Another year, another chapter…

April 14, 2004

Each year, when HCA’s (HCA) proxy comes out, investors learn a little more about the sweetheart deal between the hospital giant and a private company run by the son-in-law of former HCA Chairman and CEO Dr. Thomas Frist, Jr. The deal has long been criticized by investor advocates. The private company, MedCap, was sold last October for $575 million, so perhaps investors have finally received the final installment. Maybe not. HCA sold 116 medical office buildings to MedCap back in December 2000 for $250 million and retained a 48% interest in MedCap. That part has remained consistent ever since HCA first disclosed the deal back in its 2001 proxy. But this year, instead of the normal 1 or 2 paragraphs devoted to its dealings with MedCap, HCA devotes nearly 2 pages to the topic. Investors now learn that the biggest chunk of the $250 million came from loans secured by the office buildings and that Charles Elcan, Frist’s son-in-law, invested $18 million, which gave him 17% of MedCap’s Class A units and 43% of Class C units. In prior proxies, investors were simply told that Elcan had a 17% stake in MedCap. How much of a difference does this all make? Hard to say. The point is that HCA should have disclosed all of the details back when MedCap was created in 2001, and not in 2004. Investors deserve to be treated better!

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