Columbia/HCA: a failure of leadership.

Abstract

Wi thin a confus ing health care marketplace, sometimes illusions are more comforting than the realities they mimic. Capitalism itself is not a pretty sight. What Schumpeter called “creative destruction” sounds much better than it looks, when one grasps the realities of the ruined lives, fortunes, and franchises involved. Yet in evaluating the legacy of a company like Columbia/ HCA, separating illusion from reality is particularly important. The demise of Columbia/HCA had all the earmarks of a Sophoclean drama, in which an arrogant protagonist was punished for his hubris. The company certainly cut a wide swath in a conservative industry. This was a company whose marketing executives disrupted hospital association meetings with paint guns and whose senior management proclaimed the Three As—acquire, affiliate, or annihilate—as their corporate partnering philosophy. The Oakland Raiders’ motto “Just Win, Baby!” would probably have been the most accurate characterization of management’s message. J.D. Kleinke’s thesis that Columbia/HCA was punished by a vengeful federal government for preemptively “reforming” the health care system reads much more like a failed Oliver Stone movie pitch than a story of miscarriage of justice by reactionary health policy. It is hard to argue with much of his critique of our health system’s unfinished business: excess capacity, antiquated payment methodologies, misaligned incentives. However, to characterize what Columbia/ HCA was attempting to do as “reform” not only reveals a fundamental lack of understanding of the company’s goals, values, and operating philosophy, but also insults those who advocate real reform. Columbia/HCA simply encouraged its managers to “push the envelope” of legally permissible business practices to grow the company’s earnings. The story is no more complicated or socially meaningful than that. Management innovation was not Columbia/HCA’s strength. The company had an overextended and marginally capable management, notably thin and unstable at the critical regional level. There were a few authentic management innovations for which the company should be credited. Outsourcing its information technology to a commercial vendor was unique to Columbia/ HCA, as was its strategy of using physician partnerships to facilitate facility closure and market consolidation. However, the company’s physician partnership strategies themselves, its conglomerate-style diversification, its dabbling in health insurance, as well as its forays overseas echoed failed strategies of an earlier generation of hospital management firms, many of which Columbia/HCA came to own. What distinguished it from its predecessor firms was not the uniqueness of its strategies but the frankness and rapacity with which it pursued them. Kleinke’s characterization of Columbia/ HCA’s strategies reads like a Classic Comics rendition of their story for Wall Street analysts, many of whom were too young to remember the earlier corporate failures. True