* Nurse's complaint led to internal probe of heart
* Justice Department reviewing billing practices
* Shares fall as much as 10 pct, close down about 4 pct
* 2nd-qtr profit 85 cents/share vs estimates of 78 cents
* Reaffirms 2012 forecast
By Bill Berkrot and Susan Kelly
Aug 6 U.S. authorities are probing whether heart
procedures performed at HCA Holdings Inc hospitals were
medically necessary and are investigating the company's billing
practices, the company said on Monday.
Shares of HCA, the largest U.S. for-profit hospital chain,
fell as much as 10 percent after the news.
HCA, in an unusual move, issued a detailed rebuttal
defending itself ahead of the publication of a New York Times
article that said a complaint by a nurse at an HCA hospital in
Florida led to an internal investigation that uncovered evidence
of unnecessary heart procedures being performed at some of the
The Times reported on Monday that HCA found cardiologists at
some of its hospitals, mainly in Florida, were unable to justify
many of the procedures they performed between 2002 and 2010. In
some cases, the doctors made misleading statements in medical
records, the paper said, citing internal company reports.
The hospitals included Lawnwood Regional Medical Center in
Fort Pierce, Cedars Medical Center in Miami, which the company
no longer owns, and Regional Medical Center Bayonet Point, the
An HCA spokesman did not immediately respond to a request
for comment on the allegations in the Times article. HCA told
the Times it took actions to investigate and address areas of
concern and did whatever was necessary to improve patient care.
The U.S. Department of Justice also is reviewing whether
charges to the federal government related to use of implantable
cardio-defibrillators (ICDs) met with billing criteria set by
the Medicare health program for the elderly, HCA said in a
filing with the U.S. Securities and Exchange Commission.
The review includes ICD billing and medical records at 95 of
the company's 163 hospitals from October 2003 to the present.
ICDs are devices implanted in a patient's chest to help
regulate heart rhythm and protect against potentially dangerous
racing heart beats. Major manufacturers of the devices include
Medtronic Inc, Boston Scientific Corp and St
Jude Medical Inc.
A representative for St Jude was not immediately available.
A Boston Scientific spokesman did not have an immediate comment.
A Medtronic spokesman declined to comment on an investigation
involving another company.
HCA said that in July the federal prosecutor's office in
Miami requested information on reviews assessing the medical
necessity of certain interventional heart procedures. HCA said
it believes such reviews have taken place at about 10 of its
hospitals, primarily in Florida.
The reviews were conducted by third-party organizations
retained by the company, an HCA spokesman said.
The company said its own review of how many of its hospitals
may be affected was not yet complete.
Interventional heart procedures include angioplasty and
stenting used to clear and prop open blocked coronary arteries.
Jefferies analyst Arthur Henderson said such inquiries were
"Every time they come out, people get pretty nervous about
it and the stocks trade down," Henderson said. "There is not
enough information to say this is going to end up bad. As long
as the company continues to execute the way they have this
quarter, I think there is some upside to the stock."
Shares in HCA fell as much as 10 percent after the
disclosures on Monday, but pared some losses to close 3.95
percent lower at $25.55. Rival hospital operators also fell on
news of the probes before recovering. Community Health
shares closed down 0.6 percent at $23.83, while shares of Tenet
Healthcare Corp shed 0.6 percent to $4.66.
EARNINGS BEAT EXPECTATIONS
HCA on Monday also reported better-than-expected quarterly
earnings as more patients were treated at its facilities. The
company stood by its 2012 earnings forecast.
Net income for the second quarter rose to $391 million, or
85 cents per share, from $229 million, or 43 cents per share, a
Excluding one-time gains, earnings were 85 cents per share,
topping analysts' average forecast of 78 cents, according to
Thomson Reuters I/B/E/S.
Revenue rose 12 percent to $8.11 billion. Admissions to
facilities owned for at least one year, combined with outpatient
volumes, increased 3.9 percent.
News of the federal probes comes as hospital operators are
set to see higher admissions of insured customers as a result of
President Barack Obama's healthcare reform law that was recently
upheld by the Supreme Court.
At the same time, pressure is growing on the U.S. healthcare
system to find ways to rein in costs that have contributed to a
massive national deficit. Recent studies have questioned the
potential overuse of highly profitable interventional heart
procedures in the United States, such as stenting and the
placing of ICDs.
Government investigations into Medicare fraud at various
hospitals including HCA have led to large monetary settlements
in the past, but not in every case.
"What the financial impact is on the company is hard to
predict at this point," said Morningstar analyst Michael
Between 2000 and 2003, HCA paid a total of $1.7 billion in
civil penalties and criminal fines to settle a massive federal
investigation into fraudulent billing practices.
Nashville, Tennessee-based HCA maintained its 2012 earnings
per share forecast of between $3.57 and $3.77 per share before
one-time items, on revenue of between $32 billion and $33
billion. Analysts on average were estimating 2012 earnings of
$3.69 per share on revenue of $35.56 billion.