Columbia / HCA Gave Ex-Chief $9.9 Million

Columbia/HCA Healthcare Corp. said it agreed to pay former Chairman and Chief Executive Richard Scott $9.88 million when he resigned in July amid a government probe of the company.

Scott, 44, received a one-time payment of $5.13 million and will receive an annual “consulting fee” of $950,000 for five years, under a severance agreement included in Columbia’s quarterly filing with the Securities and Exchange Commission.

The package is Columbia’s farewell to the man who built up the largest U.S. health-care company in 10 years and left under a cloud. The filing also contains Scott’s assertion that he had “acted in good faith” and didn’t believe he had broken the law.

Shares in Nashville-based Columbia rose 31 cents to close at $30.56 on the New York Stock Exchange.

Former Chief Operating Officer David Vandewater, who resigned with Scott, agreed to a one-time payment of $3.24 million and an annual consulting fee of $600,000 over five years.

In addition, both men had the right to exercise any vested stock options within 90 days of resigning on July 25. The agreements include coverage of legal and moving fees, and require both Columbia and the two executives to keep matters pertaining to the investigation confidential.

Scott received a base salary of $900,000 in 1996, although he also received a $720,000 bonus for that year and converted it to restricted stock. Vandewater was paid $565,000 and received a $226,000 bonus in 1996, according to regulatory filings.

The severance packages brought to a close the era of Scott and Vandewater. Scott co-founded Columbia in 1987 with two Texas hospitals and, after Vandewater joined in 1990, built it into a $20-billion network of more than 340 hospitals, home-health sites and various outpatient services.

Columbia’s rapid expansion, as well as its role in driving consolidation and networking within the health-care industry, earned it both admiration and contempt. Its achievements lost the spotlight once the government probe was revealed in March, bringing its Medicare billing and other practices under scrutiny.

A week after a second round of raids at Columbia in July, Scott and Vandewater were forced out. Days later, indictments were unsealed against three mid-level executives for allegedly covering up a Medicare billing error at a Florida hospital.

Health-care industry stock analyst Sandy Lutz of Rauscher Pierce Refsness in Dallas said the payments weren’t exorbitant.

“They built the company from two hospitals to 342, and mostly through their sweat and toil,” she said. “I’m sure if Rick had his way, he’d rather not have the money and still be in charge of the company.”

The severance packages were part of $40 million in severance costs for paying off 120 former employees, the company said.