For Rick Scott, success and scandal are inseparable

Rick Scott's campaign for the Florida governor's mansion is starting to look like his latest business acquisition.

In the 1990s, Scott exploded on the business scene and reshaped the hospital industry thanks to financial moxie, relentless drive and a salesman's knack for exploiting opportunities missed by others.

Those attributes have made the Naples millionaire the fronrunner for governor today. A political newcomer, Scott unexpectedly entered the race in April, hired a top-notch campaign staff and leveraged his sizable fortune to surge ahead of Attorney General Bill McCollum in the Aug. 24 Republican primary where career politicians appear more endangered than ever.

But Scott's successes have come at a cost.

As head of the mammoth Columbia/HCA hospital chain in the 1990s, Scott acknowledges, he was "responsible'' for what became the largest Medicare fraud case in U.S. history, totaling $1.7 billion. McCollum and a coterie of well-financed Capitol insiders are bombarding television airwaves and mailboxes with ads and flyers to make sure every Florida voter knows about the scandal.

Scott, 57, brushes it off – sometimes literally, by waving his hand as if shooing gnats.

"Attacks are life," Scott said when asked about the negative ads. Last month, voters asked him about the fraud case at nearly every stop of a six-day bus trip.

The questions underscore a conflict inherent in Scott's campaign: His business background and the Medicare scandal are inseparable. Scott – who was not charged or fined – said he didn't know about the troubles that unfolded on his watch, which raises questions about his leadership.

"We could have done things better," Scott acknowledged at Thursday's debate in Tampa. "When you have 285,000 employees, you have to trust people."

• • •

Scott is a study in polarizing contrasts. Depending on who's talking about him, he's either a micromanager or delegates too much. He's arrogant or humble. He's a visionary who wants to revolutionize health care, or he's blinded by ambition and a lust for profits.

Some fear him. Some love him. Few know him. Scott doesn't do much to fill in the blanks. He prefers to communicate via pricey 30-second TV campaign ads – the best way to move public opinion in a large state like Florida – rather than face news media questions or debates with McCollum.

So far, Scott has earmarked about $33 million of his family fortune and last week dumped $2 million more for ads heading into the primary. He says he will forgo the $130,273 salary if elected governor.

Scott's mother, Esther Scott, says her son was always a competitor. When he was in fifth grade, he once discovered the local supermarket was hosting a talent show. So, she said, he went home, taught the family dog, Duke, to jump through a hula hoop and entered the contest that day.

"He always wanted to get ahead and really be first in everything," she said. ''He didn't want to be second place."

On the campaign trail, Scott offers red-meat conservatism: Illegal immigration crackdowns, tax cuts, budget cuts, gun rights and opposition to abortion and President Barack Obama's stimulus package.

In his standard rags-to-riches campaign speech, Scott often avoids mention of the riches: his $9.2 million beachfront Naples home, his $218 million net worth or his background as merger-and-acquisitions lawyer. Instead, he chronicles his humble roots that began in public housing in Kansas City, Mo. He worked a newspaper route, sold 15-cent TV Guides door to door and is the second of five children, four of whom were boys. One Christmas, he said, his parents couldn't afford presents.

"I know what it was like to have my parents always worry about money," he says, noting his father was a trucker who, before he became disabled, was frequently jobless during the holidays. He says his mother held odd jobs before she found steady work at a donut shop, Flavor Maid, started by him and his wife, Anne, his childhood sweetheart.

• • •

The governor's race isn't Scott's first campaign. In February 2009, he founded a political action group called Conservatives for Patients Rights, or CPR, that joined a web of other interests to fight Obama's health care initiative and the so-called "public option'' – a government-run health-insurance plan that failed in Congress.

The ObamaCare battle was deja vu for Scott.

In the early 1990s, he was one of the most vocal critics of then-first lady Hillary Clinton's health care plan. More than a decade later, the CPR campaign did far more for Scott's political ambitions, building up credibility with the tea party movement, whose rage over ObamaCare reinvigorated Republicans.

The CPR campaign also gave Scott entree to some of Washington's best ad men, who have produced numerous commercials for the slogan-rich campaign titled "Let's Get to Work." The ads package Scott as the fresh-faced antidote to Florida's ills. Scott bashes McCollum for being a "Tallahassee and Washington insider," but that's an apt description for Scott's campaign staff as well.

The commercials depict a smoother-talking Scott when compared with his more stilted and unscripted performances in the campaign's two debates. With a gentle and calm demeanor, Scott conveys a quiet sense of reserve that belies his intensity. At campaign events, he's so soft spoken that he can barely be heard by some in the crowds, which have been fed hot dogs, hamburgers and pies courtesy of Scott's deep-pocketed campaign.

Scott has successfully fought to keep his wealth from helping McCollum by persuading a federal court to block a tax subsidy for opponents of candidates who spend tens of their own millions.

The McCollum campaign has tried to use Scott's wealth against him, noting that he has invested in a company, Xfone Inc., that has received some of the very stimulus money he bashes. Another company, Emida Technologies, could help "illegal aliens transfer money'' to their homeland, McCollum said in an effort to poke holes in Scott's immigration position.

But Scott's campaign has surged anyway, all the while savaging his opponent as a tax-and-spend Republican, a flip flopper and a tool of special interests who are funding McCollum's campaign.

"No one will own me," Scott said Thursday. "No special interest will ever be able to persuade me to do something."

• • •

Still, Scott's political opponents have tried for months to make his fortune look like the result of a crime.

Democrats have circulated e-mails noting the Columbia/HCA fraud case and alleging that Scott, who said he spent $5 million on the CPR initiative, was really trying to protect the profits of his new Florida company, Solantic, a chain of walk-in clinics that serves high numbers of uninsured. If more people were insured, Democrats suggested, Solantic could lose business.

Scott, though, said he's fighting the ills of "government-run health care," which would "ration'' care. He says he wants to ensure the United States' health care market is molded by the free market, an echo of his time leading Columbia/HCA. The hospital company wasn't just profitable, he said it provided better care at a lower cost.

Critics say Columbia/HCA jiggered health care statistics in some cases by finding innovative ways to shed problematic patients, such as the chronically sick, who drive up costs or don't recover fully from surgery.

"Rick Scott rationed care at HCA, and that's one of the many ironies about him," said David Yarian, a Jacksonville physician who was Solantic's first physician and the first of a handful of former employees to sue him.

"Hospitals at his company were pressured to cherry pick patients to improve their statistics," Yarian said. "That's the way he deals with people. Individuals are just a number."

Scott and his campaign dismiss Yarian as a "disgruntled former employee'' who had an arrest record for drunken driving and driving with an open-container.

Solantic settled Yarian's employment lawsuit in 2002, and has since grown to nearly 30 clinics across Florida on the notion that patients should be treated more like Starbucks customers who get fast service and menu board pricing.

Solantic CEO Karen Bowling, who worked under Scott at Columbia/HCA, said Scott deserves credit for improving health care. "He's just incredibly sharp ... an amazingly inquisitive mind."

Obsessed with data and details, Scott invariably invites comparisons to former Gov. Jeb Bush – a McCollum backer – who ran as the outsider businessman candidate in his first, failed 1994 campaign.

• • •

Scott's journey from lawyer to Columbia/HCA began in the late 1980s when he saw an opportunity to trim fat and demand better performance from a bloated hospital industry.

With $125,00 in life savings, a bank loan and the backing of a well-financed partner, Scott founded Columbia and bought two struggling El Paso hospitals. Within a few years, Columbia merged with Hospital Corporation of America to form the country's largest for-profit hospital chain with $19 billion in revenue from 340 hospitals – 55 of them in Florida – and 550 home-health agencies that spanned 37 states.

"We went from a company that didn't ruffle any feathers to a company that became very aggressive," said Alan Levine, a former state health agency appointee of Jeb Bush, who was an administrator of Bayonet Point Medical Center in 1992 when Columbia took over.

An admirer of Scott, Levine said his hospital and others like it improved because Scott demanded more medical and financial accountability and training. "Rick Scott's philosophy was that you can't manage what you don't measure," he said, adding that Scott helped revolutionize the hospital industry.

Dubbed a Wall Street wunderkind, Scott was hailed in Forbes and Time magazines at the time.

But over time, Wall Street came to expect double-digit profit margins from Columbia/HCA, and under such pressure, suspect Medicare and Medicaid billing practices became common among some company auditors and top officials. At the same time, the government cracked down on widespread health care fraud.

In one federal court document, investigators contended that Scott personally participated in suspect schemes to give doctors more money for more patient referrals – a system of incentives that can be traced back to his original hospitals in El Paso, which were among the first to be raided by FBI agents.

Peter Chatfield, a lawyer representing some of the 30 Columbia/HCA whistleblowers, said company accountants kept two sets of books. One was shared with federal auditors. The other, nicknamed the "aggressive'' file, was kept internally and marked with a unique stamp: "Do not share with Medicare auditors."

Chatfield said he never deposed Scott nor found evidence he was directly involved in the fraud. But he said Scott created a "penny pinching culture," which went so far that Scott once recommended in a newsletter that employees save money by using the pens and paper pads of other companies when they sit down to negotiate.

John Schilling, a former accountant at Fawcett Memorial in Port Charlotte, blew the whistle on the fraud and went undercover for the FBI. He said some of the fraud preceded Scott and that he had no evidence that the gubernatorial candidate ever knew about it.

"There was a lot of pressure to meet the expectations of big profits, and without them people could be out of a job," said Schilling. "That culture led people to look the other way, keep their jobs and make advancements in the organization."

The problem at Columbia/HCA was that Scott was blinded by his "vision'' of making the company a free-market model to improve health care said Houston lawyer Jerre Frazier, whom the board hired to examine the hospital company for compliance problems. He said Scott either didn't see or ignored all the transgressions and "compliance issues'' on his watch.

"He was so focused, so driven by his dream that he just didn't have time for the bad news," he said.

In 1997, following FBI raids on his hospitals, toxic relations with the press and hospital board members, Scott was ousted but given $10 million in severance and $300 million in stocks. Scott says he learned that he should have hired more auditors.

Along the campaign trail, Scott calls what happened at Columbia/HCA "mistakes'' and turns it into another pitch for votes. "I take responsibility," he says repeatedly. ''Politicians never do."

Times/Herald staff writer John Frank contributed to this report. Marc Caputo can be reached at mcaputo@MiamiHerald.com.

For Rick Scott, success and scandal are inseparable 08/07/10 [Last modified: Sunday, August 8, 2010 1:08pm]

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