Summary: When I wrote Money-Driven Medicine, the Real Reason Health Care Costs So Much (Harper Collins, 2006), Rick Scott stood out as one of the more memorable characters in a rogues’ gallery of CEOs who helped create the stock market bubble of the 1990s.
This week, Rick Scott beat Florida Attorney General Bill McCollumn to win the Republican party’s nomination for governor, shattering campaign spending records by investing $50 million of his own money in the race. Yesterday, in an interview with CNN, Scott said there is no limit on how much of his own money he would spend in the upcoming election.
The citizens of Florida might want to ask: Where did that money come from?
I first met Scott in the early 1990s, when he had just been named CEO of Columbia/HCA, a for-profit hospital chain that would makes its reputation as a serial acquirer, gobbling up other hospitals to become one of the biggest health care companies in the world. At the time, I was mystified: Scott had no experience in the health-care industry, and didn’t appear to be CEO material.
I had been sent to profile Scott for Barron’s, and was expecting to meet an “up and comer.” But when I looked into his eyes, it was like trying to look into the windows of an empty house, late at night. No lights on. No one at home. Who was this man? Why had Dr.Thomas Frist Jr., co-founder of Hospital Corporation of America (HCA) (and the brother of former Senate Majority Leader Bill Frist) chosen him for this job?
By the time I wrote Money-Driven Medicine in 2006, I understood. While running HCA/Columbia, Scott would preside over the biggest Medicare fraud scheme in U.S. history. In 1997, the FBI raided HCA/Columbia offices in seven states. A few days later, the Board of Directors ousted Scott. Ultimately the company pled guilty to no fewer than 14 felonies and paid a total of $1.7 billion in criminal and civil fines. Scott was never charged with any wrong-doing. As I explain in the book, it’s very likely that he knew too much. Scott waltzed away with a $9.88 million severance package, along with 10 million shares of stock worth up to $300 million at the time.”
The fallen CEO “retreated into finance, starting the investment firm Richard L. Scott Investments in Connecticut, that bought stakes in a variety of industries, including a TV network devoted to health news . . . But he clearly wanted to reestablish himself as a healthcare player.” Tristram Korten later reported in Salon.
And in 2001, he did just that, funding a chain of retail health clinics, headquartered in Jacksonville, Florida, that targeted uninsured and underinsured patients able to pay cash for their care.
I lost track of Scott after I wrote about him in Money-Driven Medicine. But three years later, in March of 2009, he surfaced, running a multimillion-dollar campaign for a group that called itself “Conservatives for Patients’ Rights.” Its goal was to kill health care reform. Scott saw his Solantic clinics as the ideal market solution to the woes of the uninsured. So what if the clinics provided no continuity of care? They were cheap– or at least the prices per treatment appeared low. Critics charge that they prescribe unncessary drugs.
Scott had seeded “Conservatives for Patient Rights” with $5 million of his own cash. I was surprised that he had survived the fall of Columbia/HCA and was now seen as a health care “expert.” Mainstream publications such as the Wall Street Journal were reporting on his activities—without bothering to mention that he was tossed out of the company after it was charged with Medicare fraud. (In the news cycle, twelve years is a long time. Most of the reporters writing about Scott in the spring of 2009 had probably never heard of the scandal.) Shocked, I explained who Rick Scott was here on HealthBeat in a post titled “Who is Richard Scott, and Why Is He Saying These Things About Health Reform?”.
A year ago, I was startled to find Scott back in the news. This year, I more than surprised; I was thunder-struck when I discovered that Rick Scott was running in the Republican primary to become governor of Florida. In May, I wrote a HealthBeat post about his candidacy, predicting that he might even win.
He did. This is why I have decided to take another crack at the story. It is essential that everyone—whether conservative or liberal—understand who Scott is, and the role he played, not only in the health care industry, but in the financial debacle of the 1990s, kiting a stock by taking over hospitals, downsizing nursing staffs, paying kickbacks to doctors, bilking Medicare, and allegedly putting patients’ lives at risk.
Now, questions are being raised about his Solantic clinics.
When I first met Rick Scott in the early 1990s, he had hair. Scott, as you probably know, is the super-conservative, whip-thin, bald-as-Bruce -Willis politician who has just become the Republican nominee in Florida’s gubernatorial race. When accepting the nomination, Scott referred to himself as “the good looking bald guy.” And I have to say, he is much better looking today than he was when I met him in 1994.
At the time, Scott was a remarkably non-descript, slightly hang-dog 41-year-old who had just landed a big job as CEO of Columbia/HCA Healthcare Corp. By 1996, it would be the nation’s 10th largest employer, with some 240,000 employees
A for-profit hospital chain, Columbia/HCA was the offspring of a merger between Columbia Health Care (a company Scott had forged with the help of Texas financier Richard Rainwater) and Hospital Corporation of America (created by the father and son team Dr. Thomas Frist Sr.and Dr Thomas Frist Jr., along with Jack Massey, the promoter who turned Harland Sander’s recipe for Kentucky fried chicken into a fast-food emporium.) For-hospital hospitals were a hot ticket on Wall Street and tended to attract a somewhat motley crew of investor/entrepreneurs.
In 1994, I was Barron’s senior editor, and had flown down to Louisville, Kentucky, in order to write a profile of Scott, a supposedly dynamic, up and coming CEO. (A year later, Scott would move the company to Nashville)
Usually, someone who runs a growth company like HCA/Columbia possesses a larger-than life personality, powered by ambition that sucks all of the oxygen out of a room. He may not be brilliant, but you understand how he got where he is. But when I got to Louisville, I found a lean, pale man with a receding hairline and a hungry look, the grown version of the boy who had grown up in Kansas City, Missouri, where his mother helped support five children by selling encyclopedias door-to-door, doing other people’s laundry, cleaning telephone booths and clerking at J.C. Penney.
Gangly, he looked young for his age, even boyish, but not in a happy way. ”According to his mother, if you went to Boy Scout camp with him, he was the boy who would do your chores for a fee. If you were in the Navy with him, he was the young married guy who took correspondence courses and brought cases of soda on board ship to sell by the can for a profit. If you knew him at the University of Missouri, he was the guy in college on scholarships and the G.I. Bill who managed to buy a donut shop with a friend,” Joe Flower reported in the Health Care Forum Journal
Heart sinking, I realized I was going to have to change the focus of my story. Barron’s had a new editor-in-chief who wanted “positive stories.” He expected a glowing cover story about a celebrity CEO. But Scott didn’t fit the part.
“Rick Scott” 2010, picture from his campaign site
Worst of all, from a writer’s point of view, Scott wasn’t particularly quotable. I was there to profile him, and his idea of an entertaining anecdote was to talk about how everyone who worked for him made fun of him for driving an old, broken-down car. I waited for the punch-line. “I’m cheap,” he explained. Indeed, he was frugal, and no doubt, a hard worker. But that wasn’t a cover story.
Meanwhile, I couldn’t figure out why Scott had been chosen to run Columbia/HCA. That was the puzzle, and instinct told me it was the key to a real story. He made me uneasy. When explaining to my editor why I couldnt' write the story he expected, I said: "I wouldn't buy a used car from this man."
But I wasn’t in a position to get the evidence to write an investigative story. I would have needed access to HCA’s books. So I wound up writing a piece about competition between the for-profit hospital industry,and non-profit hospitals that received tax breaks that they didn’t always deserve, creating unfair competition. Scott aruged. This was about the only idea that Scott had. (He had gotten it from Richard Rainwater. In fact, Rainwater was correct: some non-profit didn’t (and still don’t) provide enough benefits to their communities to justify the tax break.)
The Back-Story: Two Men with A Vision
Fort Worth financier Richard Rainwater set Scott, a mergers and acquisitions lawyer from Dallas, on the path to corporate stardom in October 1987, when the two created Columbia Health Care. When Scott and Rainwater teamed up, Scott’s medical experience was limited to helping health care companies buy and sell each other. He got his start in the M&A business, orchestrating deals involving radio stations, fast-food businesses and oil and gas companies. He was, as Joe Flower observes, “the kind of lawyer that a buy-out artist would lovingly call a ‘mechanic.’”
Rainwater’s knowledge of running a hospital was equally limited. But they had a vision: “to do for hospitals . . . what McDonald’s had done for the food business . . . what Wal-Mart had done in the retailing business.” Rainwater wanted to combine volume with low cost. (Since then, of course, U.S. hospitals have learned how to combine volume with high cost, but that is a story that HealthBeat readers already know.)
In Part 2 of this post, I will chronicle Scott’s rise and fall at Columbia/HCA, raise some questions about how much the Frist family knew about the Medicare fraud, why Scott was never questioned, and why the company settled with the government when it did. Finally, I’ll take at look at the chain of urgent care clinics that Scott has set up in Florida, the alleged charges against them, his campaign against health care reform, and the danger that he might be elected Florida’s governor. In the meantime, let me recommend the post below, from “Still Liberal at 83,” an imaginary dialogue between Scott and Scott’s “inner voice.”