By Tristram Korten, Investigative Fund at The Nation Institute. Posted October 2, 2009.
A leading foe of healthcare reform owns a chain of clinics aimed at people who would benefit from a public option.
Editor's note: Research support was provided by the Investigative Fund at The Nation Institute.
For months now multimillionaire healthcare entrepreneur Rick Scott has been at the center of the aggressive campaign to derail healthcare reform in Washington, D.C. Reprising the role he played nearly 20 years ago, when as the head of a national hospital chain he helped kill Clintoncare, the former hospital-chain executive founded the group Conservatives for Patients' Rights, raising $20 million to fight Obamacare, including $5 million of his own money. The tall, lean Scott, whose shiny bald head swivels in exasperation at the idea of government involvement in healthcare, even stars in its nationwide ad campaign comparing Democratic proposals to socialized medicine. Through this group, he has fomented the conservative strategy to disrupt town hall-style healthcare meetings around the country by shouting down elected officials. (CPR sent schedules of the meetings to so-called Tea Party activists.) He can justifiably claim some of the credit for the Senate Finance Committee's two votes Tuesday against a public option. But in Rick Scott the right has found a frontman whose baggage threatens to overwhelm his message.
A linchpin of Scott's 2009 campaign has been the use of anecdotes from abroad -- horror stories from Britain and Canada meant to illustrate how government-controlled healthcare systems "clearly kill people" by controlling their access to care, as he told Fox's Sean Hannity in June. He even funded a documentary titled "Faces of Government Healthcare" cataloging the horror stories of British and Canadian patients who were purportedly denied medical attention for life-threatening illnesses until it was too late.
Yet even as Scott makes the rounds of Congress and talk-show green rooms, a wrongful death lawsuit has been working its way through the Florida courts against a doctor employed by the chain of walk-in clinics Scott founded. Scott has repeatedly bragged that the 27-clinic, Florida-based company, Solantic, is an example of the free-market ingenuity needed to fix our ailing medical infrastructure. The lawsuit, however, alleges a Solantic doctor misdiagnosed a patient's deep-vein thrombosis as a sprained ankle, leading to a pulmonary embolism and death. That same doctor was reprimanded by the state for misdiagnosing deep-vein thrombosis in a patient who died two years earlier. It's the kind of anecdote you'd expect to hear in Scott's documentary -- except that it condemns a free-market system where profit and patient volume may take precedence over care.
And this isn't the first time that Scott's warnings about the ills of socialist medicine have found an ironic echo in his own healthcare business. Scott argues that socialized medicine rations care and strangles competition, yet just after his first stint as anti-reform spokesman in the 1990s, while he was running the world's largest healthcare company, he was accused of monopolizing markets and choking out the competition while slashing the chain's costs to the point that it affected patient care. And while he asserts that two of the core principles of healthcare reform are "accountability" and "personal responsibility," Scott ran a company that ultimately pleaded guilty to defrauding the government in one of the nation's largest Medicare frauds ever. Two executives went to prison, the company paid almost $2 billion in fines, and Scott was pushed out of the company. Before he could retake the political stage, he had to build his healthcare business all over again.
In the end, Scott's virulent opposition to Democratic healthcare proposals may simply be a business decision. The post-millennial incarnation of Rick Scott has plunged into several new healthcare businesses that could be adversely affected by reform. Among other healthcare businesses, Richard L. Scott Investments has invested in a pharmacy company, Pharmaca, where one of his employees sits on the board of directors. Drug manufacturers are opposed to a Medicare-type entity that could negotiate bulk purchases of drugs and drive down the cost of their products. More important, Scott's Solantic bills itself as a low-cost alternative to people who would otherwise go to emergency rooms for their immediate care needs -- i.e., the uninsured and people paying out-of-pocket expenses as a result of diminished insurance plans -- the very people reforms are intended to cover.
Solantic's very existence is an implicit acknowledgment that healthcare costs have not been reined in by free-market forces. Scott himself boasts that a person paying out of pocket will spend at least 10 times less at a Solantic clinic than in a hospital emergency room. That's because hospitals have to charge insured patients a premium to help cover the costs of the uninsured, who often can't pay the full price for medical care, and may skip out on paying altogether. (The Center for American Progress, a liberal think tank that supports a public option in healthcare reform, estimates there is an $1,100 cost shift to family premiums in order to cover the uninsured.) As insurance premiums rise as a result, businesses are turning to higher-deductible plans for their employees, which forces Americans who do have health insurance to pay more in out-of-pocket expenses.
Solantic makes its profit on the spread in this system. "He's there to catch everyone who doesn't have access to regular healthcare," says the Center for American Progress's Igor Volsky. "It's just a business opportunity."
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Richard Lynn Scott was raised in Kansas City, Mo. His father was a truck driver, his mother a department store clerk who sold encyclopedias door-to-door to augment their income. After high school he joined the Navy, then attended the University of Missouri, while working full-time at a grocery store. It was also during college that he exhibited his entrepreneurial drive, buying two doughnut shops for his mother to manage. Ultimately, he decided to become a lawyer, and attended the law school at Southern Methodist University in Dallas, staying in town afterward to practice at a large firm, Johnson & Swanson, where he represented hospitals in mergers and acquisitions. It's there that he began to see healthcare in terms of its business components and profit potential.
He had no medical background and never operated a hospital or ran a clinic, but at some point decided he wanted to own hospitals. In 1987 Scott made a failed bid on behalf of some investors to buy the Hospital Corporation of America, a hospital chain founded by members of the Frist family, including Dr. Thomas Frist Sr., the father of then-U.S. Sen. Bill Frist. But the Frists rejected the offer. The move, however, brought him to the attention of Richard Rainwater, a politically connected investor with ties to the Bush family. Rainwater had made a fortune investing for the wealthy, including George W. Bush. At one point Rainwater, who owned a big chunk of the Texas Rangers and brought Bush in as the team's managing partner, brought in Scott as an investor in the team as well.
In 1987 Rainwater and Scott partnered, and with the initial purchase of two hospitals in El Paso, Texas, formed the Columbia Healthcare Corp. They took their company public and used the money to buy hospitals at a fast clip, focusing on dominating specific markets by buying several hospitals in a region and closing the poor-performing ones. They slashed costs, cutting jobs and hours, and bought bulk supplies at discount. Wall Street rewarded them. By 1994 they had enough capital to buy Scott's original target, HCA. The combined company, rechristened Columbia/HCA, would grow to more than 340 hospitals, 135 surgery centers, 550 home health locations in 37 states and two foreign countries, making it the largest healthcare company in the world. Scott moved to HCA's corporate headquarters in Nashville, Tenn., as CEO.
Although Scott, through Rainwater, hobnobbed with politicos, he was not known as a political animal. He was a workaholic. His political contributions in those days were to trade groups like the Federation of American Health Systems, and to people associated with his business, like Bill Frist's Senate campaign. "I do not recall that he was a major political player back in either the '80s or early '90s, even though he had these connections to Bush through Rainwater," says R.G. Ratcliffe, a veteran political reporter for the Houston Chronicle, who has covered Texas politics, and Rainwater, for 30 years.
Scott himself was an unassuming man, even as his company made financial news across the country. Maggie Mahar, a journalist for the business magazine Barron's in those days, flew down to meet Scott in order to write a profile, but found a man so undynamic she had to change the focus of her story. "He was supposed to be a new up-and-comer, and I just didn't get it," she recalls. "Usually someone who runs a large corporation has a large personality, if not intelligence. With Scott there just wasn't enough there, so I wrote about whether tax breaks for nonprofit hospitals were unfair to for-profit hospitals."
Yet when the Clinton White House began aggressively pushing healthcare reforms, it was Scott who took up the role as frontman for his company, voicing opposition to industry groups and the media. "What's happening in Washington is not healthcare reform," he was quoted in the New York Times as saying to a group of Tampa hospital executives in 1994. "Healthcare reform is happening in the market place." Many suspect he was urged to do this by the Frists, who still retained much control of the company.
The Center for American Progress put together a video montage showing that Scott's talking points today are almost exactly the same as they were in 1993 and 1994. He was at the top of his game then, a man Time magazine praised in 1996 as one of the 25 most influential Americans, alongside Jerry Seinfeld and Sandra Day O'Connor. "In an industry notorious for waste and inefficiency, Scott aggressively consolidates operations and imposes cost controls," Time lauded in its article. One of the examples Time cited was Scott and Rainwater's investment in the two El Paso hospitals, followed by the purchase of a third nearby, which they promptly closed to drive up revenue at the other two.
Others were not so smitten. Journalist Mahar studied Columbia/HCA's business model for her book "Money-Driven Medicine: The Real Reason Healthcare Costs So Much." Hospitals were traditionally seen as a nonprofit business because they provide an essential service to society, Mahar explains. "Hospitals are a necessity like gas and electricity," she says. "We regulate those industries. We don't allow prices to skyrocket. The same thing in healthcare. We don't want hospitals gouging sick people." But in the 1980s, she says, ambitious investors began to see healthcare as a way to make money. Chief among them was Scott.
"What Rick Scott wanted, and his shareholders wanted, was for healthcare to be a growth industry where revenues go up every year," says Mahar, now a fellow at the public-policy think tank the Century Foundation. "I think it's basically impossible to achieve the level of profitability they wanted in the hospital business. You can't expect double-digit profits from a hospital. It's a very tough business. You need a lot of people. You need a good nurse-to-patient ratio to keep patients comfortable and respond to emergencies. And it's unpredictable; you don't know how many patients on a night shift are going to get sick. So you can't trim down to the bone. When you do, people die."
Columbia/HCA regularly posted double-digit growth that paid big dividends to shareholders. BusinessWeek recognized it as one of the 50 best-performing companies on the S&P 500. But in her book Mahar cites examples of how the cost cutting at Columbia/HCA impacted care. One technician complained of having to watch 72 heart monitors at one time. Nurses at an Indianapolis hospital complained to state authorities that babies in the neonatal unit were left unattended for up to three hours. In one case a nurse caring for seven infants was so busy she failed to hear an alarm when a baby stopped breathing; the child was saved when a parent rushed in. The state fined the hospital.
Other, bigger problems were looming. In the mid-1990s, aided by a former accountant who became a whistle-blower, the feds opened an investigation into suspicions that Columbia/HCA hospitals were routinely defrauding the government by inflating the expenses of procedures billed to Medicare, and paying illegal kickbacks to doctors who steered patients to Columbia/HCA hospitals. In July 1997, a year after Time's coronation, federal agents raided Columbia/HCA hospitals in more than half a dozen states, and carted away reams of paperwork. Some hospitals were discovered to have two sets of books, one reflecting the true costs for procedures and another with inflated expenses charged to Medicare. Four executives were indicted; two were found guilty and sent to prison. Rather than continue to fight the government, company executives decided to have Columbia/HCA plead guilty to 14 felonies. The hospital giant ended up paying $1.7 billion in fines and settlements.
Scott was not indicted in the scandal and has protested that he never condoned any illegal activity. He has asserted that federal agents never even interviewed him. But Columbia/HCA's board found him an unpleasant symbol of the problem and voted to oust Scott almost immediately after the scandal erupted in 1997, paying him a $9.88 million severance package, along with 10 million shares of stock worth up to $300 million at the time, to walk away.
Mahar lays much of the blame for Columbia/HCA's illegal acts at Scott's feet. He cultivated a corporate culture where profit was the most important thing, and, as she put it in her book, "executive salaries hinged not on such criteria as reducing infections or lowering death rates, but on meeting financial targets like 'growth in admissions and surgery cases.'"
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Scott was stung by his fall. He 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 (later acquired by Fox) and a computer security firm. But he clearly wanted to reestablish himself as a healthcare player.
A few years after his HCA ouster he got his chance when he and a former Columbia/HCA marketing executive named Karen Bowling conceived of a chain of urgent-care clinics. They collaborated on a business plan for a company that would provide a retail experience not unlike Starbucks or McDonald's -- convenient, affordable, with a focus on "customer satisfaction." In 2001 Scott funded it. The company, based in Jacksonville, Fla., was formed as a service to people who would otherwise visit overburdened emergency rooms with relatively routine problems, such as broken bones, sprains and minor infections, to patients who need to see their primary care doctor for matters such as immunizations and physicals but would have to wait days or even weeks for an appointment. The clinics were designed to be open 12 hours a day, seven days a week. Today, there are 27 Solantic clinics, all in Florida.
Karen Bowling is a cheery former Jacksonville TV reporter. She began working for Scott in the late 1980s when Columbia/HCA gobbled up the Jacksonville hospital where she was the marketing director. She has been a faithful Scott ally ever since, even leaving her job with Columbia/HCA when Scott was ousted. She worked for various of his companies before starting Solantic. "We both really believed healthcare should be more convenient for patients," Bowling says.
Bowling insists the majority of clients are insured, and just want the no-wait convenience of a Solantic clinic. But Scott's repeated emphasis on the cost savings for those paying cash implies the company sees the uninsured as a market to be tapped. "We're probably one-tenth to one-fifteenth the cost if you're just writing a check and going to the E.R.," he boasted to Texas Rep. Michael Burgess in a made-for-YouTube interview the congressman shot. And most press reports identify Solantic as targeting the uninsured. The New York Times described Solantic as a "chain of urgent care clinics which Mr. Scott promotes as inexpensive alternatives to emergency rooms, especially for the uninsured." And why not? With an estimated 45 million to 47 million Americans without health insurance right now, it would seem a smart business move. But just as happened with his first healthcare empire, Scott's newest business raises questions about the compatibility of a corporate bottom line with quality patient care.
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One of Scott and Bowling's initial hires at Solantic was Dr. David Yarian, the company's first regional medical director. His job was to create the clinical design for the urgent-care centers. Yarian lasted roughly five months. He clashed repeatedly with Scott over hiring practices. They also had philosophical differences about how to set up the clinics. Solantic initially designed them so that there would be one doctor and one physician's assistant on staff for 12-hour shifts to meet a steady stream of patients, Yarian says.
"The whole design was for people to get in and out quickly," Yarian says. "I believe the target was 50 patients a day based on a 12-hour day. But no clinic works that way, especially urgent-care clinics where people don't make appointments." The business is too unpredictable. "But Rick and Karen had never run a clinic. He wanted to turn it into a McDonald's. His whole point was volume and speed."
Yarian knew about Scott's past, and he worried that Scott was emphasizing profits over patients again.
"It was made very clear to me this was a numbers game," Yarian says. "The doctors were going to be evaluated on the number of patients they saw. This is exactly what happened at his hospitals."
After one clash too many, Scott and Bowling fired Yarian in November of 2001. Yarian sued for breach of contract and ended up settling with the company.
Scott, in a statement to Salon, declined to address Yarian's criticisms and dismissed him as a "disgruntled employee."
In 2004, three years after Yarian's brief tenure, Solantic hired Dr. Nadeem Maalouli as one of the doctors for its Orange Park clinic just outside Jacksonville. It's not clear if the company knew it at the time of his hire, but Maalouli was being investigated by state health officials for a botched diagnosis. In September 2002 Maalouli was working in a hospital emergency room when he treated a 32-year-old woman complaining of shortness of breath, chest pain and possibly blood-tinged sputum, according to a complaint by the Florida Department of Health. But after Maalouli examined her, the complaint states, he found her "normal." In fact, Maalouli had failed to detect the woman's deep vein thrombosis (DVT). Four days later the woman suffered a pulmonary embolism and died. In 2007 the state's Board of Medicine ultimately ruled that Maalouli's failure to detect the DVT had violated medical standards and reprimanded him. Maalouli agreed to pay a $15,000 fine and to take a continuing education course in detecting pulmonary embolisms.
That case was winding its way through the state's bureaucracy when Maalouli started at Solantic. (Maalouli through his lawyers declined to comment for this article). Then, on March 16, 2005, Tanieta Ogden Shuler, a 31-year-old Jacksonville woman, limped into his clinic, according to information taken from court and medical records. It was around 8 p.m., right before closing, and Shuler complained of a pain shooting from her right heel up the back of her leg. Dr. Maalouli, who was finishing a 12-hour shift, examined Shuler and diagnosed a sprained ankle. He recommended she keep her foot elevated, treat it with ice, and use crutches for the time being. Then he prescribed Motrin 800 and Darvocet for the pain.
Six days later Shuler followed up with a podiatrist who recommended an MRI to see why the pain was persisting, a task Shuler put off. The next day, at about 7 p.m. on March 29, Shuler was rushed to the emergency room at Memorial Medical Center, where she died. An autopsy revealed that Shuler suffered from DVT in her leg, which caused a pulmonary embolism.
In their lawsuit, Shuler's family asserts that Maalouli's examination fell below the accepted standard of care because he didn't send her off to get a sonogram or other tests to double-check his assessment (the clinics don't have sonograms). Maalouli's and Solantic's lawyers dispute that, saying all indications pointed to a sprained ankle, and that it's likely Shuler didn't even have the DVT when she came in to be examined.
Questions likely to come up at trial include whether the company's supposed emphasis on numbers pushed Dr. Maalouli to see Shuler as the clinic was closing, after he had worked a 12-hour shift, and whether Maalouli did not send her off for further tests because he might have lost a client to another facility.
Bowling declined to comment on this case because it is still in the court system. "It's important to say it hasn't gone to trial and it's outcome hasn't been determined yet," she says.
And of course, one wrongful death case, amid the 1.7 million visits to Solantic's 27 clinics, according to company statistics (counting multiple visits by the same patient), is not a condemnation of the entire business model. But it is an uncomfortable fact for Scott to deal with as he travels the world cherry-picking horror stories from countries that use government run systems.
After all, a doctor at a for-profit clinic that relies on high patient turnover, who is called to account for two alleged misdiagnoses ending in two deaths, is right up there with the examples from Scott's documentary -- the English woman denied routine pap smears for two years until she was diagnosed with fatal cervical cancer, or the Canadian man who had to wait 20 months for an appointment regarding his heart arrhythmia, and finally came to the U.S. for treatment.
Aside from the paradox the wrongful death suit puts Scott's example-rich campaign against socialized medicine in, it also counters his boast that Solantic is the kind of free-market exemplar that can fix our healthcare industry. Urgent care clinics provide a service, but only for the most uncomplicated procedures. Doctors don't review a patient's past medical history. There is no ongoing primary care offered. They have limited testing abilities. Other than X-ray machines the facilities don't have any advanced equipment. This is not the solution for the nation's uninsured.
"For very limited things it could work," says author Mahar. "But one problem with this transparent pricing is that if I go in with a terrible stomach pain, no one knows where this is in the price plan until they start examining me. How can they possibly tell me when I stagger in how much it will cost to treat me? Even something as simple as a headache, well I could have a tumor. Basically healthcare is not a commodity that can be neatly priced."
Even Bowling concedes it is no replacement for ongoing care from a physician. "I think people should rely on us for episodic care," Bowling explains. "As a policy we refuse patient requests to be the primary care physicians."
And Rick Scott has never proposed his own full-length healthcare plan, though he has ventured a few specific proposals -- transparent pricing by insurance companies and standardized forms for insurance submissions. Mostly, Scott knows what he's against.
Solantic's target customers -- not only the uninsured, but the self-employed, and small businesses seeking to provide insurance to employees -- are the ones advocates say would benefit most from some kind of affordable healthcare option, even if it was provided by the government. Reforms that would make sure every American had access to affordable health insurance might put Solantic's business plan in jeopardy, giving Scott incentive to gum up the works. "I think those kinds of clinics will become less popular as everyone becomes insured," notes the Center for American Progress's Volsky.
It was only after founding Solantic that Scott began to invest heavily in politics again. He moved from Connecticut to Naples, Fla., along with the bulk of his investment company, and became increasingly active in Republican activities. From 2004 through 2009, he has given $67,000 to Republican candidates and organizations, according to the Federal Election Commission, including $25,000 to the Republican National Committee in 2004, and another $28,000 in 2008.
Then, in February 2009, after the Obama administration announced that reforming healthcare was a priority, but before any concrete plans were announced, Scott reclaimed his mid-'90s soapbox. He charged in with his money and organizational support and helped the diminished GOP galvanize the anti-reform cause, quickly emerging as perhaps the most vocal and prominent conservative voice on the issue. He launched Conservatives for Patients' Rights, which promotes what it sees as the four pillars of healthcare reform -- choice, competition, accountability and personal responsibility. He chose to become its spokesman, appearing in a series of ads put together by Creative Response Concepts, the P.R. firm involved in the Swift Boat Veterans for Truth campaign to discredit Sen. John Kerry's presidential bid. The healthcare ads have aired on CNN and Fox, as well as the Web site Politico.com, and he has penned opinion pieces on RealClearPolitics.com.
In mid-July Scott's group organized a conference call with 104 conservative leaders, plotting a strategy to drag out the healthcare debate in Congress until they have enough popular momentum against reform. Participants in the meeting came out energized. "This healthcare issue is D-Day for freedom in America," South Carolina Sen. Jim DeMint was quoted in Politico.com as saying. "If we're able to stop Obama on this it will be his Waterloo. It will break him."
For Scott that would no doubt be good for business.