Frist Dumps HCA Stock After Ethics Complaint
Remaining Senators Must Follow Suit: Sell Hospital, Pharmaceutical, Insurance Stock Or Abstain From Votes
Originally Published: 17 Years Ago | Republished: Dec 26, 2022
Santa Monica, California — After refusing for two years to admit a conflict of interest, Senator Bill Frist (R-TN) has now sold his $10 million to $30 million holdings in the Frist family-founded HCA hospital chain.
The Foundation for Taxpayer and Consumer Rights (FTCR) filed an ethics complaint with the United States Senate Ethics Committee last April charging Frist with an irreconcilable conflict of interest for promoting medical malpractice liability limits that would financially benefit HCA, which also owns the nation’s fourth largest malpractice insurer.
“Senator Frist sold off his stock to protect his political image, and the rest of the Senate should recognize the implications and do the same,”
said Carmen Balber, consumer advocate with FTCR.
“The motive of every Senator with holdings in a hospital, insurer or pharmaceutical company should conflict them out of a decision affecting those companies’ financial interests.”
In July, Congressman James Sensenbrenner (R-WI) recused himself from voting on legislation that would have limited pharmaceutical companies’ liability for selling dangerous drugs because he holds millions in pharmaceutical industry stock. The Senate must now live up to the Sensenbrenner Standard, said FTCR.
FTCR noted, however, that the Senate Majority Leader should still recuse himself from the medical liability debate because his immediate family maintains significant financial interest in HCA. Frist’s brother, Thomas, is HCA’s largest non-institutional shareholder, with over $200 million in HCA stock, and sits on the company’s board.
Frist has been an advocate for legislation to impose a malpractice damage cap and other changes in the medical liability system that would financially benefit HCA, and the company’s medical malpractice insurer, Health Care Indemnity (HCI), by limiting their responsibility to compensate patients who are victims of medical negligence.
FTCR has urged Congress to pass strong insurance reform, not limits on victims’ rights, to stabilize doctors’ increasing malpractice premiums. The group released a report which shows that medical malpractice premiums rose 450% after the passage of a malpractice cap in California, and did not fall or stabilize until the voters approved insurance reform initiative Proposition 103, which included strict rate regulation and a mandatory rate rollback. The report is available online.
FTCR: SEC Should Subpoena Senator Frist Concerning HCA Stock Sale
Originally Published: Sep. 22, 2005 | Republished: Dec. 26, 2022
SANTA MONICA, Calif., Sept. 22 — The Securities and Exchange Commission should subpoena phone records and receipts to investigate possible insider trading activities between Senator Bill Frist and his brother, HCA Director Thomas Frist, Jr, said the nonprofit, nonpartisan Foundation for Taxpayer and Consumer Rights (FTCR) in a letter to the Commission yesterday. Frist directed his trust manager to sell all of his and his immediate family’s HCA stock, valued somewhere between $10 million to $30 million, at the beginning of June just as the market value of HCA stock was peaking. The stock fell precipitously on July 13 after the announcement of poor quarterly earnings that failed to meet expectations.
“Given the close relationship between Senator Frist and Thomas Frist, it is imperative that their communications concerning the sale of Senator Frist’s HCA stock be investigated fully, including use of your subpoena power to acquire phone and financial records, board meeting minutes, and other pertinent records to verify the veracity of the assertions by the subjects of the investigation,” wrote FTCR to the SEC’s Director of Enforcement.
Read the letter to the SEC: http://www.consumerwatchdog.org/resources/Frist_SEC.pdf
Thomas Frist, Jr.’s position of influence as an HCA Director qualifies him as an insider under the Securities and Exchange Act. Thomas is the largest individual shareholder in HCA, with 5.5 million shares that were worth over $263 million at the end of trading Wednesday. He has also held the positions of Chairman, President and Chief Executive Officer at the company he founded with his father, Thomas Frist, Sr.
The Foundation for Taxpayer and Consumer Rights (FTCR) filed an ethics complaint last April asking the United States Senate Ethics Committee to investigate Senator Frist for a conflict of interest in his advocacy of medical malpractice liability limits that would financially benefit HCA, which also owns the nation’s fourth largest malpractice insurer.
Read FTCR’s complaint: http://www.consumerwatchdog.org/malpractice/pr/ (deleted by website)
Read the Ethics Committee response: http://www.consumerwatchdog.org/resources/Frist_ethics.pdf
(Editors: The URLs in this document may contain extra spaces or text equivalents of non-transmitting characters. Copy and paste into your Internet browser, removing extra spaces, etc)
William H. Frist: A Featured Biography
Originally Published: Sep. 22, 2005 | Republished: Dec. 26, 2022
The son of a physician and an educator, William H. Frist of Tennessee earned his undergraduate degree from Princeton University before graduating from Harvard Medical School with honors in 1978.
After working for 16 years as a surgeon, specializing in heart and lung transplants, Frist was elected to the United States Senate in 1994, becoming the first practicing physician to serve in that body since 1928.
While in the Senate, he continued annual medical missions to impoverished countries.
In 2000 Senator Frist became chairman of the National Republican Senatorial Committee.
Two years later, the Senate Republican Conference elected Frist to be their party’s floor leader.
As majority leader, he championed legislation to fight HIV/AIDS globally, modernize Medicare to include prescription drug coverage for seniors, reduce taxes, and achieve K-12 education reform.
Majority Leader Frist retired in 2007.
Frist’s Real HCA Scandal
It’s how he and his party have helped ruin the family business
Originally Published: Sep. 27, 2005 | Republished: Dec. 26, 2022
Senate Majority Leader Bill Frist’s 2008 presidential campaign has gotten off to a rocky start, what with the Securities and Exchange Commission and a U.S. attorney investigating whether Frist ordered the sale of his shares in HCA, the hospital company his family founded, because he knew the stock was about to plummet.
Frist welcomes the investigation, and he’s probably correct that he will be cleared of wrongdoing. Sure, his blind (or perhaps seeing-eye) trust sold shares in the company ahead of a disappointing earnings report in July.
But a shrewd investor (or broker) didn’t need a personal tip from a company official to dump HCA in May and June. You could just look at sales by HCA executives—widely available to the public through SEC filings and on free services like Yahoo! finance—to see how company insiders were trying to get out before a crash.
The real story about Frist and HCA is just how little he has done to help his family company. As Senate leader, he has done nothing to address the health-insurance problems that have caused HCA’s stock to plummet.
Republican policies have been troublesome for many health-care businesses, but they have been particularly devastating to HCA.
HCA and other large hospital companies face a serious problem. They can’t refuse to serve customers who show up at emergency rooms, even those who lack insurance.
As a result, they wind up giving away or writing off a significant chunk of the services they provide.
In the disappointing second quarter, between charity care, bad debts, and special discounts extended to the uninsured, HCA essentially gave away $1 billion in services, about 15 percent of its revenues.
Even with several consecutive years of economic and job growth, uninsured patients—or underinsured patients who prove unable to pay their bills—have continued to flood into HCA’s hospitals.
Between 2000 and 2004, the company’s provision for doubtful accounts more than doubled, rising from $1.255 billion, or 7.5 percent of revenues, to $2.7 billion, or 11.4 percent or revenues in 2004.
This year is looking no better. In the first quarter of 2005, uninsured emergency-room admissions were up more than 15 percent. In the second quarter of 2005, provisions for doubtful accounts ate up an even higher proportion of revenues than they did in 2004: 11.6 percent.
Meanwhile, in the second quarter of 2005, the company provided $275 million in charity care, up 18.5 percent from the second quarter of 2004.
How is it that, in the midst of the purported Bush Boom, HCA each quarter has to write off a huge—and growing—chunk of its potential revenues?
Long-standing macro politico-economic trends, including the increasing divorce of work and health benefits and the government’s disinterest in the problem, are to blame.
Four years of economic growth—the brief recession ended in the fall of 2001—simply haven’t made a meaningful dent in the number of the uninsured.
According to the Census Bureau, the number of Americans without health insurance rose from 45 million in 2003 to 45.8 million in 2004, holding steady at 15.7 percent of the population.
Plenty of jobs may have been created in 2004. But increasingly, American jobs don’t come with health-care benefits.
The percentage of Americans whose health care was covered by employers fell from 60.4 percent in 2004 to 59.8 percent. (Thanks, Wal-Mart!)
These national trends have disproportionately affected HCA because of its Southern strategy. Founded and based in Tennessee, HCA has sought growth by expanding into rapidly developing, union-hostile, business-friendly (and poor) Southern states.
The company’s fact sheet says it has 190 hospitals and 91 outpatient centers in 23 states, England, and Switzerland. But check out the facility location map.
It looks like something you’d find on Karl Rove’s laptop. Operations are concentrated in Florida, Texas, Georgia, Tennessee, Louisiana, Virginia, South Carolina, Oklahoma, Missouri, and Colorado. The only outpost in the northeast is in New Hampshire.
By my count, only 15 of HCA’s 281 facilities are in states that voted for John Kerry in 2004.
HCA is drawn to states in the old Confederacy and Sun Belt, such as Texas and Florida, for the same reasons that Republicans have focused so much attention on them.
Employment and population are growing more rapidly there than in the congested, competitive Northeast and Rust Belt.
And in theory, states in which Republicans predominate should be good for business—lower taxes, less regulation, and so on.
This is true—except if you’re in the business of providing health care. The regions and states in which HCA has chosen to set up shop are noteworthy for their lack of businesses that provide health care to workers.
As Figure 5 in the Census report shows, the regional uninsured rates break down as follows: South, 18.3 percent; West, 17.4 percent; Midwest, 11.9 percent; and Northeast, 13.2 percent.
As this Robert Wood Johnson Foundation report shows (see Figure 5 on Page 10), of the six states with the worst record on insuring the employed—Texas, Louisiana, New Mexico, Montana, and Oklahoma—four are big HCA states.
If Bill Frist were really interested in his portfolio and the long-term fortunes of HCA, he wouldn’t be messing around with blind trusts. Instead, he might propose a national debate on what companies and the government can do to increase the proportion of the population that has insurance.
Or he might start to echo the thinly veiled call for some form of national health care that HCA CEO Jack Bovender has been making in recent years.
Or, as Republican National Committee Chairman Ken Mehlman has been doing, Frist might raise question s about his beloved institution’s Southern strategy.