Frist's action in Senate helps family-owned business

5 Dec 2005 // 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.

"America's health care system is failing the American people," the lawmaker said in a speech this summer in San Francisco.

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

It would help Hospital Corporation of America Inc. make money. The Nashville-based hospital company is the foundation of the Frist family's wealth.

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 it 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 has denied that his connections to HCA, which his father and brother co-founded, influence his actions in the Senate.

But his proposals to help insure the uninsured and limit jury awards, which were included in a bill he introduced in July, are good examples of the kind of HCA-friendly bills he has supported since entering the Senate 10 years ago.

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 also has helped HCA in less obvious ways.

Several years ago, the Tennessee Republican fought a Democrat-sponsored version of a patients' bill of rights bill that would have allowed patients to sue health maintenance organizations, or HMOs, and collect unlimited damages.

Physician groups such as the American Medical Association supported the bill. 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 their services.

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.

Frist sells HCA shares

Until this summer, Frist owned shares in HCA, raising questions about whether links to the company had affected his votes. Attention to these links has caused political problems for Frist, a potential 2008 presidential candidate.

Frist held his shares in so-called "blind trusts," which are intended to distance the holder to avoid conflicts of interest. This summer, Frist ordered the sale of all his HCA stock, saying he wanted to settle the conflict-of-interest issue.

The sell order caused 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 launched investigations. Frist denies selling his shares based on illegal tips from company insiders.

In 1997 and 1999, the Senate Ethics Committee took up the question of Frist's possible conflicts of interest. It concluded that Frist's financial stake in HCA didn't prevent him from 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.

HCA executives declined to comment. Spokesman Jeff Prescott said HCA doesn't lobby Frist and tries to keep him at a distance from the company.

Appearance not everything

Frist's supporters say he hasn't always voted for bills in HCA's interest.

For example, 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 are troubling.

"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 non-partisan watchdog group, based in Washington, D.C., that has called on the Senate Ethics Committee to reconsider whether Frist should be prohibited from voting on bills that could affect his family's fortunes.

Jan Baran disagrees that Frist's ownership of HCA stock creates a 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. "It's not like judges or cabinet officials who could recuse themselves and let someone vote in his stead," the lawyer said.

Vote expands Medicare

In 2003 Frist voted with many of his Republican colleagues in favor of the Medicare Modernization Act. Perhaps the best-known part of the measure expands the government's health plan to include prescription drug benefits for senior citizens and younger people with disabilities. Drug benefits begin on Jan. 1.

The legislation gave hospitals an extra $25 billion in Medicare and Medicaid payments over 10 years, according to the American Hospital Association, which supported the bill.

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

It 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 that they "cherry pick" patients with the best insurance, leaving traditional hospitals with an unfair share of uninsured and underinsured patients.

The moratorium on new physician-owned specialty hospitals expired on June 8.

Last month, however, the Senate 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 who voted in favor of the budget bill. Two Democrats also voted for it. Four Republicans voted against it.

Rules provide wiggle room

Senate rules say lawmakers can't introduce or "aid the progress" of legislation with "a principal purpose" of furthering the financial interests of themselves or their families.

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," former 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.

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