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HCA chief shifts focus forward

photo
[Times photo 2000: Jim Damaske]
Dr. Alan Lichtenstein, left, and anesthesia technician Joe Emberton examine equipment in Largo Medical Center's heart surgery room, part of an addition completed last year. Parent HCA has kicked $32.5-million in improvements into the hospital recently.

By KRIS HUNDLEY

© St. Petersburg Times,
published June 7, 2001


As disputes with the government wind down, Jack Bovender prepares for increased demand and a nursing shortage.

LARGO -- Frances Crist has been a volunteer at Largo Medical Center since it opened under the leadership of Jack Bovender 23 years ago.

So when the old boss visited the Largo hospital this week, Crist's first impression was purely personal. "He's got a lot more silver in his hair now," she said between fielding information requests at the front desk. "But as someone said, he's got a lot more money, too."

Bovender is now chief executive and president of the Largo hospital's corporate parent, HCA-The Healthcare Company. He came to inspect $32.5-million of improvements that have been poured into the facility over the past three years.

The improvements are part of a $1.3-billion capital spending campaign at HCA, which is rebuilding both its image and its hospitals after being embroiled in a long-running federal investigation. Under Bovender and his mentor and predecessor, HCA chairman Dr. Thomas Frist, the Nashville, Tenn., chain has agreed to pay the government a criminal fine of $95-million and another $745-million to settle several civil claims of wrongdoing.

While dealing with the Justice Department on one front, HCA has been polishing its reputation on Wall Street over the past four years by focusing on profits in key markets, rather than aggressive expansion.

Among its most profitable markets is West Florida, which includes HCA's nine hospitals in the Tampa Bay area. The region, which stretches from Spring Hill to Fort Myers, is second only to East Florida, posting $1.2-billion in revenues last year.

After touring the Largo hospital's new emergency department and surgical suites, Bovender, 55, talked to the St. Petersburg Times about the new HCA and how it's dealing with both industrywide issues like a nursing shortage and more company-specific problems, like never-ending Justice Department negotiations.

Q: What do you learn on trips to HCA's hospitals?

Bovender: First, I hear what's going on in the local community because health care is very different from place to place. I find out what's going on in the service area and I learn something new about how the technology is changing. I hear what we did right and what we can do different next time. Coming back to Largo is like coming home because the area is still a lot like it was 23 years ago. I don't know a lot of our markets like I know this one.

I also get a feel for what's bothering people, and the biggest problem right now is nursing. Everybody, not just HCA, is going to be facing a huge nursing shortage over the next 10 to 15 years, just as baby boomers need someone to care for them. And we have to figure out some national solutions. The government has to put more money into primary nursing education.

Q: What is HCA doing to deal with the nursing shortage?

Bovender: We need to figure out strategies that will make our hospital better than the one down the street. First of all, we need to create an atmosphere inside the hospital with the leadership where there's a more enlightened environment. There's an old saying that people don't leave a company, they leave their supervisor. We've committed ourselves to improving skill levels at supervisory positions as the single most important thing we can do.

Supervisors have got to have autonomy to make independent decisions. A good example is day care. In some locations, it may be important to offer day care to attract and retain nurses. In others, it may not.

Q: You don't mention higher pay as an incentive.

Bovender: The wage issue will drive itself. That's not the thing that causes nurses to leave. It's the stress, the schedules. We can overcome some of that.

Nurses are frustrated with all the stuff -- like Medicare rules and regulations and the time they need to spend on paperwork -- that keeps them from patient care. We're automating that as much as we can. Over time, we'll move to wireless devices (for paperwork) that nurses can carry around in their pockets. Q: In the fourth quarter, HCA said it was able to cut labor costs through productivity improvements. Can you continue to do that with the nursing shortage?

Bovender: What I see are productivity gains offset by increasing salaries. We've seen wage pressures in the 4 to 5 percent range. I think we'll see increases in the 6, 7, even 8 percent range in the future. And that means we've got to make sure we get rate increases out of managed care companies to offset that.

Q: HCA has been successful in winning tough negotiations with managed care companies, including the battle with BlueCross BlueShield of Florida last year that went down to the wire.

Bovender: We're trying to talk to the managed care companies early enough so they understand our needs and have a chance to get an increase into the underwriting cycle with employers. The whole idea is to get a reasonable rate increase given cost increases. We want to make sure that we don't wake up six months into a contract and the HMO is paying us $2,000 for a procedure that costs $10,000.

And we're not getting double-digit increases; they're more in the 5 to 8 percent range.

Q: Since HCA restructured four years ago, you're focusing on key markets. What does that mean in terms of capital expenditures that result in improvements like the ones in Largo?

Bovender: When we had 365 hospitals in 1997, we spent $1.1-billion on capital expenditures. Today, with 196 hospitals, we're spending $1.3-billion, so the average per hospital expenditure is up significantly. And we expect to increase that to $1.5-billion for each of the next three years.

If you look at projections for population growth over the next decade, nationwide it's 4.5 percent. But in most of our markets, it's in the double digits. Intuitively you know that with the baby boomers, new technology and utilization up, one of our biggest problems will simply be being able to meet the demand for medical services over the next five to 10 years.

Q: On HCA's quarterly conference call in April, for the first time since HCA began negotiations with the Justice Department four years ago, you spoke candidly about being willing to go to court rather than settle. Why the new, more aggressive stand?

Bovender: I wouldn't call it aggressive. I just wanted everyone to understand where we are now.

Look, all five criminal issues have been settled as well as three of five civil issues. Just physician relationships and cost reports are outstanding, and these are the most complex and cloudy, about what people may or may not have done here and there.

We've spent huge amounts of time and lots of money to get our arms around cost reports and the physician issue. We've audited tons of cost reports and we know, objectively, a reasonable range of settlement. And we're prepared to settle within that range tomorrow.

What I said in April was that if the government is going to insist we settle outside that range, it would not be responsible for us -- to our shareholders, employees or patients -- to settle. Then the money would not be available to do what you've seen today in Largo.

I don't think my comments were "in-your-face" at all. We're just down to these two issues.

- Kris Hundley can be reached at hundley@sptimes.com or (727) 892-2996.

HCA-The Healthcare Company

Headquarters: Nashville, Tenn.

Chief executive/president: Jack O. Bovender, 55

Hospitals: 196

2000 revenues: $16.7-billion

2000 net income: $21-million

2000 earnings per share: 4 cents

Ticker: HCA

52-week high/low: $26.88-$45.25

Share price (Wednesday): $41.40

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