Last week, Attorney General Eric Holder and HHS Secretary Kathleen Sebelius sent a letter to five hospital trade organizations warning against the abuse of electronic medical record systems to seek inflated Medicare reimbursements. The Obama administration's concern is well-founded. Earlier this month, both the Washington Post and New York Times documented the use of techniques including "code inflation" and "cloning" by some hospitals, clinics and physicians to extract overpayments from the government and private insurers alike for office visits, patient treatment and especially emergency room visits. According to one study from the Center for Public Integrity, the cost to U.S. taxpayers for Medicare overbilling reached $11 billion over the past decade.

But in a less noticed twist, the story involves the dark nexus where presidential politics, the private equity industry and some of the leading lights of the Republican Party meet. As it turns out, HCA, one of the nation's largest for-profit hospital firms, is facing scrutiny for suspect billing practices, unnecessary procedures and questionable profit-taking that increased following its 2009 buyout by private equity firms including Mitt Romney's former firm, Bain Capital.

If the name HCA sounds familiar, it should. Before the giant chain came to operate 163 hospitals nationwide, it was owned by the family of former Republican Senate Majority Leader Bill Frist. In the 1990s, the Hospital Corporation of America founded by Frist's father merged with Columbia Healthcare Corporation, a group then led by current Florida Gov. Rick Scott. Scott was later forced off the board after HCA was forced to pay a staggering $1.7 billion penalty for Medicare fraud. For his part, in 2007 Doctor Frist was eventually cleared of insider trading involving his supposedly blind trust's sale of HCA stock.

But now, the New York Times reports, HCA's business practices are once again being viewed under the microscope. And as it turns out, the company's laser-focus on profit maximization followed its 2006 buyout by a group of private equity firms including Bain:



In fact, profits at the health care industry giant HCA, which controls 163 hospitals from New Hampshire to California, have soared, far outpacing those of most of its competitors. The big winners have been three private equity firms -- including Bain Capital, co-founded by Mitt Romney, the Republican presidential candidate -- that bought HCA in late 2006. HCA's robust profit growth has raised the value of the firms' holdings to nearly three and a half times their initial investment in the $33 billion deal.

It figured out how to get more revenue from private insurance companies, patients and Medicare by billing much more aggressively for its services than ever before; it found ways to reduce emergency room overcrowding and expenses; and it experimented with new ways to reduce the cost of its medical staff, a move that sometimes led to conflicts with doctors and nurses over concerns about patient care.

The secret to HCA's success, now sadly a model for the entire industry, appears to be a formula that drains the U.S. Treasury and puts patients at greater risk. As the Times explained:Like other hospital groups that "cloned" patient records to collect payments from Medicare and other insurers for procedures and treatments not actually delivered, beginning in late 2008, "HCA changed the billing codes it assigned to sick and injured patients who came into the emergency rooms. Almost overnight, the numbers of patients who HCA said needed more care, which would be paid for at significantly higher levels by Medicare, surged."

But at its facilities, HCA isn't merely gouging taxpayers. As the Times reported, lives are sometimes being jeopardized.

(Continue reading below the fold.)