HCA Healthcare
Based on Wikipedia: HCA Healthcare
In 2003, the Hospital Corporation of America pleaded guilty to fourteen felonies and paid over two billion dollars in criminal fines and civil penalties to the federal government. It was the largest healthcare fraud settlement in American history. The company's chief executive, Rick Scott, had been forced out years earlier when investigators discovered the company was keeping two sets of books—one to show the government, and one with the actual expenses.
Today, that same company operates 186 hospitals across the United States and United Kingdom. It ranks sixty-first on the Fortune 500. And Rick Scott? He went on to become the governor of Florida and then a United States senator.
This is the story of HCA Healthcare.
A Family Business in Nashville
The company began, as many American business empires do, with a doctor and his son. Thomas Frist Senior founded Park View Hospital in Nashville, Tennessee, in 1960. Eight years later, he joined forces with his son Thomas Frist Junior and a businessman named Jack Massey to create something new: a for-profit hospital company.
The idea was simple but revolutionary for its time. Instead of each hospital operating independently—as most did—why not chain them together? A corporate parent could negotiate better prices for supplies, share administrative expertise, and bring modern management practices to an industry that had long resisted them.
When HCA filed its initial public offering on the New York Stock Exchange in 1969, it owned eleven hospitals. By the end of that year, it had twenty-six hospitals with three thousand beds. The growth was just beginning.
The Acquisition Machine
The 1970s were a golden age for American healthcare expansion. Medicare and Medicaid, created in 1965, were pumping federal money into the system. Private insurance was expanding. And HCA was positioning itself to catch the wave.
By the early 1980s, the company had shifted from building new hospitals to buying existing ones. It swallowed General Care Corporation, General Health Services, Hospital Affiliates International, and Health Care Corporation in rapid succession. By the end of 1981, HCA operated 349 hospitals with more than 49,000 beds. Operating revenues had grown to 2.4 billion dollars.
But growth at this pace creates problems. Managing hundreds of hospitals spread across the country requires a different kind of organization than running a few dozen. In 1987, HCA spun off 104 of its hospitals into a separate company called HealthTrust. The following year, believing the stock market was undervaluing the company, Thomas Frist Junior led a leveraged buyout—borrowing 5.1 billion dollars to take HCA private.
A leveraged buyout works like this: instead of using your own money to buy a company, you borrow most of the purchase price. The debt gets loaded onto the company you're buying, and you pay it back from the company's future profits. It's a way to take control of something far more valuable than what you can personally afford. When it works, the returns are spectacular. When it doesn't, the debt crushes the company.
For HCA, it worked. The company went public again in 1992, and the Frist family remained in control.
Enter Rick Scott
While HCA was going through its buyout and restructuring, a young lawyer in Texas was building his own hospital empire from scratch.
In 1988, Rick Scott and an investor named Richard Rainwater each put up $125,000 to start Columbia Hospital Corporation. They borrowed the rest of the money needed to purchase two struggling hospitals in El Paso for 60 million dollars. Then they did something clever and ruthless: they acquired a neighboring hospital and shut it down. With one less competitor, the remaining two hospitals thrived. Within a year, Columbia owned four hospitals with 833 beds.
Scott's strategy was pure consolidation. Buy hospitals, eliminate competition, increase prices. In 1992, Columbia purchased Basic American Medical, which owned eight hospitals in southwestern Florida. In 1993, it made a 3.4-billion-dollar stock purchase of Galen Healthcare, which had approximately ninety hospitals. The deal was structured so that Galen's stockholders ended up with 82 percent of the combined company—but Scott remained in charge.
In February 1994, Columbia merged with HCA itself. The combined company, called Columbia/HCA Healthcare Corporation, became the largest for-profit hospital chain in America.
The Fraud
Almost immediately, things started to go wrong—or rather, the things that had been going wrong started to come to light.
In 1993, former employees had filed lawsuits alleging that HCA engaged in questionable Medicare billing practices. By 1997, federal investigators from the FBI, the IRS, and the Department of Health and Human Services were deep into what would become the longest and costliest healthcare fraud investigation in American history.
What they found was systematic. The company was billing the government for procedures that weren't medically necessary. It was inflating costs. It was claiming reimbursement for expenses that had nothing to do with patient care. And most damning of all, investigators discovered that Columbia/HCA had been keeping two sets of financial records—one showing what they told the government, and one showing what was actually happening.
The board of directors forced Rick Scott to resign as chairman and CEO. Thomas Frist Junior, who had stepped back from day-to-day management, returned to lead the company through the crisis. He brought in Jack Bovender, an old friend and colleague, to help.
The federal investigation concluded in 2003. Columbia/HCA pleaded guilty to fourteen felonies. The company paid more than two billion dollars in criminal fines and civil penalties. No individual executives went to prison.
Private Equity Takes Over
By 2006, HCA had largely recovered from the scandal—at least in terms of its stock price and operations. That November, a group of private equity firms saw an opportunity.
Kohlberg Kravis Roberts, Bain Capital, and Merrill Lynch, along with Thomas Frist Junior himself, bought HCA in a leveraged buyout valued at approximately 33 billion dollars. At the time, it was the largest leveraged buyout in history, eclipsing the famous 1989 purchase of RJR Nabisco.
Private equity firms make money by buying companies, restructuring them to increase profitability, and then selling them at a higher price. Sometimes this restructuring involves genuine operational improvements. Often it involves cutting costs, loading the company with debt, and extracting fees. HCA was attractive because healthcare is a relatively stable industry—people get sick regardless of economic conditions—and because the company's massive scale offered opportunities to squeeze out efficiencies.
The private equity owners didn't hold HCA for long by private equity standards. In March 2011, they took the company public again in what was, at that time, the largest private-equity-backed initial public offering in American history. The company sold 126.2 million shares at 30 dollars each, raising about 3.79 billion dollars.
The Modern Healthcare Giant
Today HCA operates in a way that would have been unimaginable to Thomas Frist Senior when he founded Park View Hospital in Nashville. The company owns 186 hospitals and more than 2,400 additional sites of care, including surgery centers, freestanding emergency rooms, urgent care centers, and physician clinics.
Its footprint is concentrated in the Sun Belt. Florida and Texas together account for the largest share of its operations. As of 2022, HCA had 47 hospitals and 31 surgery centers in Florida, and 45 hospitals with 632 affiliated sites of care in Texas. The company announced plans to build three new hospitals in Florida in 2021 and five new hospitals in Texas the following year.
HCA also maintains a significant presence in the United Kingdom, where it operates under the name HCA International. The UK arm claims to serve about half of all private patients in London, operating hospitals including the London Bridge Hospital and the Portland Hospital. The company opened urgent care walk-in centers at these locations in 2018, advertising average wait times of just seven minutes to see a nurse and seventeen minutes to see a doctor.
The contrast with the National Health Service, which provides free care but often requires longer waits, is part of HCA's business model in Britain. Private medicine in the UK serves those who can afford to pay for faster access and more comfortable facilities.
Training the Next Generation
One of HCA's more surprising roles in modern American healthcare is as an educator. The company has become the largest sponsor of graduate medical education programs in the United States, operating 56 teaching hospitals across 14 states.
Graduate medical education refers to residency programs—the training that newly minted doctors undergo after medical school, working under supervision while treating real patients. These programs are essential to the healthcare system but expensive to run. Hospitals that host residents must pay their salaries and provide dedicated teaching faculty.
HCA has focused its teaching hospitals in regions where there's a shortage of physician training programs. This serves a dual purpose: it helps address healthcare workforce shortages in underserved areas, and it creates a pipeline of doctors who may choose to stay and practice at HCA facilities after their training.
The company also owns a majority stake in Galen College of Nursing, which operates 21 campuses in 12 states offering nursing degrees. This investment reflects the nationwide nursing shortage that has only intensified since the COVID-19 pandemic.
Controversies Continue
The two-billion-dollar fraud settlement didn't mark the end of HCA's legal troubles. The company has faced ongoing scrutiny about its practices, particularly during the COVID-19 pandemic.
In April 2020, two nurses who worked at HCA hospitals—Celia Yap-Banago in Kansas City and Rosa Luna in California—died after contracting coronavirus. Their deaths sparked outcry when other HCA healthcare workers spoke out about inadequate supplies of personal protective equipment. Nurses reported being asked to reuse masks and gowns that were designed for single use.
In February 2022, outsourced cleaning staff at London Bridge Hospital reported similar problems: a lack of protective equipment, no access to sick pay, insufficient training, and no warning about which rooms might be contaminated with the virus.
More recently, in December 2023, the North Carolina Attorney General sued HCA for violating the terms of an agreement that had allowed the company to purchase Mission Health, a hospital system in that state. HCA denied the allegations and asked a judge to dismiss the lawsuit, filing a counterclaim against the Attorney General in February 2024.
The Rick Scott Question
Perhaps no aspect of the HCA story raises more questions than what happened to Rick Scott.
When Scott was forced out of Columbia/HCA in 1997, he left with a severance package worth hundreds of millions of dollars. He kept a low profile for several years while the federal investigation played out. No criminal charges were ever filed against him personally.
Then, in 2010, Scott ran for governor of Florida. His opponents attacked him relentlessly over the fraud scandal. Scott's defense was consistent: he hadn't known about the billing problems, and he took responsibility for not knowing. Florida voters elected him anyway. He served two terms as governor and was elected to the United States Senate in 2018.
Scott's political success despite—or perhaps because of—his business background reflects something about American attitudes toward corporate misconduct. The company paid a historic fine. Someone must have been responsible for the fraud. But the person at the top walked away wealthy and went on to hold high office.
What Is a For-Profit Hospital?
To understand HCA, it helps to understand what makes for-profit hospitals different from their nonprofit counterparts.
Most hospitals in America are nonprofits. They're organized as charitable institutions, exempt from most taxes, and theoretically dedicated to serving their communities regardless of ability to pay. In practice, nonprofit hospitals often behave much like for-profit ones—they charge high prices, sue patients for unpaid bills, and pay their executives handsomely. But they're not allowed to distribute profits to shareholders.
For-profit hospitals like those operated by HCA can and do distribute profits. They're owned by shareholders who expect returns on their investment. This creates pressure to increase revenues and cut costs in ways that may not always align with patient welfare.
Critics of for-profit healthcare argue that the profit motive inevitably corrupts medical decision-making. When a hospital makes more money by performing more procedures, there's an incentive to perform procedures that aren't strictly necessary. When cutting nursing staff increases the bottom line, patient safety may suffer.
Defenders counter that for-profit hospitals are often more efficiently run than their nonprofit counterparts. Competition forces them to innovate. And in any case, nonprofit hospitals are hardly free from conflicts of interest—they just distribute their surplus to executives and expansion rather than shareholders.
The Consolidation of American Healthcare
HCA's growth reflects a broader trend in American healthcare: consolidation. Over the past few decades, independent hospitals have been absorbed into larger systems, whether for-profit chains like HCA or nonprofit networks.
This consolidation has consequences. When one company owns most of the hospitals in a region, it can charge higher prices because patients and insurers have fewer alternatives. Studies have consistently found that hospital mergers lead to higher prices without corresponding improvements in quality.
Yet consolidation continues because the economics of modern healthcare favor size. Larger systems can negotiate better prices from suppliers. They can invest in expensive technology like electronic medical records. They can spread administrative costs across more facilities. And they can attract capital for expansion more easily than small independent hospitals.
HCA sits at the extreme end of this spectrum. With 186 hospitals and thousands of other facilities, it represents a level of concentration that would have seemed impossible to the doctors who founded independent community hospitals a century ago.
A Company and Its Country
The history of HCA is, in many ways, the history of American healthcare over the past half-century. The company emerged at a time when Medicare and Medicaid were expanding access to care and pumping money into the system. It grew through aggressive acquisition during decades when antitrust enforcement was lax. It committed massive fraud and paid massive fines—but continued operating. It was bought and sold by private equity firms that extracted billions while loading it with debt. And through it all, it kept growing.
Whether HCA is a success story or a cautionary tale depends on your perspective. For shareholders, it has been spectacularly profitable. For executives, it has generated enormous wealth. For patients, the picture is more complicated—they receive care at HCA facilities every day, care that might not exist without the company's investment, but care delivered by a company whose incentives don't always align with their wellbeing.
Thomas Frist Senior, the doctor who started it all with Park View Hospital in Nashville, died in 1998, just as the federal fraud investigation was reaching its peak. A historical marker was installed in the parking lot where his hospital once stood in 2018, now the site of HCA's Sarah Cannon Cancer Center. The plaque commemorates the founding of what became one of the largest healthcare companies in the world.
It does not mention the two billion dollars in fines.