Outside In

REVIEW SUMMARY
Who. Richard Scott
Challenge. Seeks the Republican nomination for Florida governor
Key. Scott could succeed if he taps into voter discontent with the government.

If there was any year for a political outsider to run for office, this is it.

Naples entrepreneur Richard Scott, 57, has launched a long-shot outside bid for the Republican nomination for governor of Florida, going against heavily favored Florida Attorney General Bill McCollum and state Sen. Paula Dockery, R-Lakeland.

But Scott's unconventional last-minute bid fits with his entrepreneurial career that rocked established norms. Scott was founder, chairman and chief executive officer of Columbia/HCA, which in a decade became the largest hospital company in the world with 340 hospitals and 285,000 employees.

Scott acknowledges that opponents will raise the fact that the government launched Medicare-fraud investigations against Columbia/HCA during his tenure even though he was never charged or implicated. By 2003, the hospital company had settled allegations at a cost of $1.7 billion. Scott generally acknowledges that people at Columbia/HCA made mistakes, but he adds quickly: “Career politicians will attack me.”

His biggest opponent's response has been mild. Asked what he thought of Scott entering the race at a press conference in Tampa recently for his jobs program, McCollum said he did not know Scott personally but that he takes seriously every candidate who enters the race. Then he moved on.

Even within health care, industry veterans say Scott remains controversial.

Somewhat surprisingly, health care industry veteran William Schoen says, “From our standpoint, he didn't really have an impact.” Schoen is chairman of Health Management Associates, a Naples-based operator of 55 hospitals. He is backing McCollum. “Building a company is a lot different than running a company,” he says.

But battling the government may confer on Scott a badge of honor today. The Naples resident formed an advocacy group called Conservatives for Patients' Rights that fought the nationalization of health care.

“People in power never ran a business and they don't appreciate it,” says Billie Tucker, former chief operating officer for TEC Florida, an organization of chief executives now called Vistage.

Tucker, a tea-party activist in the Jacksonville area, says entrepreneurs such as Scott don't view challenges such as mounting a statewide campaign in four months as insurmountable. “If there's an obstacle, they say: what obstacle?”

Tucker dismisses the government action against Columbia/HCA and says voters care even less about the mainstream media repeatedly raising the issue. “Nobody cares what the media thinks anymore,” she says. “They do their own research.”

Scott's backers include people like Wayne Mullican, a retired entrepreneur who started a printing company in Virginia and moved to Naples after he sold it. He is a member of the board of trustees of NCH Healthcare System in Naples. “When you do anything in business, there are people who want to help you and there are some who stand by on the sidelines who are envious,” Mullican says.

Mullican, who met Scott at the Naples church they attend together, says he is impressed by Scott's plans for low taxes, elimination of burdensome regulations and balancing budgets. “I started telling him you're nuts,” Mullican chuckles. “You're going to have a rough time of it.”

Building Columbia/HCA
Scott and legendary Texas investor Richard Rainwater co-founded Columbia Hospital Corp. in 1987 starting with two hospitals in El Paso. Scott, the son of a truck driver and J.C. Penney clerk, bet his life savings of $125,000 on the effort.

As the company grew, Scott trimmed costs as his hospitals gained purchasing power. Eight years after buying the hospitals in El Paso, health care inflation fell from 18% annually to just 0.8%, Scott says. In the 10 years he operated Columbia, Scott says supply costs at Columbia fell from16.8% of revenue to 13.5%.

But Schoen says you can measure hospital efficiency in many ways. “We were more efficient than HCA from an operating-earnings standpoint,” Schoen says. “That goes back to when I was running the company.”

Still, by the time he resigned in 1997, Scott had built the largest hospital company in the world. Columbia/HCA had 340 hospitals, 135 surgery centers and 550 home health locations in 37 states and two foreign countries. With 285,000 employees, the company was the seventh-largest employer in the U.S. and 12th in the world.

But as the government began to investigate, Scott and President and Chief Operating Officer David Vandewater resigned in July 1997. HCA founder Thomas Frist Jr. took over as chairman and chief executive officer.

In his resignation letter, Scott wrote: “Though the decision to resign was an extremely difficult one, we consider it to be the ultimate demonstration of our commitment to Columbia's mission.”

Frist could not be reached, but Schoen says: “Tommy Frist did an outstanding job turning that company around because they were in very big trouble with the government.”

One month after Scott resigned, Frist announced changes at Columbia/HCA that included eliminating cash incentive compensation for all employees, discontinuing sales of interests in hospitals to physicians and unwinding existing ones, increasing Medicare compliance and changing laboratory-billing procedures. “Tommy Frist unwound most of the things that Rick did,” Schoen says.

But in an interview with Business Week in November 1998, Rainwater asked why Scott had been forced to resign. “And the only reason I got was because they didn't think he was the right person to deal with the government,” Rainwater told the magazine. “That's not a reason to terminate him. If that's the case, I said, let's go hire someone to deal with the government.”

Scott, who has long declined to discuss in detail events relating to his resignation, doesn't seem to mind that his opponents will dredge up events from 13 years ago. “If you do anything in life, you're going to get criticized,” he says.

Health care takeover
Among conservatives, a run-in with the government today is a feather in your cap. “People want new conservative ideas,” Scott says. “They know the government can't run the country.”
After he left Columbia/HCA, Scott shied from the limelight and started a chain of urgent-care centers called Solantic. In interviews since he formed the Jacksonville-based company, Scott says he believed he would be more effective as an entrepreneur than a politician.

But Scott says he changed his mind in recent weeks. “Career politicians aren't getting anything done,” he says.

Scott got a taste of politics when he formed Conservatives for Patients' Rights, an advocacy group that fought Obamacare. While Congress passed the controversial health-care legislation, Democrats were denied a full takeover of the system, Scott says. He adds that the legislation will eventually be repealed.

Still, forming an advocacy group is different than running for office. And Scott, a member of the National Rifle Association and hunter, acknowledges that his bid will upset many in the Republican ranks who believe the prize should belong to McCollum.

The last-minute aspect of his bid is evident in his Naples offices, where pizza boxes consumed late at night are now stacked in the waiting area. Scott speaks mostly in generalities about preventing wasteful spending, accountability, lowering taxes and reducing regulations.

Position papers haven't yet been published and Scott says he's not sure how much the effort will cost him, though he says he's raised “tens of thousands of dollars.” He declines to say whose opinion he sought before making his bid. Television ads have started to run and Scott plans to canvass the state. “The country is ready for new ideas,” he says.

Scott's Ideas

Entrepreneurs may find appealing many of Richard Scott's ideas about government, although his plans are short on specifics at this point. The broad concepts include:

• Make state agencies set spending goals, measure their performance and hold them accountable for their outcomes. Force bureaucrats to justify how they spend taxpayer money.

• Reduce taxes.

• Eliminate burdensome regulations so Florida is the easiest place in the country to start a business.

• Support a constitutional amendment that prohibits the federal government from imposing President Barack Obama's health-care mandate.

• Support offshore oil drilling, nuclear power and alternative fuels.

• Support school vouchers and charters, merit pay, home schooling and eliminate teacher tenure.

Governor entrepreneur

You'd have to go all the way back to Claude Kirk Jr. to find an entrepreneur who started his own company before entering politics and eventually becoming Florida governor.

Kirk, a Republican who served as governor from 1967 to 1971, co-founded American Heritage Life Insurance Co. in Jacksonville in 1956.

Kirk served in the U.S. Marines in the Korean War and started his venture from scratch when he returned home.

In 1966, he told the Palm Beach Post-Times: “When I was discharged from the Marines in 1952, I had $408 in the bank, no job, no house, no car and no business.”

After a few years selling insurance, Kirk assembled a group of investors and formed American Heritage, eventually taking the company public. Kirk sold his shares in the firm before launching his political career in 1964. Allstate Corp. eventually acquired American Heritage in 1999.

Since then, other governors have been involved in entrepreneurial ventures.

For example, Jeb Bush became a business partner with Miami developer Armando Codina and Lawton Chiles built and was the landlord for Red Lobster's first four restaurants. Bob Graham and his brothers established The Graham Companies to develop Miami Lakes on what once was the family's dairy farm.