Mega-Hospital Chain HCA Soars with Profits for Private Equity Firms

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HCA, the giant hospital chain which controls over 160 medical facilities across the USA, has posted profits that far surpass those of competing hospital chains, bringing a windfall to investors.  Those who have received the most financial benefit from the situation are three private equity firms, one of which is the Mitt Romney-founded Bain Capital that bought HCA in 2006.

HCA’s stunning profits have made the firm’s holdings worth 350 percent more than their initial value, making HCA a model for the medical investment industry.  What makes HCA’s profit performance rather incredible in the eyes of some is the fact that only a decade ago, the company’s reputation was badly damaged by a Medicare fraud investigation and lawsuit which was settled for a massive $1.7 billion.

HCA credits its profit making success to a more aggressive billing policy which aimed to get more revenue from patients, Medicare and private insurance companies along with a reduction in staffing costs by experimenting with staff levels and placement.  Changes in billing codes in 2008, which claimed patients needed more care, also increased the amounts of revenue that came in from Medicare.  This move alone resulted in an increase in operating earnings of almost $100 million in the first quarter of 2009.

Costs were also reduced by not admitting non-urgent emergency room patients who presented with conditions such as the flu or sprains unless patients paid before receiving treatment.  According to HCA, this cut down on ER waiting times and allowed emergency room staff to focus on urgent cases.

While HCA and its investors are understandably happy with the windfall, some reports are critical and question that the search for profits may be undermining the quality of care in the hospitals run by HCA; however the company assures that they provide only the best for their patients.

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