Original Link: http://mediamattersaction.org/factcheck/200904280006
Richard L. Scott and his new organization, Conservatives for Patients Rights, have recently received a large amount of media attention. What is getting less attention is his professional record. The Columbia/HCA hospital system that he built was investigated for Medicare fraud - an investigation that turned up documents "stamped with warnings that they should not be disclosed to Medicare auditors." His participation in defrauding America's Medicare system and hurting the millions of Americans who benefit from the program is only a small piece of the complex puzzle that is the man who is leading the charge against a progressive health care reform movement.
Richard L. Scott Brief Biography
Richard L. Scott Served In The Navy And Holds Two Degrees. According to his biography page on the Conservatives for Patients Rights website, Richard Scott served in the United States Navy for 29 months, earned a bachelor's degree in business administration from University of Missouri-Kansas City, and received a law degree from Southern Methodist University. [CPRights.org, accessed 4/15/09]
Scott Specialized In Health Care Mergers During His Time Practicing Law. Richard Scott practiced law in Dallas, TX at "the city's largest law firm Johnson & Swanson primarily representing companies in the healthcare, oil, and gas and communication industries. His specialization was in health care mergers and acquisitions." [CPRights.org, accessed 4/15/09]
Richard L. Scott Has Received Several Prestigious Awards. According to the Richard L. Scott Investments, LLC website: "Since 1997, Mr. Scott has been Chief Executive Officer of Richard L. Scott Investments, LLC, focusing on public and private investments in strong cash flow generating companies. Mr. Scott currently serves on the boards of Secure Computing Corporation, Envestnet Asset Management, Pharmaca Integrative Pharmacy, Inc., Continental Structural Plastics, Inc. and Solantic, LLC. Richard L. Scott was recognized by TIME magazine as one of America's 25 most influential people in 1995. Also in 1995, he was named CEO of the Year by Financial World magazine and was also cited as one of the Top 25 Performers of 1995 by U.S. News and World Report magazine. A native of Kansas City, Missouri, Mr. Scott holds an undergraduate degree in business administration from the University of Missouri and a law degree from Southern Methodist University." [RichardLScottInvestments.com, accessed 2/27/09, emphasis original]
Scott Has Held Signatory Power Over At Least 51 Companies. As of February 20, 2009, Richard L. Scott had been either a Signatory for/with or held Signatory interests in fifty-one companies including: Banc One Corp/OH, Bexil Corp., CyberGuard Corp., HCA, Inc/TN, Egames Inc., Secure Computing Corp., and Wireless Telecom Group, Inc. [SECinfo.com, accessed 4/20/09]
Scott Has Been An Active GOP Contributor
Richard L. Scott Has Donated More Than $63,000 To Republican Political Candidates. According to CQMoneyline.com, Richard L. Scott of Florida, Tennessee, and Texas has donated at least $63,500 to political campaigns since 1989. The figure includes $2,300 given to the Presidential campaign of Governor Mitt Romney in December 2007 and another $2,300 given to the Presidential campaign of Senator John McCain in March 2008. [CQMoneyline.com, accessed 2/27/09]
Richard L. Scott Donated More Than $30,000 To John McCain. According to the financial records of Campaign Money, Richard L. Scott donated at least $45,000 to Republican candidates and committees during the 2008 election cycle:
McCain Victory Committee: -$2,300, 6/29/08
McCain Victory Committee: $30,800, 5/7/08
John McCain 2008, Inc: $2,300, 3/11/08
Republican Party of Florida: $10,000, 3/6/08
McConnell Senate Committee '08: $2,000, 12/14/07
Romney for President, Inc: $2,300, 12/12/07
[CampaignMoney.com, accessed 2/27/09]
Conservatives For Patients Rights, est. 2009
Richard L. Scott Announced "The Creation Of Conservatives For Patients Rights." The Wall Street Journal reported: "The day after Mr. Obama formally laid out his policy goals in his first address to Congress, the former chief executive of HCA Inc. unveiled a $20 million campaign to pressure Democrats to enact health-care legislation based on free-market principles. 'What you see is when the government gets involved, you run out of money and health care gets rationed,' former CEO Richard Scott said Wednesday, after announcing the creation of Conservatives for Patients Rights." [Wall Street Journal, 2/26/09]
CPR Will Advocate For A Health System Based On "Choice, Competition, Accountability And Responsibility."
According to its website, "Conservatives for Patients' Rights is a non-profit organization dedicated to educating and informing the public about the principles of patients rights and, in doing so, advancing the debate over health care reform. Those principles include choice, competition, accountability and responsibility. We believe the path to effective health care reform must be based on the patient-doctor relationship and not from a top-down, big government perspective. Anything that interferes with an individual's freedom to consult their doctor of choice to make health care decisions defeats the purpose of meaningful health care reform." [CPRights.org, accessed 4/15/09]
Scott: Increased Government Control Will Lead To "Dramatically Worse Health Care." According to Politico, Conservatives for Patients Rights founder Richard L. Scott said, "If we have more government involvement we're going to have dramatically worse health care." [Politico, 3/3/09]
CPR Will Promote Four Principles To Health Care Reform. The Politico reported that Richard Scott supplied Conservatives for Patients Rights with $5 million from his own pocket. He is also "pushing for four principles to any health care reform package: individual choice, competition between carriers, giving patients' [sic] ownership over their own coverage and rewarding those who make healthy lifestyle choices." [Politico, 3/3/09]
"Scott Plans To Spend At Least $5 Million To Push A Limited-Government, Free-Market Approach To Medicine."
According to Politico, "Scott plans to spend at least $5 million to push a limited-government, free-market approach to medicine. He has assembled a staff of 12, hired the Virginia public relations firm that assisted Swift Boat Veterans for Truth, bought six weeks of radio and TV ads, and commissioned a poll by Republican strategist Tony Fabrizio." [Politico, 4/20/09]
Scott And CPR Plan To Spend Up To $1 Million On TV Advertising. According to its website, "CPR's phase two advertising campaign starts with an initial $600,000 ad buy, with ads airing nationally on CNN and FOX News. However, if the budget reconciliation process drags on into Congress' Easter recess, CPR will increase spending to $1 million, extending the TV spots through the Easter break." [CPRActionFund.org, 3/27/09]
CPR's Ad Buys "Topped $1 Million" In April For Ads Airing On CNN And Fox News Channel. According to its website, "Conservatives for Patients Rights' Action Fund's current television campaign topped $1 million and has been extended to three weeks inluding [sic] the launch of a new ad today, airing nationally on CNN and Fox News Channel." [CPRActionFund.org, 4/6/09]
Scott: "I Would Just As Soon Not Be In The Limelight." According to the Gulf Coast Business Review, "'I would just as soon not be in the limelight,' Scott acknowledges. But Scott says he's compelled to act because he's concerned about the speed at which the Obama administration wants to nationalize health care. He's jumping headlong into the health-care debate by agreeing to interviews on CNN and Fox News as well as with newspapers such as USA Today. He announced the launch of his organization March 3 and paid $500,000 for a three-week advertising blitz on CNN, Fox News and the Rush Limbaugh and Sean Hannity radio shows." [Gulf Coast Business Review, 3/26/09]
Scott Is The Star Of CPR's Advertisements. The New York Times reported, "Mr. Scott is starring in his own rotation of advertisements" on TV and radio. The video ads are available on Conservatives for Patients' Rights' You Tube channel. [New York Times, 4/2/09; YouTube.com, accessed 4/23/09]
CPR Plans To Release A Documentary "To Discredit The Public Insurance Option" By Using Canadian And European Examples. According to Politico, "Within a month, Scott's Conservatives for Patients' Rights will release a documentary illustrating what he describes as the perils of public health care in Great Britain and Canada. He's trying to discredit the public insurance option, an idea supported by many Democrats that would force private insurers to compete with a government plan...The film will feature people affected by the Canadian and British health care systems, Scott said, and the interviews will 'most likely' make it into TV ads." [Politico, 4/21/09]
"The future belongs to whoever best measures quality of care and then markets it the best. Whoever does will absolutely control the market, and everyone who doesn't will disappear." - Richard Scott [Business Week, 4/8/96]
Richard L. Scott Founded Columbia Hospital Corporation/HCA, Inc. In 1987. According to the Richard L. Scott Investments, LLC website: "In 1987, Richard L. Scott founded Columbia Hospital Corporation (later renamed HCA, Inc.) and began a decade-long effort to build an integrated health system designed to meet the needs of the healthcare consumer." [RLSI.net, accessed 2/26/09]
Scott Teamed Up With Richard Rainwater To Launch Columbia Hospital Corporation. Business Week reported, "on Oct. 19, 1987, the day of the stock market crash, [Richard E.] Rainwater launched Columbia Hospital Corp. with a rambunctious health-care buyout specialist named Richard L. Scott. Putting up $ 125,000 each, they formed a partnership to buy two hospitals. Inside of a decade, the operation was the world's largest hospital company." [Business Week, 11/30/98]
Scott, Rainwater, And George W. Bush Jointly Owned The Texas Rangers. According to the Houston Chronicle, Richard L. Scott "was a limited partner with Haddock, Rainwater and Bush in the Texas Rangers." [Houston Chronicle, 8/16/98]
By 1991, Scott's Stock In Columbia/HCA Was "Worth More Than $80 Million" And He Wanted More. The Dallas Business Journal reported: "[Richard L.] Scott's Columbia Hospital Corp. is leading the industry with his physician partnership approach to acquiring hospitals--a tactic he helped put into play on a smaller scale for Republic. Scott gained the attention of Fort Worth investor Richard Rainwater, and the pair put together a company that currently has a market value of about $ 230 million. Scott's stock in the company is worth more than $ 80 million. Scott says he'll direct his ambition to growing Columbia into an even bigger company. 'I have a large interest in Columbia and I want to spend my time building the company.'" [Dallas Business Journal, 9/27/91, emphasis added]
In Ten Years, Scott Turned Two Hospitals Into A $20 Billion National Corporation. The New York Times reported: "Richard L. Scott, once celebrated as a visionary reformer of the hospital industry but more recently criticized for his aggressive tactics, resigned under pressure as chairman and chief executive, as did his top lieutenant, David Vandewater...In less than a decade, Mr. Scott had built a company he founded with two small hospitals in El Paso into the world's largest health care company -- a $20 billion giant with about 350 hospitals, 550 home health care offices and scores of other medical businesses in 38 states." [New York Times, 7/26/97]
Scott Made Questionable Decisions As Leader Of Columbia/HCA
Rick Scott's "arrogance and disdain for concern for communities...are appalling." - Paul Torrens, MD, UCLA School Of Public Health
Scott Aimed To Market Health Care In The Most Profitable Way. Business Week magazine reported that Richard L. Scott, CEO of Columbia/HCA said: "The future belongs to whoever best measures quality of care and then markets it the best. Whoever does will absolutely control the market, and everyone who doesn't will disappear." [Business Week, 4/8/96]
Richard L. Scott Had A Reputation For Dismissing The Needs Of The Community. NurseWeek.com reported: "'Rick Scott created a public relations nightmare for himself. He created an image, which may or may not be fair, of a grand buccaneer,' said Paul Torrens, MD, MPH, professor of health services management at the UCLA School of Public Health. 'His arrogance and disdain for concern for communities, which had been a part of health care, are appalling.'" [NurseWeek.com, 9/10/97]
"Scott Has No Qualms About Closing Hospitals If They Compete With Facilities His Company Owns." In an article discussing the Columbia/HCA merger and the possible effects upon Texas medical facilities, the Austin Business Journal reported: "The president of that new corporation would be Richard Scott, a former attorney who lives in Fort Worth. Media reports from across the nation have noted Scott has no qualms about closing hospitals if they compete with facilities his company owns or if the facilities are not performing up to par." [Austin Business Journal, 10/18/93]
Columbia/HCA Eliminated 1,000 Hospital Beds In Dade County, Florida. According to the Omaha World Herald, "Columbia/HCA has bought eight general hospitals in Dade County since December 1988. It closed two hospitals and transferred some general medical services out of a third to eliminate 1,000 acute-care hospital beds." [Omaha World Herald, 3/19/95]
Scott "Became Respected And Reviled" For His Cost-Cutting Activity As Head Of Columbia/HCA. The Rocky Mountain News reported that during his time heading the Columbia/HCA Hospital system, Richard L. Scott "became respected and reviled as one of the hospital industry's most aggressive cost-cutters. In many instances, he would buy two neighboring hospitals and then shut one." [Rocky Mountain News, 11/20/03]
Columbia/HCA Said Shareholders Would Benefit From Hospital Closings. The New York Times reported: "The $5 billion merger that Columbia/HCA and Healthtrust Inc. announced Tuesday night would involve a swap of stock valued at $3.6 billion and an assumption of Healthtrust's $1.8 billion in debt...Columbia/HCA said that the deal would be profitable for its shareholders from the outset and that further profits would come from increasing efficiency and taking competitors' market share, not from raising occupancy levels by closing hospitals in areas where both chains operate." [New York Times, 10/6/94]
Columbia/HCA Allegedly "Reneged On A Commitment To Invest Money And Expertise In The Framingham Hospital." In an article discussing the possible acquisition of two Neponset Valley hospitals, the Patriot Ledger reported that "two officials of the only Massachusetts hospital owned by Columbia/HCA, Columbia/MetroWest Medical Center, also have left amid controversy. Former chief executive Lawrence Kaplan and trustee Lauren Rikleen said Columbia/HCA reneged on a commitment to invest money and expertise in the Framingham hospital." [Patriot Ledger, 7/30/97]
"With Columbia, Whatever You Get, You'd Better Get On Paper." According to the Patriot Ledger: "Despite these developments Neponset Valley officials haven't changed their minds, board Chairman Anthony Andreotti said this week...As for the allegations that Columbia/HCA didn't keep some of its promises to MetroWest, Andreotti said Neponset Valley drew its own conclusion: 'With Columbia, whatever you get, you'd better get on paper.'" [Patriot Ledger, 7/30/97]
Under Scott, Columbia/HCA "Squeezed Blood From" Each Hospital It Purchased. According to Forbes: "Under former Chief Executive Richard Scott, [Columbia/HCA] bought hospitals by the bucketful and promised to squeeze blood from each one." [Forbes, 12/15/00]
Under Scott, Columbia/HCA Sold "Doctors Stakes In Columbia Hospitals." The New York Times reported: "In the first hours after Mr. Scott's departure Columbia began to undo some of his legacies. For example, it has vowed to be more cooperative with Federal authorities in their investigation, and to halt its widely criticized practice of selling doctors stakes in Columbia hospitals." [New York Times, 7/26/97]
During His Columbia/HCA Tenure, Scott Dragged The Company Through An Anti-Trust Investigation
Columbia/HCA Involved In $5 Billion Utah Hospital Merger. According to the Caller Times: "Shareholders of Columbia/HCA Healthcare Corp. and HealthTrust Inc., in separate votes on Tuesday, approved a proposed $ 5.4 billion merger that could involve eight area hospitals...The Federal Trade Commission has expressed concern that the merger would hinder competition in the Utah area in and near the cities of West Valley City, Layton and West Jordan." [Corpus Christi Caller Times, 3/1/95]
Columbia/HCA Suspected Of Dominating The Hospital Market. According to the Associated Press: "Columbia-HCA Healthcare Corp. and HealthTrust Inc. said Wednesday they have agreed to sell three Utah hospitals in connection with the proposed merger of the two hospital chains...The FTC is investigating the antitrust implications of the merger. The commission wants to make sure it doesn't allow the combined company to dominate hospital care in any particular region." [Associated Press, 2/15/95]
Scott Justified Consolidation Of Power By Predicting Greater Control Over Costs. The Associated Press reported: "Richard L. Scott, president and chief executive officer of Columbia, and R. Clayton McWhorter, chairman, president and chief executive officer of HealthTrust, said the merger will cut health costs. 'We anticipate annual savings of approximately $ 125 million from cost reductions and improved efficiencies resulting from our consolidation,' they said. 'By leveraging our economies of scale and collective strengths and efficiencies, we believe that we can greatly control health care costs while maintaining quality patient care.'" [Associated Press, 2/15/95]
Scott Offered The FTC His "Candid Appraisal" Of The Investigation. During his testimony before the Federal Trade Commission, Richard L. Scott said: "You have investigated Columbia up, down, and sideways. You and the Justice Department have together required us to supply literally over two thousand boxes of documents, and pay for the time and expense of countless lawyers and economists, in order to justify our competitive activities. You have forced us to divest ten hospitals and one surgery center and undo one joint venture. You have used a great part of your staff resources investigating us and the healthcare industry. Thus, we are particularly pleased that you have invited us to testify in your present hearings. In the spirit in which I know these hearings have been convened, I want to give you a candid appraisal of how we see your work, and how we believe it could be improved upon." [Testimony of Richard L. Scott before the Federal Trade Commission, 11/7/95, emphasis added]
Richard L. Scott "Handled Previous Federal Investigations With A Disdain That Is Remarkable." According to the New York Times: "Indeed, Mr. Scott had handled previous Federal investigations with a disdain that is remarkable for the head of a public company. When Federal investigators in Tampa, Fla., asked for him to be interviewed regarding certain accusations during an investigation in 1995, Mr. Scott not only did not agree to the interview, neither he nor the company even replied to the repeated requests. Beginning last March, articles about Columbia's business practices began to appear in the New York Times...But again, when directors questioned Mr. Scott about the issues being raised in the articles, Mr. Scott dismissed them, people familiar with the discussions said." [New York Times, 7/26/97]
Under Scott's Management, Columbia/HCA Was "Combative With The Government, Competitors, Its Employees And The Press." According to the New York Times: "People close to Mr. Scott characterized his downfall in terms suitable for a Greek tragedy, portraying him as a brilliant and incisive businessman who was undone by his fatal flaws. Those flaws, they said, included an arrogance and aggressiveness that permeated the company. Indeed, in interviews yesterday, Dr. Frist, who has agreed to work without pay, went to great lengths to emphasize that the Columbia of old was dead, and what was emerging was a gentler company that intended to be less combative with the Government, competitors, its employees and the press." [New York Times, 7/26/97]
Under Scott, Columbia/HCA Was Investigated For Defrauding Medicare
Columbia/HCA Investigated For Medicare Fraud. According to the New York Times: "Officials at a number of Federal agencies began investigating whether Columbia hospitals engaged in practices such as fraudulently overstating their expenses to increase their compensation from Medicare, and regularly conducting unnecessary blood tests. Last week, law enforcement agents raided Columbia offices and hospitals in seven states, seizing documents related to business practices." [New York Times, 7/26/97]
Evidence Collected In Columbia/HCA Investigation Included Documents "Stamped With Warnings That They Should Not Be Disclosed To Medicare Auditors." According to the New York Times: "The investigation of HCA's cost reporting began in 1993, when James Alderson, a former chief financial officer of one of its former hospitals, filed a whistle-blower suit contending that the expense documents were rife with fraud. The government began a civil investigation and obtained critical evidence: second sets of cost reports and worksheets maintained at HCA hospitals that contained significantly lower expenses than in reports submitted to the government. Some of those documents were stamped with warnings that they should not be disclosed to Medicare auditors." [New York Times, 12/18/02]
Columbia/HCA "Hospitals Were Knowingly Inflating The Numbers Reported To The Government." The New York Times reported: "In particular, these people said, investigators are examining accusations of significant differences between the cost reports submitted by certain Columbia hospitals to the Government and separate reports -- known as reserve cost reports -- that were kept at hospitals. Investigators were said to believe that these second reports, along with work sheets prepared by analysts working with the company, provided evidence that at least some hospitals were knowingly inflating the numbers reported to the Government in the cost report to improperly raise total compensation." [New York Times, 7/17/97, emphasis added]
Defrauding The Government Could Include Accounting Administrative Costs As Patient Care Costs In Order To Receive Higher Reimbursement Rate. According to the New York Times: "Medicare pays far more for capital improvement costs than for administrative expenses. And only expenses related to patient care qualify for such payments...Part of that could be accomplished by shifting expenses unrelated to patient care into the cost reports, or by accounting for some expenses that would be reimbursed at a lower rate, like administrative costs, as expenses reimbursed at a higher rate, like capital improvements." [New York Times, 7/17/97]
Columbia/HCA Marked Employee Social Function Expenses As Patient Care Costs In Reports. According to the New York Times: "A 1993 report by the General Accounting Office found that Hospital Corporation of America -- the company that accounts for the 'HCA' in Columbia's name -- improperly included expenses for employee picnics, Christmas gifts and food for nonemployees at social functions as expenditures related to patient care in the cost report for its headquarters. The agency did not examine the cost reports for HCA hospitals." [New York Times, 7/17/97]
Columbia/HCA Emergency Rooms Suspected Of Charging Unnecessary Tests To The Government. The New York Times reported: "In addition to the cost report issue, people with knowledge of the investigation said that the Government was also closely inspecting possible fraud in lab work conducted by the company...Officials were said to be investigating whether emergency room doctors were led to prescribe medically unnecessary tests, particularly screening for complete blood counts, which were subsequently billed to the Government." [New York Times, 7/17/97]
The Columbia/HCA Inquiry Spanned Several Years And Involved At Least 50 Facilities. The New York Times reported: "That civil inquiry, which has been under way for several years, has resulted in the Government's obtaining the cost records for at least 50 Columbia facilities, which are now being used as part of the criminal inquiry, people with knowledge of the case said...The cost reports themselves are an arcane, often overlooked portion of the Medicare system, but one that has meant billions of dollars in payments by the Government to hospitals and other health care providers over the years. Those payments come in a number of ways. For example, most outpatient services -- such as home health care -- are reimbursed on the basis of cost, meaning that the higher the costs reported to the Government, the greater the payment to the health care provider." [New York Times, 7/17/97]
Columbia/HCA Healthcare Pled Guilty To Fraud Charges Following Seven Year And Multi-State Investigation. According to Forbes.com: "Yesterday, the nation's largest hospital chain, known until recently as Columbia/HCA Healthcare, pleaded guilty to a variety of fraud charges. It admitted to bilking various government programs and agreed to pay a total of $840 million in fines and penalties. The fraud settlement is the largest in U.S. history, breaking the old record held by Drexel Burnham...The guilty plea follows a seven-year federal investigation that resulted in charges being filed in five different federal courts in Florida, Texas, Georgia and Tennessee, where HCA is headquartered. The fraud revealed by that investigation ran deep within HCA's way of doing business." [Forbes.com, 12/15/00, emphasis added]
Richard L. Scott Had Previously Assured Columbia/HCA Board "The Government Had Nothing On The Company." According to the New York Times, in March 1997 "the company's hospitals and offices in El Paso were raided by Federal agents. Board members, who until then had been content with Columbia's consistent high earnings and growth, turned to Mr. Scott for answers. According to people with knowledge of the discussions, Mr. Scott handled the concerns by assuring the directors that the Government had nothing on the company, that there were no problems, and that there had been similar investigations in the past that had simply fizzled." [New York Times, 7/26/97]
Columbia/HCA Admitted To Several Serious Fraudulent Activities:
Overcharging: "The company admitted to systematically overcharging the government by claiming marketing costs as reimbursable, by striking illegal deals with home care agencies, and by filing false data about how hospital space was being used." [Forbes.com, 12/15/00, emphasis added]
Exaggerating Illness: "The company increased Medicare billings by exaggerating the seriousness of the illnesses they were treating." [Forbes.com, 12/15/00, emphasis added]
Kickbacks and Free "Loans": "It also granted doctors partnerships in company hospitals as a kickback for the doctors referring patients to HCA. 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." [Forbes.com, 12/15/00, emphasis added]
Columbia/HCA Paid "More Than $1.7 Billion In Civil And Criminal Penalties." The New York Times reported that a settlement was reached in the HCA fraud investigation. "Under the terms, HCA would pay $630 million in fines and penalties to resolve all outstanding civil litigation with the Justice Department. An additional $250 million would be paid by HCA to the Medicare program to resolve expense claims submitted by the company to the government...Combined with previous settlements HCA has negotiated with the government involving fraud accusations -- including its agreement in 2000 to plead guilty to 14 felonies -- the company will be paying a total of more than $1.7 billion in civil and criminal penalties, by far the largest amount ever secured by federal prosecutors in a health care fraud case." [New York Times, 12/18/02, emphasis added]
Scott Was Forced From Columbia/HCA By The Board Of Directors
Scott Departed Columbia/HCA Amid "A Rash Of Civil And Criminal Fraud Inquiries." Modern Healthcare reported: "Richard Scott left HCA in July 1997 as a rash of civil and criminal fraud inquiries into what was then known as Columbia-HCA Healthcare Corp. became public. Scott resigned less than two weeks after investigators raided 18 Columbia-HCA hospitals in six states. The HHS' inspector general's office issued the company three subpoenas and five of its employees received grand jury subpoenas. Ultimately, HCA brokered two massive settlements in 2000 and 2002 worth a combined $1.74 billion to wrap up fraud charges." [Modern Healthcare, 7/11/05]
CEO Richard L. Scott Forced To Resign Amid Fraud Charges. According to Forbes: "The investigation and the plea is an obvious blow to a company that became a Wall Street darling by promising to bring first-class business practices to the hospital sector, still dominated by not-for-profits. Under former Chief Executive Richard Scott, it bought hospitals by the bucketful and promised to squeeze blood from each one. Scott was forced to resign in the wake of the initial fraud charges in 1997." [Forbes, 12/15/00, emphasis added]
Scott's Golden Parachute Included Nearly $10 Million In Severance And $300 Million In Stock Options
Scott Received Nearly $10 Million In Severance And A 5 Year Contract With Columbia/HCA Following Resignation. Modern Healthcare reported that Richard L. Scott's "$9.9 million severance included a five-year consulting contract with HCA." [Modern Healthcare, 7/11/05]
Scott's 5 Year Consulting Contract Paid $950,000 Every Year. According to the New York Times: "The Columbia/HCA Healthcare Corporation said yesterday that it had agreed to pay its former chairman and chief executive nearly $10 million when he was forced out in July in the wake of an unfolding criminal investigation of the company. The agreement with the executive, Richard L. Scott, provided for a one-time payment of $5.13 million, as well as a five-year annual consulting fee of $950,000, for a total of $9.88 million, according to a copy of a severance agreement included in the company's quarterly filing with the Securities and Exchange Commission." [New York Times, 11/14/97]
Scott's Severance Package Included $300 Million In Stocks. According to the Florida Times-Union, Richard L. Scott left Columbia/HCA "with a $10 million severance package and 10 million shares of stock valued at more than $300 million." [Florida Times-Union, 6/21/06]
Columbia/HCA Paid Legal Fees For Scott And Fellow Ousted Executive. The St. Petersburg Times reported that along with Richard Scott, COO David Vandewater was expelled from Columbia/HCA. In addition to Scott's extensive severance package, "Vandewater was paid $ 3.24-million plus an annual consulting fee of $ 600,000 over five years. Both men had the right to exercise any vested stock options within 90 days of resigning July 25. Columbia also agreed to pay legal fees for both men, assuming they are found not to have committed any wrongdoing. This policy applies to all Columbia employees." [St. Petersburg Times, 11/14/97]
FBI "Uncovered A 'Systemic Corporate Scheme' To Defraud Medicare" On The Part Of Columbia/HCA Under Scott And Vandewater. According to the St. Petersburg Times: "Neither Scott nor Vandewater has been charged with wrongdoing, though agovernment affidavit said the FBI has uncovered a 'systemic corporate scheme'to defraud Medicare and Medicaid. In signing the severance agreement, each man said he 'had acted in good faith and in what he reasonably believedto be the best interest of the company, and that he had no reasonable cause to believe that any of his conduct was unlawful.' Dr. Thomas Frist, who replaced Scott, has since reversed most of his predecessor's policies and put a halt to Columbia's rapid expansion." [St. Petersburg Times, 11/14/97]
Former Columbia/HCA Partner Disagreed With Scott Ouster. Business Week reported: "By the time Rainwater left Columbia's board [in1994] to concentrate on Crescent Real Estate Equities, his investment had grown to some $ 300 million -- a 2,400% return. [...] To this day, Rainwater says Columbia's board should never have fired Scott. 'I asked everyone the same thing: 'Why are you doing this?' Rainwater says. 'And the only reason I got was because they didn't think he was the right person to deal with the government. That's not a reason to terminate him. If that's the case, I said, let's go hire someone to deal with the government.'" [Business Week, 11/30/98]
Banc One Board Of Directors, 1994-1997
Scott Elected To Banc One Board Of Directors In October 1994. The Columbus Dispatch reported: "Richard L. Scott, president and chief executive officer of Columbia/HCA Healthcare Corp., has been elected a director of Banc One Corp. Scott, 41, founded Fort Worth, Texas-based Columbia Healthcare Corp. in 1987, after having specialized in health-care mergers and acquisitions at his Texas-based law firm. It later merged with Healthcare Corp. of America. Columbia recently announced plans to merge with HealthTrust Inc. Healthcare. The newly combined companies will operate 311 hospitals with 60,000 beds and 125 outpatient centers." [Columbia Dispatch, 10/19/94]
Scott Served On Banc One's Personnel And Compensation Committee. According to the Banc One Proxy Statement to Shareholders filed for March 6 - April 16, 1996, "BANC ONE has three standing committees of the Board of Directors. The Personnel and Compensation Committee, which currently consists of John R. Hall (committee chairman), E. Gordon Gee, Richard L. Scott, Thekla R. Shackelford and Alex Shumate, held four meetings during 1995. In addition to reporting to the Board on the selection of BANC ONE's principal officers...and the fixing of their salaries, this Committee determines the amount of bonus paid to principal officers of BANC ONE and its affiliates, approves the salaries and bonus received by the principal officers of BANC ONE affiliates, administers certain BANC ONE employee benefit plans and serves as the Board of Directors' nominating committee..." [Banc One Proxy Statement, 3/6-4/16/96]
Scott Approved More Than $9 Million In Salaries And Bonuses For Five Employees Over Two Years. As a member of the "Personnel and Compensation Committee," Richard L. Scott approved the following salaries and bonuses for Banc One's CEO and "the four other most highly compensated executive officers" for FYs ending December 31, 1994, and 1995:
John B. McCoy
Chairman & CEO,
John B. McCoy
Chairman & CEO,
Richard J. Lehmann
Richard J. Lehmann
Banc One Arizona Corp.
Thomas E. Hoaglin
Banc One Ohio Corp.
Thomas E. Hoaglin
Banc One Ohio Corp.
Joseph D. Barnette, Jr.
Banc One Indiana Corp.
Joseph D. Barnette, Jr.
Banc One Indiana Corp.
Ronald G. Steinhart
Banc One Texas Corp.
Ronald G. Steinhart
Banc One Texas Corp.
[Banc One Proxy Statement, 3/6-4/16/96]
Scott Left Banc One's Board Of Directors In 1997. The Columbus Dispatch reported that following the FBI probe into Ohio hospitals, "the top officer of Columbia/HCA has decided to leave the board of directors of Banc One Corp. Richard L. Scott, chairman and chief executive of Columbia/HCA, decided not to seek re-election to Banc One's board, on which he has served since 1994." [Columbus Dispatch, 4/1/97]
America's Health Network (AHN), 1997-2001
America's Health Network Provided "All-Original Health And Medial Programming." The Nashville Business Journal reported: "AHN was launched in March 1996 and provides 24-hour, all-original health and medical programming daily. The network is based in Universal Studios Florida in Orlando and reaches 9 million households in all 50 states through cable television and satellite distributors. According to Media Metrix, AHN.COM is the 26th fastest growing site on the Internet." [Nashville Business Journal, 2/12/99]
Former Columbia/HCA Executives Invested In AHN. The Nashville Business Journal reported: "Among AHN investors are Richard L. Scott, a founder and former chairman and chief executive officer of Columbia Healthcare Corp., and David T. Vandewater, Columbia's former chief operating officer." [Nashville Business Journal, 2/12/99]
Under Scott's Leadership, Columbia/HCA Made Moves To Purchase America's Health Network. According to Business Wire: "Columbia/HCA Healthcare Corporation...and America's Health Network today announced the signing of a letter of intent in which Columbia would acquire majority interest in AHN from its parent company A.H. Belo Corporation. Terms of the transaction were not disclosed." [Business Wire, 5/14/97, via FreeLibrary.com]
Scott: Purchasing AHN Will Complement Columbia/HCA's "Existing Consumer Health Information Initiatives." Business Wire reported: "'Columbia's acquisition of majority interest in AHN provides another opportunity which will allow us to continue our efforts to build a pathway for individuals to improve their personal health,' said Richard L. Scott, Chairman and Chief Executive Officer of Columbia. 'This complements our existing consumer health information initiatives, which include our award-winning site on the World Wide Web, with more than 4.5 million hits in the first quarter of this year..." [Business Wire, 5/14/97, via FreeLibrary.com]
Columbia/HCA Deal Collapsed, Resulting In Layoffs Of 80% Of AHN's Workforce. According to the New York Times: "The A. H. Belo Corporation said yesterday that it had sold its 65 percent stake in America's Health Network after a deal with the Columbia/ HCA Healthcare Corporation collapsed. Belo sold the stake to its unnamed partners in the medical cable television network. The terms of the deal were not disclosed. America's Health, which reaches more than six million households in the country, last week laid off 161 of its 200 employees after the Columbia deal collapsed." [New York Times, 8/5/97]
Scott Rescued AHN "When The Money Dried Up." The St. Petersburg Times reported that: "When the money dried up about a year ago and AHN was limping along with a skeleton crew, [AHN] found a big backer who had plenty of money and experience in health care: Rick Scott." [St. Petersburg Times, 11/3/98]
Scott And Another Columbia/HCA Executive Purchased 75% Of AHN. According to the St. Petersburg Times: "Booted out of the business of providing health care, [Rick] Scott and Columbia's former president, David Vandewater, bought a 75 percent stake in a business dedicated to providing health information...Scott's fingerprints are all over AHN's Web site, which is run by Columbia's former Web guru, J. Tod Fetherling." [St. Petersburg Times, 11/3/98]
Starting In 1998, AHN Broadcast Several Medical Procedures On Its Website. The Tennessean reported: "America's Health Network is a 3-year-old cable TV network co-owned by Rick Scott and David Vandewater, former top Columbia/HCA executives. AHN.COM officials say the Web site is based in Nashville because its top executives, including Fetherling, live in the area and because Nashville 'is a hub for health and medical management firms.' Since last summer, the Web site has broadcast a live birth, open-heart surgery and several other operations, including a brain surgery performed last month at Centennial Medical Center in Nashville." [The Tennessean, 2/23/99]
Scott Held Interest In AHN Through Its Sale To The Discovery Channel In 2001. According to the Richard L. Scott Investments website, America's Health Network was a "Prior Investment" of the company and is "[b]ased at Universal Studios in Orlando, Florida, America's Health Network was a cable health television and Internet company in which Richard L. Scott Investments, LLC acquired a majority interest in 1998. Originally launched in 1996, America's Health Network was the first television source for around-the-clock health and medical information. News Corp's Fox Broadcasting Company acquired a 50% interest in America's Health Network in 1999, at which time the network was renamed The Health Network. The Health Network was subsequently sold to Discovery Communications Inc. in September 2001 and became part of the Discovery Health Channel." [RichardLScottInvestments.com, accessed 4/28/09]
After Scott Joined AHN Leadership, Other Partners Filed Lawsuit Against Columbia/HCA
AHN Limited Partners Filed Suit Against The Majority Partners' Former Employer. According to The Tennessean: "On Friday investors in a limited partnership with the former America's Health Network an Orlando, Fla.-based cable property now known as The Health Network filed suit against HCA in Davidson County Chancery Court. The suit claims that HCA aborted a promised deal to invest in the then fledgling network on the same day in 1997 that Scott, at the time HCA's embattled chairman and chief executive officer, was shown the door. The lawsuit seeks unspecified financial compensation for losses investors say they have suffered as a result of the deal's demise. The suing investors include: Jeffrey Maddox and Webster Golinkin, two of America's Health Network's co-founders..." [The Tennessean, 8/2/00]
Lawsuit Pitted AHN Partners Against Each Other - With Scott "At The Center Of The Controversy." The Tennessean reported: "At the center of the controversy is Scott, who resigned in July 1997 amid a growing federal fraud investigation into HCA improprieties involving Medicare and other federal health programs. Scott, along with David Vandewater, is now one of the principal investors in AHN Ltd. Partners, a limited partnership that owns half of The Health Network. The suing investors are also part of AHN Ltd. Partners." [The Tennessean, 8/2/00]
Scott's Columbia/HCA Struck A "Non-Binding Agreement" To Purchase "Controlling Interest" Of AHN. The Tennessean reported: "According to the complaint, on May 7, 1997, at the direction of Scott then-Columbia/HCA entered into a 'non-binding agreement in principle' to acquire a controlling interest of AHN from a subsidiary of A.H. Belo, a media company whose holdings also include The Dallas Morning News. Founded in 1995, AHN was initially funded with $65 million in venture capital from private investors. By early 1997, however, the company was apparently in need of additional funds to continue operations." [The Tennessean, 8/2/00]
Columbia/HCA "Backed Out" Of Nearly $40 Million Purchase Of AHN. According to The Tennessean: "HCA was to give Belo [which held a controlling interest] a $34.7 million promissory note and $4.7 million in cash. The company also contemplated giving AHN an additional $25 million in cash. Rather than closing the deal as expected, however, AHN's limited investors say HCA backed out of the sale on July 23, 1997. On that morning, HCA announced Scott's immediate departure and the naming of Dr. Thomas Frist Jr. as the company's new chairman and CEO. Because HCA backed out of the deal, the investors contend they have suffered 'substantial damages and loss.'" [The Tennessean, 8/2/00]
Plaintiff Investors Said Columbia/HCA Back Out "Forced Them To Seek Financial Help" From Scott. The Tennessean reported: "Specifically, the investors say HCA's decision compelled AHN, at the time strapped for cash, to furlough 161 of its 200 employees. The investors also say they were forced give up equity to a lender that offered it a bridge loan to remain afloat. Moreover, the investors contend their financial plight subsequently forced them to seek financial help in the form of an equity investment from Scott. In return, however, the investors say they 'had to give Scott' a 75% ownership interest in the venture." [The Tennessean, 8/2/00]
Scott "Failed To Pursue Litigation" In Lawsuit Due To "Conflict Of Interest" Between AHN And Columbia/HCA. According to The Tennessean: "Despite their involvement with AHN Ltd. Partners, neither Scott nor Vandewater, former Columbia/HCA president and chief operating officer, are parties to the suit. In its complaint, the suing investors say Scott has failed to pursue litigation because of a 'conflict of interest' stemming from his ties to AHN and role in HCA's original decision to buy a controlling stake in AHN." [The Tennessean, 8/2/00]
After Forced Exit, Scott Brought Along Two Columbia/HCA Executives To AHN
Vice President Of AHN Marketing Had Been A Columbia/HCA Executive. According to the St. Petersburg Times, "Karen Bowling, a former Columbia executive...is vice president of marketing at AHN." [St. Petersburg Times, 11/3/98]
Scott's AHN Partner, Vandewater, Also Ousted From Columbia/HCA Amid Fraud Investigation. The St. Petersburg Times reported: "Richard Scott, ousted as Columbia/HCA Healthcare Corp.'s chief executive in July, received a severance package totaling nearly $10-million, company filings show. Former chief operating officer David Vandewater, meanwhile, will get more than $6-million. Both resigned from the beleaguered health care company under pressure from Columbia's board...And Scott and Vandewater lead an equity group that this week said it would invest in America's Health Network, an Orlando-based company." [St. Petersburg Times, 11/14/97]
Richard L. Scott Investments, LLC, 1997-Present
Scott "Launched Richard L. Scott Investments The Same Month He Left HCA." According to Modern Healthcare, Richard L. Scott "launched Richard L. Scott Investments the same month he left HCA, according to his biography as a director of Cyberguard Corp., a technology firm. Scott Investments, based in Stamford, Conn., has stakes in companies in manufacturing, catalog retail and healthcare, including Pharmaca Integrative Pharmacy, a retail pharmacy chain where Scott is also a director." [Modern Healthcare, 7/11/05]
Richard L. Scott Investments, LLC Holds Interests In A Variety Of Companies. According to the website, Richard L. Scott Investments, LLC is invested in the following companies:
Continental Structural Plastics, Inc. - "supplier of engineered thermoplastic and thermoset compression-molded, structural components"
Drives - "designers and manufacturers of...heavy duty drive chain-based products and assemblies for industrial and agricultural applications; and ii) precision engineered augers"
Engineered Data Products Holdings, Inc. - "designer and manufacturer of computer-related support equipment"
Colorflex - "provider of on-demand labeling and filing systems technology"
Tri-Optic - "research and develop the newest technology for media bar code label printing"
Airco Industries, Inc. - "manufactures...integrally-lighted displays and control panels for military and commercial airborne and ground communications and navigation systems"
L.E.Technologies, LLC - "manufactures steel frames and related components"
Solantic, LLC - "operates walk-in, retail-based clinics staffed by board certified physicians"
Pharmaca Integrative Pharmacy, Inc. - "operates unique pharmacies that combine prescription drug and over-the-counter products with natural, complementary and personal body care products"
Alijor - "founded with the purpose of making it easy for patients in need of medical services to find a healthcare provider"
Novasan, LLC - "provides high quality nutritional supplements under the Viosan brand name"
America's Health Network - "a cable health television and Internet company in which Richard L. Scott Investments, LLC acquired a majority interest in 1998"
EnvestnetPMC - "delivers separately managed accounts, mutual funds and alternative investments to independent financial advisors through its sub-managers"
Strike & Spare Family Fun Centers - "one of the top ten largest operators of bowling-based family entertainment centers in the United States"
Digirad Corporation - "develops, manufactures and markets solid-state, digital gamma cameras to hospitals, imaging centers and physician offices"
Emida Technologies - "transactional network which enables electronic prepaid service distribution, money transfer and stored value card processing targeting the Global Hispanic market"
[RichardLScottInvestments.com, accessed 4/14/09, emphasis added]
Solantic Was Founded In 2001. Business Wire reported: "Jacksonville, Fl.-based Solantic was founded in 2001 by Richard Scott, founder and former Chairman and CEO of Columbia/HCA, and Karen Bowling, a 25-year veteran of the health care industry, with the goal of providing physician-staffed, patient-centric, convenient walk-in urgent health care. Solantic's centers offer patients a broad range of health care services spanning urgent care, immunizations, screenings and physicals." [Business Wire, 7/30/07]
Bowling Has Working With Scott At Both Columbia/HCA And AHN. According to the St. Petersburg Times, "Karen Bowling, a former Columbia executive...is vice president of marketing at AHN." [St. Petersburg Times, 11/3/98]
Solantic Business Model Based Upon Home Depot, McDonald's, And Wal-Mart. The Florida Times-Union reported that Solantic President and CEO Karen Bowling "and her business partner Rick Scott, now Solantic's chairman, pored over books about successful companies such as Home Depot, McDonald's and Wal-Mart...The company was established on June 6, 2001, with Scott, the company's largest investor, contributing an undisclosed amount of money. The first four clinics opened simultaneously six months later. In total, there have been about 300,000 patient visits since the 2002 opening." [Florida Times-Union, 6/21/06]
"Scott Always Wanted To Bring A Friendly, Open, Retail Style To His Hospital Emergency Rooms." According to CNN Money, "Solantic, an incipient Starbucks of emergency rooms, [is] a string of 23 urgent-care facilities that proudly posts its prices, boasts of chirpy service, and is popular with insurance companies because visits are cheaper than the ER. Customers are offered a menu that includes an $89 visit, a $50 basic checkup, and a $30 flu shot. Scott always wanted to bring a friendly, open, retail style to his hospital emergency rooms. Now he's doing it on his own." [Money.CNN.com, 4/9/09]
Scott Is "A Retail Nut - Not A Health-Care Wonk." In her CNN Money piece on Richard Scott, Nina Easton wrote: "We are standing in the produce section of a Wal-Mart [during a visit to a Solantic Clinic] because Rick Scott can't help himself - he's drawn to the retail beauty of the place. 'It's such an attractive presentation,' Scott says in awe of the colorful tumble of grapefruit and apples and celery. The first thing to understand about Scott is that he's a retail nut - not a health-care wonk." [Money.CNN.com, 4/9/09]
Scott "Wanted To Create A Clinic Business" During His Time Running Hospitals. According to the New York Times, Richard L. Scott said of Solantic: "'I always wanted to create a clinic business when I was in the hospital business.'" [New York Times, 5/14/06]