Echos of Previous Scandals in the For-Profit Hospital Sector

Two stories have surfaced that echo previous scandals.

HealthSouth

Former HealthSouth CEO Richard Scrushy was just convicted of crimes including bribery, conspiracy, and mail fraud, per the Birmingham (AL) Business Journal. He was "accused of buying his way into the state's Certificate of Need review board" by "arranging $500,000 in donations to a campaign committee for [former Alabama Governor Don] Siegelman in exchage for a seat on the state's certificate of need review board, the regulatory body that determines bed capacity at existing health-care facilities and approves construction requests for new facilities based on demonstrated demand." Scrushy is no longer at HealthSouth. The company's spokesman Andy Brimmer said said that the company is working to "put our past behind us. Mr. Scrushy is part of HealthSouth's past and today's verdict has no impact on the company."

Scrushy is still facing civil lawsuits initiated by the US Securities and Exchange Commission (SEC) and private investors, per the Associated Press.

Tenet Healthcare

According to the Los Angeles Times, "Tenet Healthcare, the nation's second-largest hospital chain, today agreed to a $900-million settlement to resolve numerous government investigations into allegations that the company overcharged Medicare for treatment for its sickest patients. The Dallas-based company also announced that it was selling 11 hospitals, including its facilities in New Orleans, as Tenet struggles to recover its financial health and emerge from years of government investigation and litigation regarding its business practices." Note that "Tenet has not settled all government probes into its business practices. The company said it is continuing to resolve a Securities and Exchange Commission investigation into the financial reporting of outlier and other payments."

To pay for the settlement, Tenet will sell 11 hospitals. Per the Philadelphia Inquirer, Tenet plans to sell three hospitals in the Philadelphia area, "Graduate Hospital and Roxborough Memorial Hospital in Philadelphia and Warminster Hospital in Bucks County." "Tenet entered the Philadelphia market with the purchase of eight hospitals from the bankrupt Allegheny health system in 1998. In a few years, the hospitals seemed highly profitable. But the success proved illusory after the firm's billing problems emerged." "Since 1998, Tenet has closed or sold four hospitals in the Philadelphia area: City Avenue Hospital, Parkview Hospital, Elkins Park Hospital, and Medical College of Pennsylvania Hospital."

It's ironic that Tenet's latest problem will lead to its divestment of its former Allegheny hospitals. The bankruptcy of the Allegheny Health Education and Research Foundation (AHERF) was one of the classic cases of health care mismanagement. One classic aspect was that despite the size of the case - the AHERF bankruptcy at its time was the second-largest bankruptcy to have happened in the US - the case was quite anechoic. No comprehensive account of the case has appeared, to my knowledge, in the medical or health care literature. For my summary of the case, see this link.

Our failure to appreciate the history may have doomed us to relive it. How many cases of failed health care organizations will it take before we as a society start to address the epidemic of poor leadership of such organizations?