qotd: HCA’s dishonest IPO

Reuters
September 23, 2014
U.S. hospital chain HCA must face class action over 2011 IPO
By Jonathan Stempel

HCA Holdings Inc, one of the largest U.S. hospital chains, must face a
shareholder class-action lawsuit accusing it of concealing revenue
declines and its routine performance of unnecessary cardiac procedures
prior to its $4.35 billion initial public offering in March 2011.

U.S. District Judge Kevin Sharp in Nashville, Tennessee, rejected HCA's
claim that the plaintiffs had missed "multiple opportunities" to learn
more about the company before buying their shares, including from media
reports, conference calls, and disclosures during the IPO road show.

Shareholders alleged that HCA, its directors, its former private equity
owners and its investment banks concealed how the company was seeing
adverse trends in Medicare revenue including cardiology, and Medicaid
revenue per admission; and accounted improperly for a 2006
reorganization and a 2010 restructuring.

"Given defendants' alleged violation of the federal securities law and
its impact on a large number of geographically dispersed investor(s), a
class action is the superior vehicle for adjudication of the claims,"
Sharp wrote. "The alternative would be to have (potentially) thousands
of individual actions, which is likely impractical for most investors,
and which would risk burdening the judicial system."

The IPO had been the largest by a company owned by private equity firms.
HCA had been taken private in 2006 by a group led by Bain Capital,
Kohlberg Kravis Roberts and Merrill Lynch's private equity arm.

The case is Schuh et al v. HCA Holdings Inc et al, U.S. District Court,
Middle District of Tennessee, No. 11-01033.

http://www.reuters.com/article/2014/09/23/us-hca-holdings-classaction-idUSKCN0HI2LA20140923

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Comment by Don McCanne

The private insurers are not the only villains that are driving high
health care costs in the United States. The private, investor-owned
segment of the health care delivery system is also bringing us higher
costs, often with inferior quality. A case in point is HCA - one of the
nation's largest investor-owned hospital chains.

HCA is already infamous for having set a record in paying a $1.7 billion
settlement for Medicare fraud. This new allegation of fraud does not
directly involve patients or taxpayers, rather it involves potential
shareholders at the time of their 2011 initial public offering (IPO).
The private owners at that time included the Frist family and some
private equity firms, including Bain Capital.

The reason that this is important to those of us concerned about health
care reform is that these people are so dishonest that they not only
cheat patients and taxpayers, they also cheat their own shareholders!

When we expel the private insurers from our health care system, we need
to expel the passive investors as well. HR 676 - the Expanded & Improved
Medicare For All Act, sponsored by John Conyers (now with 62 cosponsors)
does both. It converts the health care delivery system to non-profit
status, and it replaces private insurers with a single payer national
health program.

HCA was founded by the family of Bill Frist, former leader of the U.S.
Senate. The Medicare fraud case was initiated when Florida Governor Rick
Scott was head of HCA. Bain Capital was co-founded by presidential
candidate Mitt Romney. If we are going to achieve health care justice
for all, the voters do have some responsibility here.