The next chapter…

April 22, 2005

Each year for the past few years, HCA (HCA) decides to provide some more details on a sweetheart deal between the hospital giant and a company run by the son-in-law of its former chairman, Dr. Thomas Frist. In a nutshell: a company owned by son-in-law Charles Elcan bought 116 medical office buildings from HCA back in December 2000 for $250 million, which was first disclosed back in the 2001 proxy, or what I’ll call Chapter 1. In last year’s proxy (or chapter), when the company, called MedCap was sold for $575 million, HCA disclosed that Elcan only put up a small fraction of the initial $250 million back in December 2000 — something I noted in a post last April.

At the time, I thought that was the end of the story, since the deal closed in October 2003 and the company took two pages to explain things in last year’s proxy. But this year, HCA has provided even more details, though it’s a somewhat convoluted path involving a swap transaction that involves quite a bit of alphabet soup. What it appears to boil down to is that HCA had to ante up even more money than it previously disclosed to essentially help the son-in-law out of a jam, even though it was unusually generous when it sold the office buildings to Elcan back in December 2000, since that investment more than doubled in less than three years. I won’t pretend to understand all of the details of the swap arrangement. But what I do understand is that HCA has chosen to let details of the deal trickle out gradually over the past few years which certainly leaves one with the impression that they’re trying to hide something.

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