NME Promises to Beef Up Oversight of Its Hospitals


National Medical Enterprises Inc., seeking to repair the damage in the aftermath of last week’s raid by federal agents of company facilities, said Monday that it is taking several steps to improve oversight at its hospitals.

The steps “are real and not generated to make the press or shareholders happy,” company Chairman Jeffrey C. Barbakow said in an interview. “We see an unusual opportunity here to try to have a company that, on all fronts, is operated in a correct and ethical way.”

National Medical said it will appoint an independent task force to randomly monitor the compliance of hospitals with company policies on patient admission and referrals. The group will report to a committee of the board headed by outside director Richard S. Schweiker, a former secretary of the Department of Health and Human Services during the Reagan Administration.

Some of the other steps that National Medical announced are actually modified or expanded procedures the Santa Monica-based company already had in place.


For example, it said it is establishing local governing boards at each of its 141 hospitals. Actually, National Medical has had such governing boards at its acute care hospitals for 25 years and at its psychiatric hospitals since early this year, company officials said.

The company also said it is setting up a toll-free telephone “patient satisfaction line” for questions dealing with managed care, patient treatment and reports of “impropriety.” Barbakow said the firm already has a toll-free line in its psychiatric hospitals but is expanding the idea to include its acute care and physical rehabilitation hospitals.

Federal authorities said Thursday that the government is investigating possible criminal misconduct at National Medical facilities, including suspicions of improper billing and patient diagnoses and illegal payments for patient referrals.

National Medical is also facing civil lawsuits from 19 insurers, who accuse the hospital company of submitting more than $750 million in fraudulent billings. And it faces more than 100 civil lawsuits alleging patient abuse and physical mistreatment.


Barbakow said in a statement that the actions taken Monday are not an admission of wrongdoing in either the government investigation or the insurer or patient lawsuits.

National Medical’s shares plunged 30% on Friday--the day after the FBI raid--to $7.75. On Monday, the stock closed down another 25 cents to $7.50 in active trading on the New York Stock Exchange.

Separately, Moody’s Investors Service said it has put the company’s unsecured senior debt under review for a possible downgrade. A downgrade would drop about $400 million of long-term debt to junk status from Baa3, the lowest of investment grade ratings available from the New York credit rating service.