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Jack O. Bovender Jr.

Jack O. Bovender Jr. was a lieutenant stationed at the Naval Regional Medical Center in Portsmouth, Va., when the founders of Nashville, Tenn.-based Hospital Corporation of America (HCA) filed the fledgling company’s initial public offering in 1969. HCA boasted 11 hospitals then, and that number grew to 26 by year’s end. The tally by 1973 was 51 hospitals – and climbing like a thermometer’s mercury on a red-hot day.

His naval service behind him, Bovender launched his civilian healthcare-management career in 1975 as an associate hospital administrator of an HCA hospital in Florida. A decade later, he joined the senior management ranks and landed the job of executive vice president and COO in 1992. In the meantime, HCA went private and then in 1992, public yet again. Bovender retired in 1994 after HCA’s merger with Columbia Hospital Corp.

The Columbia/HCA years were fraught with mismanagement, unbridled and unwise growth, and federal agents raiding HCA hospitals to investigate massive Medicare fraud. Stock plummeted. In August 1997, Bovender answered a phone call from Dr. Tommy Frist Jr., whose father was an HCA cofounder. He lured Bovender out of retirement and – against the odds and sans Columbia – HCA thrives. He rejoined the company as president and COO and today is chairman and CEO of a lean hospital-management machine that last year went private – to the record-breaking tune of $33 billion. Bovender talked exclusively to Medical News Inc. about the buyout deal, the challenges of America’s demographics today, the plight of the uninsured and more.


Medical News Inc: Why the decision to go private at this stage? What has it done to help HCA provide better care to its patients?

Jack Bovender: The main reason that I believed it was the right time for us to go private is that there are some difficult headwinds in healthcare, and particularly hospitals, right now.

One of them is bulk volumes, which I think is just a cycle that we’re going through. Certainly, the demographics point eventually to more hospital utilization as the population ages and, quite frankly, as the population seems to be getting – how should I say this delicately? – fatter. That creates obviously more disease processes. The demographics will work themselves out over time, and the data and future expectations of healthcare utilization and hospital utilization will certainly bear that out. The second issue is what all hospitals have had to deal with over the last three to four years, and that has been the issue of the uninsured. Forty-seven million people without health insurance, which I think is a national disgrace in a country that’s this rich and this well off.

But those two factors and some other issues have certainly cast a pall across the hospital industry, and you can see it in how the publicly traded hospital stocks have done over the last couple of years. I just felt that our best strategy right now is to become a private company, so that we don’t get whipsawed from quarter to quarter in a market based upon factors essentially that we can’t control, at least in the short term. That allows us, I think, to focus our attention on the longer-term strategies for growth, and not have to be as reactive as we had to be sometimes relative to what was happening in the public markets and whether the industry was in favor or not.

One of the ironic things, when you think about private equity, firms like the ones we’re associated with now, they have a longer-term view and they make their investments in a longer-term manner than a lot of the firms like the mutual funds and others who get into your stock one month and may stay there a month or six months or a year, but are not in there for the long term. I think that’s very important for all of us right now.


Talking long-term strategies, do you foresee HCA in acquisition mode in, say, the next three to five years? Is growth defined by acquisition?

Not for us, per se. We are not bent on an acquisition strategy. We’re opportunistic when it comes to acquisitions. We look at those opportunities and make decisions about whether it makes sense to us. About four years ago, we bought Health Midwest in Kansas City, which was the largest not-for-profit acquisition that had ever been made. It was about a $1 billion acquisition. So, if it makes sense and fits our strategy, we will do that. And that one fit our strategy.


And that strategy is?

Our strategy is to be the No. 1 system or No. 2 in large urban and suburban markets, and Kansas City fit that description. Health Midwest had about a 32 percent market share – a 1.7 million person market. So we will do acquisitions when it fits our general strategy. But our real growth strategy is to invest in our existing markets, add capacity to fit the growing needs, keep our hospitals modern and up-to-date, desirable both in terms of the quality of the facilities, the quality of the service that we provide and the technological innovation so that patients, patients’ families and physicians associated with those patients desire to use us. That’s our main strategy, and we will continue to pursue that and make the necessary investments in our existing markets to see that that comes about.


What do you think the biggest obstacle is to the delivery of quality care today?

I think in this information age, one of the real needs – and the president has obviously focused on this as well as others – is that we make a transition within a reasonable period of time to an electronic health record that makes the information necessary to take care patients instantly available to all the caregivers, so that information is not lost or misplaced, or that tests and other procedures are not repeated unnecessarily because information may not be available from one provider to the other. There’s been a lot of talk about that.

I think one of the issues that the country is going to have to address, and it needs to be addressed on the federal level, is how we are going to ensure compatibility across all providers. Inside HCA, we can and will do that so that information is portable to other hospitals within our system and certainly to any physician and nurses who need to get information to take care of patients. The problem is, what kind of standards are going to be set across the country so that our information, for instance, might be available to a non-HCA hospital somewhere else in the country should the need arise?


Tell us about HCA’s efforts to make hospital costs more transparent. I can only imagine the hurdles in the way of such an effort.

It’s a very difficult thing to do in healthcare because anybody who goes in for any kind of procedure – surgery or illness or whatever – it’s not a packaged price. People consume different resources because of different needs. … What we try to do is take the most common diagnoses that patients come into our facilities for, both outpatient and inpatient care, and give a price range for most people’s care. You’re then led to some phone numbers you can call to pin this down. Is this care covered by insurance, and how much of it is going to be covered, and what is an estimate of your out-of-pocket costs?


How does HCA define charity care and discount uninsured care?

You need to think about the uninsured in three categories: charity care, the uninsured discount and those who don’t pay even after the uninsured discount and you have a bad debt. For us, we define charity care as 200 percent or below of the federal poverty guidelines. … If a person who comes into the emergency room and gets admitted into the hospital does not have insurance and falls within those guidelines, we will first try to get them qualified for Medicaid. The issue is not just the hospital care, but essentially the ongoing care of the family. Getting them qualified for Medicaid means that they will have access to physician offices and other modes of care even after their hospitalization. If they don’t qualify for Medicaid or a state program and there’s no other way for their care to be paid for, then we would write that off as charity care and never send them the bill.

The next category is people who don’t fall within that 200 percent or below of the federal poverty guidelines, are not on Medicaid and are going to be asked to pay this cost out of their pocket. For those, we provide an uninsured discount that mimics in each of our communities what discount we give to preferred provider organizations. … In a lot of these cases, these people do not have the resources to even pay it at the discount. Those will eventually become bad debts.

To put this in perspective for you, in 2003, if you add it up, our charity care, our uninsured discounts and our bad debt came to about $2 billion. In 2005, that number had risen to $4 billion, and last year it was roughly $5 billion. So you can see how that problem has grown for us, and it’s not dissimilar to how it’s grown for others in the industry since 2003.


As the private sector retreats from insuring workers, government is picking up some of that slack. Does that present any opportunities for HCA?

Well, the government’s not picking up enough of that slack, and I’ve been spending time up in Washington talking to members of Congress, particularly since we’ve had a leadership change, about some comprehensive program to deal with the uninsured. The Federation of American Hospitals has put together a plan called Health Coverage Passport, which I think is a good starting point. Basically, this plan would require every individual in the country to have health insurance just like states require people who drive cars to have car insurance. That would be monitored and administered through your federal income-tax form that you file, your 1040.

If you didn’t have health insurance and your income qualified you for Medicaid, you would be automatically enrolled simply by doing your tax return. Then for people at 150 percent of the federal poverty guideline and below who did not qualify for Medicaid or the SCHIP program for children, the federal government would pick up the total cost of your health insurance if your employer didn’t provide it or would pay the cost of the premium sharing if your employer did provide it – so there would be no reason financially not to have health insurance.

Then from 150 percent up to 400 percent, the federal government would pay on a sliding scale a portion of your premium. There would be provisions to subsidize private health insurance in a community-rated pool across the country, and you could rest assured that given that kind of subsidy that insurance companies would move probably very quickly into this. … I think this is a good basis, a good paradigm, for exploring this.


You really sound passionate about this plan. What is it that makes you passionate about your job? Why do you go to work in the morning?


Because I know that all across the country, our hospitals and the people who work in our hospitals are providing a service that is not only needed, but is desperately needed in these places. Our people literally every day are relieving pain and suffering and saving lives. It’s a privilege to be the CEO of a company that is providing that kind of service – and there are these dramatic moments when it reminds you so much of how important what we do is.

Most recently was the shootings at Virginia Tech, in which our hospital there, Montgomery Regional in Blacksburg and another one of our hospitals down the road in the Roanoke-Salem area, Lewis-Gale, received all of these patients from those shootings. Our physicians and our nurses did all the things necessary to make sure that those people got the care they needed to get and survived. That obviously is a very satisfying thing for any of us who have dedicated our lives to healthcare careers.

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