SEC Investigates Columbia/HCA

April 1, 1998 / 11:13 AM EST / AP

Columbia/HCA Healthcare Corp., already targeted by a sweeping federal fraud investigation, also is under scrutiny from the Securities and Exchange Commission.

The SEC is looking into whether the nation's largest hospital company violated federal securities law, Columbia disclosed Tuesday in its annual report.

In its filing, Columbia said "the company understands that the investigation includes the antifraud, periodic reporting and internal accounting control provisions of the federal securities laws."

Last year, the US Justice Department began investigating allegations Columbia overcharged Medicare, Medicaid and other government health care programs. Three middle managers have been indicted in Florida.

The investigation prompted a management shakeup last summer. Founder and chief executive Richard Scott was replaced by Dr. Thomas Frist, who pledged to cooperate with investigators.

Late last year, Frist announced plans to sell off nearly one-third of Columbia's 336 hospitals, some surgery centers, and its home health business.

Under Frist's direction, Columbia also has overhauled its compensation system, eliminating performance-related cash bonuses.

Frist banned the use of compensation bonuses amid concerns Columbia managers might have been under undue pressure to bend federal rules to ensure their bonuses. Instead, they will receive straight salaries with raises that reflect their prior bonuses, the proxy statement said.

Columbia lost $1.29 billion in the fourth quarter, but last month predicted its first-quarter earnings would be between 25 cents and 30 cents per diluted share a drop of more than 50 percent from last year but better than Wall Street analysts predicted.

The proxy material showed Scott walked away from Columbia with more than $17 million, including the value of a previously reported severance deal and the exercise of stock options.

Frist, who holds 14.7 million Columbia shares, has said he will work as CEO without a salary or bonus while the company is restructuring.