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HCA Says Heart Procedures in Florida Scrutinized by U.S.

A U.S. attorney in Miami asked HCA Holdings Inc. (HCA), the country’s biggest for-profit hospital operator, for information on the “medical necessity” of cardiac procedures in its Florida hospitals, the company said.

The disclosure came yesterday as the New York Times reported that Nashville, Tennessee-based HCA had investigated numerous cases in which doctors conducted unnecessary surgeries in its facilities, and wouldn’t say if it alerted patients, regulators or insurers about the results.

The Times story, released on its website, said the paper reviewed thousands of pages of internal documents. “The problems at HCA went beyond a rogue doctor or two,” the paper wrote, though it didn’t give a specific number of possible cases. After falling yesterday, HCA rose 5.2 percent in New York trading as stock analysts said the revelations failed to show more than isolated problems at the company.

“Today, with uncertainty resolved and our view of ‘if that’s all there is, it isn’t much,’ we actually think the stock should trade higher today.” said Sheryl Skolnick, a CRT Capital Group LLC analyst in Stamford, Connecticut, in a note to clients. “Fear trumped greed yesterday.”

The problems cited by the newspaper don’t seem to be practiced on a “systemic basis” at HCA and reflect issues throughout the industry, said Thomas Gallucci, a Lazard Capital Markets analyst in New York, in another note.

Heightened Scrutiny

HCA climbed to $26.89 at the close of New York trading after falling 4 percent yesterday.

The U.S. Attorney’s request is part of a heightened federal government push against alleged health-care fraud. In the last month alone, Johnson & Johnson (JNJ), GlaxoSmithKline Plc (GSK) and Teva Pharmaceuticals Industries Ltd. all announced actions by the U.S.

J&J, of New Brunswick, New Jersey, said in an Aug. 2 filing that it had received requests for information on the marketing of Doribax, an antibiotic, and the Relieva Stratus MicroFlow Spacer, a medical device used for sinus conditions. On Aug. 3, Petach Tikva, Israel-based Teva said it received a subpoena from the Securities and Exchange Commission in connection with a Latin America bribery probe. On July 5, London-based Glaxo pleaded guilty to illegally promoting drugs in a $3 billion deal with the Justice Department.

Conference Call

HCA owns 160 hospitals and 110 surgery centers. Its chief executive officer, Richard M. Bracken, declined to answer questions about the legal probe or the Times article during a conference call with analysts yesterday after the company released its second-quarter earnings report.

Bracken said on the call that the Times may be preparing more than one story about the company and that the newspaper had also asked about wound-care practices, treatment of uninsured patients and emergency-room procedures. Ed Fishbough, an HCA spokesman, didn’t immediately respond to messages seeking comment on the newspaper’s story.

Interventional cardiology includes procedures such as the implantation of metal stents or balloons to open clogged arteries as well as tests for heart disorders. Procedures to treat cardiac illness and strokes are among the biggest revenue sources for HCA, as they are at most hospitals, Skolnick said.

The Times said documents and interviews found evidence that cardiologists at HCA’s hospitals were performing procedures they couldn’t justify as far back as 2002 and as recently as late 2010, sometimes causing injury and extended hospitalizations for patients.

1,200 Procedures

Half of the cardiac catheterizations performed at one Florida hospital, 1,200 procedures in all, were done on patients without significant heart disease, the Times said, citing a company memo. At another hospital, 43 percent of 355 angioplasties to open clogged arteries were “outside reasonable and expected medical practice,” the newspaper said, citing another memo from 2004.

While the hospital notified authorities of the suspected overuse in at least one case, others weren’t reported, and the hospital company refused to say whether it had told the government, insurers or patients who may have been placed at risk, the Times said.

In an unsigned statement posted yesterday on its website before the Times published its story, HCA defended its cardiology practices.

Subject of Debate

“These physician-driven decisions have been and are the subject of much debate within the cardiology community,” HCA said. “Accordingly, there is variation across the country, between regions, within regions, and even within the same medical staff or medical group regarding this issue.”

The rate of some cardiac procedures has declined at HCA hospitals over the past decade, the company said in the statement.

The newspaper also provided the company with examples where it asserts “individual patients may have had adverse outcomes from the care they received at HCA-affiliated facilities,” according to the statement.

The company said there were about 20 million visits to its facilities last year and “we deeply regret any adverse occurrences to even one of our patients. HCA-affiliated physicians and employees strive to provide the highest quality care and minimize adverse outcomes.”

‘Medical Necessity’

The Justice Department “requested information on reviews assessing the medical necessity of interventional cardiology services provided at any company facility (other than peer reviews),” HCA said. An early look found information on such reviews at about 10 hospitals, mostly in Florida, the company said in the filing.

“At this time, we cannot predict what effect, if any, the request or any resulting claims, including any potential claims under the federal False Claims Act, other statutes, regulations or laws, could have on the company,” HCA said.

Alicia Valle, special counsel to Wilfredo Ferrer, the U.S. attorney in Miami, didn’t respond to a telephone message seeking comment.

The probe and newspaper coverage overshadowed generally good earnings, CRT’s Skolnick said. Second-quarter net income increased 71 percent to $391 million, or 85 cents a share, from $229 million, or 43 cents, a year earlier, the company said today. Revenue rose 12 percent to $8.11 billion, boosted by the company’s $1.45 billion buyout last year of a partner’s stake in the Denver-based HealthOne hospital system.

Same-facility inpatient admissions rose 2.5 percent from a year earlier, the company said. Equivalent admissions, which also include outpatient visits, gained 3.9 percent.

As of April 1, Boston-based Bain Capital LLC held 20 percent of HCA’s outstanding shares, worth about $2.2 billion, and was the company’s biggest shareholder. The hospital company was taken public last year by an investment group led by Bain and New York-based KKR & Co. (KKR) in an initial offering that raised $3.79 billion. Alex Stanton, a Bain spokesman, didn’t return a call seeking comment.

To contact the reporter on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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