Conflict of Interest Requires Majority Leader's Immediate Recusal
Santa Monica, California -- Senate Majority Leader Bill Frist's connections to HCA and the company's subsidiary malpractice insurer, HCI, create a personal and financial conflict of interest for Frist with hospital liability legislation he is bringing to the Senate floor on Wednesday, said a complaint filed with the Senate Select Committee on Ethics today by the non-profit, non-partisan Foundation for Taxpayer and Consumer Rights (FTCR). The complaint calls for the Senator's immediate removal from from the vote and the medical malpractice debate.
Senator Frist's fortune, and that of his family, is tied to the welfare of the HCA hospital chain. Senate financial disclosures reveal that Senator Frist, and his wife and children, transferred at least $10,150,000, and up to $30,350,000 or more, in HCA stock into blind trusts in December 2000. Read the letter below.
To: Senator George Voinovich, Chairman
Senator Harry Reid, Vice Chairman
Senate Select Committee on Ethics
Re: Senator Frist's Ties to HCA Create Conflict of Interest in Hospital Liability Debate
The Foundation for Taxpayer and Consumer Rights (FTCR), a non-profit, non-partisan consumer education and advocacy organization, urges an immediate Ethics Committee investigation into Senate Majority Leader Bill Frist's personal and financial ties to the HCA hospital chain and to its subsidiary malpractice insurer Health Care Indemnity (HCI), with specific focus on the conflict of interest inherent in Frist's advocacy for recent legislation to limit hospital and malpractice insurer liability. We believe this conflict should disqualify Senator Frist from involvement in any legislation concerning liability limits benefiting hospitals and malpractice insurers, and can no longer be overlooked.
Majority Leader Frist's Senate financial disclosures reveal that he, and his wife and children, hold millions of dollars in HCA stock. Documents filed with the Senate Office of Public Records at the end of the year 2000 indicate that HCA stock worth at least $10,150,000, and up to $30,350,000 or more, was transferred into Frist family blind trusts in December, 2000. The trust agreements note that "the assets initially contributed by him [Frist] to this Trust are concentrated in the stock of HCA, the Healthcare Company," and reveal that trustees were specifically relieved "from any obligation the Trustee might otherwise have to diversify the investments." At least $1,125,000, and as much as $2,320,000, in HCA stock has been contributed to the trusts since December, 2000, while just under $625,000 has been sold. Despite the "blind" moniker for these trusts, these disclosures reveal to the public, and importantly to Frist himself, that the family's fortune rests upon the welfare of HCA. The "blind" trusts prohibit Frist from managing his investments, but they do not stop him from knowing what they consist of.
We are aware that this committee once before considered the issue of whether Senator Frist faced a conflict while voting on general health care legislation. However, Senator Frist's current involvement in the medical malpractice debate rises beyond the level of general concern for health issues to specific advocacy for his family's company.
HCA is the nation's largest for-profit hospital chain, operating 179 hospitals across the country. Health Care Indemnity, a wholly-owned subsidiary of HCA, is the nation's sixth-largest medical malpractice insurance company, writing $260 million in medical malpractice premiums annually. The company provides liability insurance for HCA-affiliated physicians and other hospitals and facilities.
HCA hospitals and doctors, as well as its malpractice insurer, HCI, will benefit from any cap on damages in medical malpractice cases. The insurer's risk would plummet while profits soared if a cap to limit the company's losses were imposed nationwide. However, these gains pale in comparison to those which hospitals and insurers would accrue under legislation Senator Frist has recently advocated. S. 2061 and S. 2207 would lead to direct financial gain for hospitals and their insurers. If Senator Frist were to lobby for a direct appropriation for HCA it would not provide a greater benefit for the company, because a liability limit will pay off indefinitely.
As the Committee is aware, Senator Frist's brother and father founded HCA, and his family's fortune also relies on the welfare of the hospital chain. Frist's brother, Thomas F. Frist Jr., sits on the HCA board of directors and has held the chairman and CEO positions. Recent reports show that Thomas F. Frist Jr. holds over 5.5 million shares of HCA stock, worth approximately $240 million. He is HCA's largest non-institutional shareholder.
Last year, Senator Frist was the lead Senate advocate for a proposal to impose a $500,000 cap on non-economic damages in all cases of medical malpractice. Though FTCR and others protested his conflict of interest at that time, Senator Frist failed to remove himself from the debate.
Last month, the Majority Leader overrode normal Senate rules to rush S. 2061 to the Senate floor. The bill would have specifically shielded hospitals in cases of babies harmed at birth and disproportionately disadvantaged families injured by HCA's negligence. In some circumstances the proposal would have prevented injured patients and their families from bringing legitimate cases, limiting losses and thereby increasing profits for HCI, in the following ways:
- Applying a $250,000 non-economic damage cap in cases involving only pregnancy, delivery and other obstetrical and gynecological care benefits hospitals that are typically defendants in these cases. Non-economic damages are often the only compensation available to families that lose a child due to medical negligence and a damage cap would restrict their ability to bring suit against a hospital at all.
- Eliminating joint and several liability benefits HCA and HCI. Joint and several liability, as it applies in most states, holds the hospital accountable if a doctor is unable to pay a damage award and the hospital was involved in the medical negligence. Dropping this rule will benefit hospitals and insurers by eliminating their liability if one of their doctors goes bankrupt and is unable to pay a victim's damages.
- The proposal would allow periodic payments of damage awards by HCA and HCI, letting them keep money which is owed to a victim and pay it out over time. While hospitals and insurers hold on to the money they owe, they can continue to invest and accrue interest on it, and the victim is denied the full value of his award. Further, if a victim dies, insurers stop making payment and keep the money.
- Effectively ending the ability of nurses or technicians to testify about others in their field makes it difficult to bring a case against a negligent practitioner, and is of particular benefit to hospitals which often indemnify these staff members or self-insure. Further, the standards set by the bill will make it more difficult for injured patients to find expert witnesses, in many cases resulting in the inability to bring suit at all.
- The bill would impose a collateral source offset, forcing health insurers and government programs to bear the bulk of the cost of medical mistakes by requiring them to pay for a victim's care before the culpable or negligent hospital. This transfers the burden of hospitals' negligence to taxpayers and everyone who pays for health insurance.
S. 2061 failed to obtain the votes it needed by a wide margin. Nonetheless, Senator Frist has announced his intention to bring forward another bill this week, S. 2207, which contains all of the provisions of S. 2061 while expanding its scope to include trauma care. This expansion, again, would be of primary benefit to hospitals and their insurers because emergency care typically occurs in a hospital setting.
As Majority Leader, Senator Frist has an obligation to uphold and protect the integrity of the United States Senate. Relentlessly advocating for legislation which will line his own pocket, and that of his family, is behavior unworthy of that body. The integrity of the Senate demands the immediate recusal of Senator Frist from any and all involvement in the medical malpractice debate.
Because Senator Frist has refused to recognize his conflict, it is up to the Senate Select Committee on Ethics to require he step aside for pending votes on liability caps, and specifically prohibit advocacy by the Senator for any further legislation which would directly benefit his family's hospital chain and insurance company and increase his personal fortune.
If Senator Frist is allowed to continue his involvement in the face of such a clear conflict, any vote on the legislation, and the reputation of the Senate itself, will be tarnished.