare settlements, HCA's Parkridge facility will be subject to a corporate integrity agreement; it will last five years. In an e-mailed statement, Kathy Winn, Director of Marketing for Parkridge, said, "We are pleased the matter is concluded, and we will diligently fulfill the terms of the corporate integrity agreement."

HCA's latest settlement with the DOJ is the latest hit to the for-profit hospital chain, which, just a month ago, disclosed to investors on a second quarter earnings call that it was under a federal investigation by the DOJ for cardiac procedures performed at hospitals in Florida.

On the call, HCA pre-empted a New York Times investigation into its care of the indigent population and payment of ER doctors. That federal probe is ongoing and is unrelated to Wednesday's settlement.  HCA stock closed down the day after the August 6th second quarter earnings call, but since then its stock price has risen by $6.96 per share.

"They're in very strong position, financially," says CRT's Skolnick. Perhaps because the company was only released from its eight-year CIA in 2009, she says she doesn't see evidence of a widespread problem at HCA. "The behaviors you learn while someone is watching your every move are hard to shake off," says Skolnick.

In fact, Skolnick says she was surprised last year when, at one of HCA's hospitals in Georgia, she had to pay for parking.  "I had to pay because their view, under the rules, is you're not even allowed to give a patient or a doctor a gift of parking without it being considered an inducement. It was very interesting to see."

 

Skolnick says the healthcare industry, particularly at the hospital level, is under tremendous pressure to be in compliance with the Patient Protection and Affordable Care Act, which gives whistleblowers and federal agencies such as the Centers for Medicare & Medicaid Services, the Office of Inspector General, and the DOJ more tools to go after healthcare fraud.

"What energized the effort is a provision in the healthcare reform act that can very quickly turn what is an error in billing into a false claims act. So you have a lot more self-reporting. Whether it be Tenet, or HCA, or even specialty hospitals like HealthSouth, everybody knows it's a very hospital-investigative environment. It's tough, and the authorities are using that as their ammunition in already well-armored fight," Skolnick said.

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Jacqueline Fellows is a contributing writer at HealthLeaders Media.

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