HCA - One Way to Pay Those Big Bonuses

At one point in my career, I worked for a division of Hospital Corporation of America. As I learned about the company's origins and strategies, I discovered they were both creative and bold. They were one of the first national hospital ownership and management companies, founded in 1968 by a doctor in Tennessee. Not so coincidentally, at the time Tennessee's (and their Blue Cross plans) reimbursement to hospitals was amongst the most liberal in the country. Blue Cross paid 90% of a hospital's charges! Guess where the first hospital they acquired was located? As they grew, they targeted other Southern states with similar reimbursement and demographics. HCA is now, of course a giant, national hospital chain.

This is not to take away from the company its strong focus on effective management and operational excellence. But I draw your attention to the front Business page of today's New York Times, and the Dealbook article by Andrew Ross Sorkin entitled "Investors Extract a Payout". We all know the public uproar about investment banks paying shovelfulls of bonuses to its managers. So, here's where HCA's creativity and boldness is exhibited.

HCA announced last week that it was paying its shareholders a $1.75 billion special dividend. Just a bullish sign of the healthcare industry's health? As the Times points out, HCA was taken private in 2006. Its buyers included Merrill Lynch, Bain Capital, Kohlberg Kravis Roberts and, yes, some of HCA's own managers, along with a giant loan from a syndicate of banks. So, who's getting the dividend payout? You get my point? And this at a time when HCA has $25.7 billion of debt it still needs to pay off.

I still respect the management of the company. After all, its been tremendously successful. My question to you is (and its not rhetorical) - Is this an example of HCA's boldness and creativity, or a sneaky way to hand out "bonuses" under the radar?