COLUMBIA I: FRIST GETS COOL RECEPTION FROM SHAREHOLDERS
Speaking at the Council of Institutional Investors' fallThis is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
meeting, Columbia/HCA Healthcare Corp. CEO Dr. Thomas Frist
yesterday attempted to convince some of the nation's "biggest
pension funds" that there is a "new day at Columbia/HCA"
following a management shakeup prompted by ongoing federal and
state investigations into the company's billing practices (see
AHL 7/29). However, Wall Street Journal reports that Frist's
speech "appeared to have left some key shareholders even
unhappier than when they arrived."
CHANGING THE CULTURE
In his remarks, Frist noted that he is determined to put
patients ahead of profits while moving Columbia away from its
often criticized aggressive business tactics (Lagnado/Rodriguez,
9/23). He said, "The only way this company can succeed in the
future is to put our patients first. In a matter of competing
interests, the patients will always win. If patients always come
first, all of our stakeholders ... will benefit." Frist also
stated that he is attempting to instill a new "system of values"
at Columbia that focuses on the "300-plus local communities we
serve, and the 100,000 patients who depend on us every day for
their health care needs." Frist pointed to management changes as
an example of his attempts to steer a new course at the company
(Columbia release, 9/22). Frist went on to intimate that
"Columbia is being swept up in a broader government crack-down on
the health care industry that will affect thousands of other
hospitals." He said, "We are the savings-and-loan industry of
the decade." See related story for other changes Frist discussed
at the meeting.
Journal reports that audience members representing large
Columbia stakeholders seemed unimpressed by Frist's speech. Many
were interested in the terms of the severance packages offered to
former Chair Richard Scott and other recently ousted executives;
Frist, however, asserted that he did not know the terms of the
deals because "they had been negotiated by a special committee."
Charles Valdes, a trustee of the California Public Employees
Retirement System, said, "[Frist] talked about the patients, and
that is well and wonderful, but that is smoke and mirrors. That
is not what is at issue, and it makes you a little suspicious."
Valdes also said that Frist's assertion that he didn't know the
terms of Scott's severance package was "very phony" (9/23).
According to Bloomberg/New York Times, Frist said Scott's
severance package might be reconsidered if the "government
investigation discloses any fraud during his tenure." Frist also
announced that the company will "appoint two independent
directors next week." The Times reports that it was unsure
"whether any of the nine current directors would step down"
Journal reports that the negative stance of CalPERs'
attendee at the conference "is significant because the huge fund
has been a pioneer in the shareholder-rights movement that has
forced many of the giants of corporate America to oust
underperforming managements, and overhaul their boards."
Following Frist's speech, "about 15 to 20 representatives of
pension funds from Colorado, Pennsylvania, Texas, Ohio, and other
states, attended a closed-door session" sponsored by New York
Comptroller H. Carl McCall, "a vocal critic of Columbia."
Herbert Dyer, executive director of the State Teachers Retirement
System of Ohio, "bluntly summed up the common concern of those"
at the meeting. He said, "I think the problem is that the
allegations are very serious, and Dr. Frist's long association
with that organization and his role ... begs the question of
whether he is the best person to represent stockholders at this
time." Frist and other Columbia officials did not comment on the
"negative reaction from council members" (9/23).