The hospital operator's chairman and CEO explains how he healed the wounded outfit upon his return in 1997
Jack O. Bovender Jr., 56, returned to hospital-management company HCA (HCA
) in 1997 at the behest of cofounder Thomas Frist Jr. Bovender had resigned his post as chief operating officer in 1994, when HCA merged with Columbia, another hospital giant. But by the late '90s, his former employer of more than 20 years desperately needed his help.
Bovender took control of a company besieged by U.S. Justice Dept. attorneys investigating medical billing fraud. HCA was also choking on all the companies it had purchased in a failed attempt to become a health-care conglomerate, controlling patient care from doctor's office to hospital bed.
Now, HCA, No. 52 on this year's list of top-performing companies in the Standard & Poor's 500 index, appears to be back on track. Bovender, now chairman and CEO, recently spoke with BusinessWeek Correspondent Charles Haddad about the difficult tasks of the past four years. Following are edited excerpts of their conversation:
Q: What surprised you most when you returned to HCA? A: The company's biggest problem wasn't the government's investigation, it was an operational wreck. It had bought all these companies, but it hadn't built the infrastructure to support them. There wasn't one culture. It was more like five different companies jammed together.
Q: What was the mood at HCA when you returned? A: I found the company demoralized, like a deer caught in the headlights. People had the sense the company was collapsing around them. After all, the FBI had just raided 22 of its hospitals.
Q: What was wrong with HCA's strategy? A: The company was going after market share by trying to create a national brand in health care and by discounting prices. The branding strategy didn't work because health care is very local. People only care about their local hospital and not whether it's part of some larger chain.
Also, we were selling care way below cost. I put a stop to that. I won't sell our services below cost. If we lose business, so be it.
Q: What was the turning point? A: I'd say in Florida in 1999. Humana [the health-insurance giant based in Louisville, Ky.] had wrested discounts of up to 50% at our hospitals in the state. We told Humana that was no longer acceptable, and they would have to renegotiate. We became locked in an acrimonious debate, with Humana threatening to take away its 50,000 members.
We were really geared up to lose patients and let Humana walk away. But at the 11th hour, the company settled. Humana became our poster child, the hallmark of our new strategy.
Q: Had HCA overextended itself? A: Definitely. We were into businesses, such as running medical practices, that we didn't understand. And we were in markets that weren't growing. We spun or sold off about a third of the company. Today, my motto is: "We won't buy the third hospital in a two-hospital town." We're only going to be in a market if we can be first and second, and we'll concentrate on the Sun Belt.
Q: Where do you stand in settling the government's complaints? A: We've settled [out of court] three of the five [federal criminal] complaints, and the only two remaining are lesser, civil complaints. [HCA paid $750 million to settle the federal complaints.] We're hopeful there won't be any more litigation, and we want to get this behind us. But the bottom line is that no matter what happens, the government won't derail us like it did in 1997.
MARCH 3, 2002
Edited by Beth Belton
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