Inside Baseball at HCA

The New York State public pension fund promptly sued 11 HCA leaders for alleged fraud, including some who executed stock sales when the company was being questioned about its activities by The New York Times.

HCA "was aware of the investigation by The New York Times, as well as the results, 'several months' before the expose was released to the public, during which time at least some of the insider transactions occurred," the Times quoted the lawsuit as saying back in 1997.

HCA later settled that lawsuit by agreeing to implement a strict corporate governance plan.

In the meantime, the Balanced Budge Act of 1997 had brought draconian Medicare cuts and, with them, immense pain for the entire hospital industry. By 1999, however, HCA was already betting on a turnaround that did, in fact, transpire.

"Their biggest year for insider buying was 1999," Cohan says. "And [former CEO] Tommy Frist was the biggest buyer, by far. That was very impressive."

Skolnick, for one, remembers that period well. She says that hospitals began to recover from the Medicare cuts in 1999 and secured some important increases in 2000.

By the following year, however, HCA insiders had started aggressively selling their stock again. They fetched high prices in both 2001 and 2002, Cohan notes, before the stock took another plunge during an industry downturn in 2003.

The trades then slowed again before picking up -- with unprecedented speed -- in 2005.

Sen. Frist's own sale came just weeks before HCA warned that the company would fall short of second-quarter expectations. However, some worry about more lasting challenges for the industry as a whole. And they believe that Frist, with his prominent role in the Senate, may see those problems surfacing earlier than most.