HCA Holdings Inc. (HCA) (HCA), the biggest U.S. hospital operator, declined the most in two months after saying its cardiology practices had come under
scrutiny from the U.S. Attorney’s Office in Miami.
HCA fell 4 percent to $25.55 at the close of New York trading, for its biggest one-day drop since June 1. The U.S. Attorney in July asked HCA for information
about the “medical necessity” of interventional cardiology procedures at its hospitals, the Nashville, Tennessee-based company said today in a regulatory
filing (HCA).
Chief Executive Officer Richard M. Bracken said today on a conference call for analysts that the New York Times was preparing a story that may focus on HCA’
s medical practices and treatment of uninsured patients. The twin disclosures spurred concern about risks for a company whose biggest shareholder (HCA), Bain
Capital LLC, was once led by Republican presidential candidate Mitt Romney.
“My concern is that it gets political legs,” said Sheryl Skolnick, a CRT Capital Group LLC analyst in Stamford, Connecticut, in a telephone interview. “I
think we have to look at it seriously.”
The U.S. request to HCA is part of a heightened federal push against alleged health-care fraud. The Israel-based generic-drug maker Teva Pharmaceuticals
Industries Ltd. said Aug. 3 that it received a subpoena from the Securities and Exchange Commission in connection with a Latin America bribery probe. London
-based GlaxoSmithKline Plc pleaded guilty July 5 to illegally promoting two drugs in a $3 billion deal with the Justice Department, the largest settlement
ever in a case involving health-care fraud.
160 Hospitals
Johnson & Johnson (JNJ) (JNJ), the world’s biggest health-care company by sales, said in an Aug. 2 filing that it received two requests from the department
in the second quarter. The government asked for information on the marketing of Doribax, an antibiotic, and the Relieva Stratus MicroFlow Spacer, a medical
device used to treat sinus conditions, New Brunswick, New Jersey-based J&J said.
HCA owns 160 hospitals and 110 surgery centers. As of April 1, Boston-based Bain held 20 percent of HCA’s outstanding shares, worth about $2.2 billion. The
hospital company was taken public last year by an investment group led by Bain and New York-based KKR & Co. (KKR) (KKR) in an initial offering that raised
$3.79 billion. Through the end of last week, HCA had gained 21 percent in New York trading this year.
2006 Buyout
Romney was a co-founder of Bain and CEO starting in 1984. He has said he gave up management control in February 1999, when he took charge of preparations for
the 2002 Winter Olympics in Salt Lake City. The private-equity firm and fellow investors took HCA private in 2006 in a $33 billion leveraged buyout.
Alex Stanton, a Bain spokesman, didn’t immediately return a call seeking comment.
While HCA declined to answer questions about the legal probe or the article, “Most people assume it’s going to be a negative view,” said Frank Morgan, an
RBC Capital Markets analyst in Brentwood, Tennessee, in a phone interview.
Interventional cardiology includes procedures such as the implantation of metal stents or balloons to open clogged arteries as well as tests for heart
disorders. Procedures to treat cardiac illness and strokes are among the biggest revenue sources for HCA, as they are at most hospitals, Skolnick said.
’Medical Necessity’
HCA’s regulatory filing said the Justice Department “requested information on reviews assessing the medical necessity of interventional cardiology services
provided at any company facility (other than peer reviews),” HCA said. An early look found information on such reviews at about 10 hospitals, mostly in
Florida, the company said in the filing (HCA).
“At this time, we cannot predict what effect, if any, the request or any resulting claims, including any potential claims under the federal False Claims
Act, other statutes, regulations or laws, could have on the company,” HCA said.
Alicia Valle, special counsel to Wilfredo Ferrer, the U.S. attorney in Miami, didn’t immediately respond to a telephone message seeking comment.
In an unsigned statement on its website, HCA said the New York Times coverage may focus on the number of cardiac procedures its hospitals conduct and how
physicians make decisions regarding them.
“These physician-driven decisions have been and are the subject of much debate within the cardiology community,” HCA said. “Accordingly, there is
variation across the country, between regions, within regions, and even within the same medical staff or medical group regarding this issue.”
Declining Rates
The rate of some of the procedures has declined at HCA hospitals over the past decade, according to the statement.
The newspaper also provided the company with examples where it asserts “individual patients may have had adverse outcomes from the care they received at
HCA-affiliated facilities,” according to the statement.
The company said there were about 20 million visits to its facilities last year and “we deeply regret any adverse occurrences to even one of our patients.
HCA-affiliated physicians and employees strive to provide the highest quality care and minimize adverse outcomes.”
The company said on the call and on its website it would decline to answer questions about the article or the subjects it addresses.
Second-quarter net income (HCA) increased 71 percent to $391 million, or 85 cents a share, from $229 million, or 43 cents, a year earlier, the company said
today. Revenue rose 12 percent to $8.11 billion, boosted by the company’s $1.45 billion buyout last year of a partner’s stake in the Denver-based HealthOne
hospital system.
Same-facility inpatient admissions rose 2.5 percent from a year earlier, the company said. Equivalent admissions, which also include outpatient visits,
gained 3.9 percent.
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