SEC Probing Biggest Hospital Company

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By Zachary A. Goldfarb
Washington Post Staff Writer
Wednesday, October 7, 2009

The Securities and Exchange Commission has opened a probe into whether the largest hospital company in the world, Hospital Corporation of America, violated securities law by manipulating its books and records, according to documents and people familiar with the investigation.

The investigation has been focusing, at least in part, on HCA's London subsidiary and whether the company fabricated tens of thousands of payments for phantom nursing shifts, according to the documents and people familiar with the matter. The SEC has been coordinating with investigators at Her Majesty's Revenue & Customs in London, according to the documents.

HCA runs more than 160 facilities across the United States and in London and treats millions of people a year. In 2006, HCA, then a public company, was bought by a consortium including its management, the family of former Senate majority leader Bill Frist (R-Tenn.) and three major financial firms for about $33 billion in the largest leveraged buyout ever at the time.

In a statement, HCA confirmed Tuesday that it has been contacted by the SEC as part of an ongoing probe, saying it "received a voluntary request for related information from the United States Securities and Exchange Commission. We have provided requested information and look forward to working with them to conclude this inquiry." The company said the allegations under investigation are unfounded.

An SEC spokesman declined to comment about the probe. The agency opens many investigations each year, and most don't lead to formal action. The prospect of action in the HCA investigation could not be determined from documents and interviews.

Previous Investigations

The investigation is the latest brush with regulators for HCA, though there is no evidence that the current probe is related to previous issues.

Earlier, an investigation dating to the mid-1990s exposed a massive health-care fraud at HCA, resulting in the largest penalty ever imposed on a company in a health-care case. In 2003, HCA agreed to pay a total of $1.7 billion to the U.S. government to settle charges that it defrauded government insurance programs. The company's top managers were replaced.

More recently, the SEC investigated whether Frist, whose family helped found the company in 1968, sold shares with insider knowledge before HCA announced that it was going to miss profit estimates in July 2005. After two years of review, the SEC closed the case without any taking any action or making any public statement. Frist said at the time that he had acted properly and had sold the stock to avoid any appearance of conflict of interest.

The latest probe grows out of a dispute in British employment court. A former HCA finance employee, Jill May-Bheemul, has alleged that up to 120,000 nursing shifts might have been improperly booked and paid for.

"We are aware that a former employee in our London payroll department is seeking money in a civil employment lawsuit, and she has made assertions about the accuracy of our nurse scheduling systems and the related compensation paid in our six UK hospitals," HCA said in a statement. "Her allegations have no merit, and we are vigorously defending the employment litigation."

The company says similar allegations have been raised with local authorities in London, which have declined to investigate. In Britain, agencies including the National Health Service and the Serious Fraud Office have examined the matter and decided not to pursue it, according to documents.

Dozens of times since January, SEC investigators have e-mailed and spoken with May-Bheemul's representative, her husband, Paul Bheemul, to ask questions about what she found, according to documents.


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