Frist votes aid HCA’s business interests;

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Review of 10 years in Senate shows pattern of favoring firm

The Tennessean (Nashville, Tennessee)

Senate Majority Leader Bill Frist is pushing a “healthy America” plan that includes tax breaks to help the poor buy insurance and legal limits on excessive jury awards that Frist says hurt access to care.

Frist’s plan would do something else besides help the poor and reduce what he says are frivolous lawsuits.

It would help make money for HCA Inc., the Nashville-based hospital company that’s been the foundation of the Frist family’s wealth.

Frist, considered a possible presidential candidate in 2008, was dogged for years by complaints that his financial stake in HCA created a conflict of interest.

This summer, he sold his stock in the company, which his father and brother helped start, but did so one month before the price took a sharp dive, raising new questions about his intentions.

Frist’s office said the Tennessee Republican wasn’t available to comment directly for this story, but he has said in the past that his connections to HCA have not influenced his actions in the Senate.

Still, an examination of Frist’s voting record over his nearly 11 years in the Senate shows a pattern of supporting bills friendly to HCA and to hospitals in general. His votes typically have followed the Republican Party line.

One example is the bill Frist introduced in July to help insure the uninsured and limit jury awards.

Uninsured patients hurt HCA, which loses billions of dollars when they don’t pay their bills. The company set aside $2.7 billion in 2004 for such doubtful accounts.

And HCA owns an insurance company that would benefit from limits on hefty jury awards. Health Care Indemnity Inc. is one of the country’s largest providers of medical malpractice insurance, with gross premiums of $382.3 million a year.

Frist’s supporters note that he hasn’t always voted for bills in HCA’s interest and say he has followed all Senate ethics rules. Barring his vote on health-care issues, one said, would not be fair to voters he represents.

Other bills supported by Frist have given hospitals more money for treating seniors and curbed development of physician-owned specialty hospitals that compete with HCA.

He’s also helped HCA in less obvious ways. Several years ago, the Tennessee Republican fought a Democratic-sponsored version of a “patients’ bill of rights” that would have allowed patients to sue their HMOs and collect unlimited damages.

Physician groups such as the American Medical Association supported the bill, but Frist, a former heart-lung transplant surgeon at Vanderbilt University Medical Center, opposed it.

Frist argued that it would do more to help trial lawyers than it would to help patients. President Bush also opposed the bill.

Had the bill become law, the added cost of the jury awards could have put financial pressure on health plans to pay hospitals and other providers less money for services they provide. HMOs and other insurance plans accounted for 42% of HCA’s revenue in 2001, the year the patients’ bill of rights came up for a vote.

Stock sale brings questions

Until this summer, Frist owned shares in HCA in so-called “blind trusts”, which are intended to keep the holder at arms length to avoid conflicts of interest. However, this summer he gave the order to sell all his HCA stock, saying he wanted to settle the conflict-of-interest issue.

But the order to sell caused its own problems. After trading at near-record prices, the company issued an earnings warning a month after Frist’s order to sell, and the stock dropped 9%, raising questions of whether Frist was tipped off.

Company insiders also exercised their options and sold large amounts of HCA stock in the months and weeks before the profit warning.

Soon after Frist’s sale was disclosed in September, the Securities and Exchange Commission and a U.S. attorney in New York began investigations. Frist has denied selling his shares based on illegal tips from company insiders.

And as to conflict of interest on his voting record, he has been backed up by the Senate Ethics Committee twice, in 1997 and again in 1999, when it said that Frist’s financial interest in HCA didn’t present a conflict of interest when it came to voting on health-care issues.

“Throughout his tenure in the Senate, Bill Frist has been extremely careful to meticulously comply with all Senate Ethics rules,” spokesman Bob Stevenson said Friday.

“He has made certain his actions are consistent with the Senate’s official code of conduct,” the spokesman said. “He has repeatedly sought and received approval from the (Senate) ethics committee before participating in debates on health-care legislation.”

HCA executives declined to comment. Spokesman Jeff Prescott said HCA doesn’t lobby Frist and tries to keep him at arm’s length from the company.

Still, given the lawmaker’s connections to the country’s largest hospital company, questions of possible conflicts of interest may be inevitable, said Craig Becker, president of the Tennessee Hospital Association.

“It’s an impossible position that he’s in,” Becker said. “He knows when hospitals are being hurt, and he can tell his peers that,” Becker said, but “there’s nothing he can’t do for health care that couldn’t be used against him.”

HCA ties cause political woes

There are some examples of Frist voting in a way that has not been in HCA’s interest.

He voted with a majority of Republicans, and Democrats, to cut Medicare reimbursements for hospitals as part of the Balanced Budget Act of 1997.

Still, government watchdog groups say that Frist’s ties to HCA pose a conflict of interest.

“Because he owned so much stock in HCA… there is the appearance that any legislation that could help the company would have helped him financially,” said Mike Surrusco, ethics director for Common Cause, a nonpartisan watchdog group, based in Washington, which has called on the Senate ethics committee to reconsider whether Frist should be prohibited from voting on bills that could affect the fortunes of his family.

Lately, much of the focus has been on questions about whether Frist’s trusts were truly blind.

Before unloading the stock, Frist told interviewers he didn’t know whether he held shares in the company. “As far as I know, I own no HCA stock,” he said on the cable news channel CNBC in 2003.

Recent news reports seem to contradict those statements, however, showing that records filed with the Senate show he received a number of letters over the years informing him about shares in the company held in his blind trusts.

Predictably, all this attention on his links to HCA has caused some political problems for Frist.

“I think the issue is whether he was looking out for the interests of the American people or looking out for his own interests,” said Amaya Smith, a Democratic National Committee spokeswoman in Washington.

Frist’s role as majority leader, which requires him to promote the interests of the Republican Party, gives him “an even greater influence on legislation that comes before the Senate and on how it’s shepherded through the Senate, and that puts him more under the microscope,” Smith said.

Republican ethics lawyer Jan Baran disagrees that Frist’s ownership of HCA stock creates a real problem. “He was in compliance with the ethics rules,” said Baran, a Washington attorney who often represents Republicans in ethics and campaign finance cases.

Prohibiting the senator from voting on health-care proposals simply isn’t practical, Baran said. Each state has only two senators, each one representing 50% of that state’s votes.

“It’s not like judges or Cabinet officials who could recuse themselves and let someone vote in his stead,” the lawyer said.

Votes on party line

Over the years, Frist has followed the Republican Party line, even on bills that could directly or indirectly affect HCA.

For example, Frist and Tennessee’s other senator at the time, Fred Thompson, were among the 35 Republicans and one independent who voted against the Democratic-supported patients’ bill of rights bill in 2001. Nine Republicans voted for it.

The bill didn’t become law because the Senate version of the plan couldn’t be reconciled with the House version.

Likewise, Thompson’s Republican successor in the Senate, Lamar Alexander, joined Frist in 2003 in voting in favor of the Medicare Modernization Act. All but nine of the Senate’s 51 Republicans at the time voted in favor of the bill, which President Bush signed into law two years ago this month.

Perhaps the best-known part of the Medicare act is the part expanding the government’s health plan to include prescription-drug benefits for seniors and younger people with disabilities. Drug benefits begin on Jan. 1.

But there was more to the measure than prescription drugs. The legislation gave hospitals an extra $25 billion in Medicare and Medicaid payments over 10 years, according to the American Hospital Association, which supported it.

Last year, Medicare and Medicaid accounted for about 35% of HCA’s total revenue.

The act also placed an 18-month moratorium on new physician-owned specialty hospitals that would compete directly with full-service community hospitals such as those operated by HCA.

HCA, like other hospital companies, oppose the physician-owned facilities on grounds they “cherry pick” patients with the best insurance, leaving traditional hospitals with an unfair share of uninsured and underinsured patients.

Doctors’ referrals limited

The moratorium on new physician-owned specialty hospitals expired on June 8. Last month, however, the Senate essentially extended the moratorium in its version of the federal budget bill. The bill would save $22 million over five years by barring doctors from referring Medicare and Medicaid patients to specialty hospitals in which the doctors have a financial stake.

Frist was among the 50 Republicans, including Alexander, who voted in favor of the budget bill. Two Democrats also voted for it. Four Republicans voted against it.

The limits on specialty hospitals were added to the budget bill in October by the Senate finance committee, which is chaired by Chuck Grassley, an Iowa Republican who opposes them. Frist is a member of Grassley’s committee.

James Grant, president of the American Surgical Hospital Association, said the limits were “politically motivated.” The group represents physician-owned specialty hospitals.

“There’s no justification for having this thing in the bill,” other than to squelch competition, said Grant, who lives in Nashville.

HCA executives wouldn’t comment for this story, but Senior Vice President Victor Campbell told The Tennessean in March that the company believes the question of whether to let doctors refer patients to limited-service hospitals in which the doctors have a financial interest was “a hugely important issue.

“We think it’s an inherent conflict of interest,” he said.

Expertise appreciated

Senate rules say lawmakers can’t introduce or “aid the progress” of legislation with “a principal purpose” of furthering their or their families’ financial interests.

Under these rules, Frist would be allowed to vote on measures affecting hospitals and health care in general, but he couldn’t vote on a bill crafted to help HCA alone.

Frist’s supporters say that his background makes him invaluable on Capitol Hill, where he is the only physician in the Senate.

“No one has changed the health-care debate in America in the last 20 years like Bill Frist,” Sen. Phil Gramm, R-Texas, said in 1999 about the debate over the patients’ bill of rights. “He’s very smart, and he knows what he’s talking about.”

Frist has said he gave the order this summer to sell his shares in HCA to avoid the appearance of a conflict of interest, but Carmen Balber, a consumer advocate with the California-based Foundation for Taxpayer & Consumer Rights, said Frist’s decision failed to ease her concerns.

She said, “The senator is incapable of totally erasing his ties to that company because his father and brother founded it and because the family fortune is tied up in HCA stock.”

Bills Frist backs that HCA favors, too

Senate Majority Leader Bill Frist has supported several pieces of legislation that would help HCA.

Issue / Status / How it helps HCA

ISSUE: Medicare Modernization Act of 2003


Included additional funding for hospitals, placed 18-month moratorium on physician-owned specialty hospitals that compete with HCA’s facilities.

ISSUE: Budget reconciliation act

Passed Senate Nov. 3

Hurts competitors of HCA, specifically specialty hospitals in which doctors have a financial interest because it would prohibit doctors from referring Medicare and Medicaid patients there.

ISSUE: Healthy America Act


Proposed tax breaks to help people afford health insurance would help HCA by reducing number of uninsured patients who can’t pay. A provision to limit malpractice jury awards would help HCA’s malpractice insurance subsidiary.

ISSUE: Patients’ bill of rights


Republican-version of the plan would have limited damages in lawsuits against HMOs and other health plans. Large awards could have hurt HCA’s ability to negotiate favorable contracts with insurers; at the time, HCA owned health insurer that offered group coverage.
Todd Pack can be reached at [email protected] or 259-8075.

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