Why HCA Is Like Barclays And JP Morgan 3

Earlier this week the New York Times reported on a pattern of seriously deficient cardiac care at a number of hospitals owned by HCA. Understandably, the most common reaction is simple disgust over more bad cardiology behavior. After the Mark Midei case, after subsequent and even worse cases in Maryland, Pennsylvania, and elsewhere, the easy thing is to say that many cardiologists, and especially interventional cardiologists, are corrupt and greedy.

But the larger significance of the HCA story has not been generally understood.

The real problem at HCA wasn’t so simple. Yes, some interventional cardiologists may have been acting like teenagers on spring break, and many may well have been guilty of poor medical judgement, and in some cases much worse. But that’s not what’s at the root of the HCA case.

And the real problem at HCA wasn’t that the hospital had no mechanism to deal with bad cardiologists. In fact, as readers of the Times article discovered, HCA had all sorts of internal and external controls and reviews. Time after time these reviews worked as intended and correctly identified the problem at hand.

The real problem at HCA was that all the oversight in the world meant nothing compared to the bottom line, and that power and authority flowed with the money. The problem is best exemplified by one anecdote in the Times story about a doctor at one HCA hospital:

Dr. Prasad Chalasani… was highlighted by the hospital in a 2009 business plan as being the most profitable doctor at the facility. “Our leading EBDITA MD,” the plan described him. (Ebitda, or earnings before interest, taxes, depreciation and amortization, is a measure of corporate earnings.) Just a few months earlier, hospital executives had received an outside review that characterized Dr. Chalasani as too quick to perform catheterizations, often without first doing the stress tests necessary to determine whether a patient needed the invasive and costly test.

Another example, featured prominently in the Times article, is the story of a nurse whose contract was not renewed after he reported  that unnecessary procedures were being performed at his hospital, although an internal HCA investigation had substantiated his allegations.

Medical judgement, the needs of patients, the responsibility to payers: these were all secondary. Oversight was blown away like so many  autumn leaves. Time and again, HCA executives ignored the reports of their own investigations or failed to implement programs and systems that would prevent them from recurring.

Now I don’t mean to suggest that the bad actions of individual physicians should not be taken seriously But there will always be incompetence, and there will always be individuals who seek to game the system to get more than their fair share. The question is whether the encompassing system is designed to encourage or hinder that behavior. Problems may arise even in the strictest systems, but they probably won’t lead to a federal investigation.

I think the best way to understand HCA is to look at the banks, since in many respects HCA acted like Barclays or JP Morgan, two banks whose inner workings have been exposed by recent scandals.  I’m not a financial journalist by any means, but several clear lessons have emerged from these scandals.
Click to continue reading…

About these ads