The air has cleared, and Merrill Lynch is now Bank of America. But greed is alive and well as HCA ownership dress this pig for an IPO. In what has become a sad reality of high finance, they have enriched themselves while making a mess of the company. Employees have an “I work for the union, not the company” attitude, and government officials have joined the fray, looking to stack up easy votes. Unfortunately, when this bridezilla of a stock finally IPOs, it will likely be the small investor who is swindled into buying it. Buyer’s remorse should not be far behind. So don’t be the one buying this dead-on-arrival stock.
Rewind to April of last year, when management signed a neutrality agreement with Service Employees International Union (SEIU) and the California Nurses Association (CNA) allowing them to organize uncontested in 20 hospitals in Florida, Texas, Missouri, and Nevada. Employees didn’t stand a chance against the unions’ organizers. CNA added 5,000 members at 13 HCA hospitals, losing not one single election, while SEIU added 4,500. It’s no coincidence that management filed for an IPO in May once the neutrality agreement, or hush money, was in place to appease the workers until the IPO was done.
Management stuffed their own coffers last spring, borrowing $2.25 billion to pay themselves a dividend. But the IPO market was still stone cold. In order not to miss out on the $4.6 billion they hoped for in offering, they decided to cancel the December IPO and instead sold $1.53 billion in junk bonds to investors in November to finance another $2-billion dividend. They’ve since filed again for an IPO for this year.
Even though management had a neutrality agreement with SEIU and CNA in four states, unrest continued to brew among the unionized force in other states who knew all too well about management’s fat dividends and largesse. And union workers at HCA’s five hospitals in California threatened to strike unless they got a better deal.
Making good on their threat, nurses in SEIU Local 121RN went on strike at two California hospitals, Riverside Community Hospital and West Hills Hospital & Medical Center, for five days beginning December 23 and ending December 28. Having received a strike sanction, which is an agreement by other unions like delivery drivers not to cross the picket line, it became more like a community strike. Imagine how the patients stuck inside felt. The politicians didn’t care. Bob Blumenfield, assembly member, 40th District, and Fran Pavley, state senator, 23rd District, supported the strikers. Governor-elect Jerry Brown, when asked if he supported the strike, asked who it was against and replied, “Oh, yes!”
The neutrality agreement among HCA, SEIU, and CNA for the 20 hospitals in four states expires in April. It looks like the owners won’t be able to pull off the IPO before it expires, but don’t be surprised if another one is signed. It’s an easy and inconceivable way to run a business when you think about it from a small business owner’s standpoint. Who in their right mind would turn their employees over to union organizers with a promise not to interfere or try to stop them from organizing?
In 2007, Tenet Healthcare signed a backroom deal similar to the above neutrality agreement with CNA. Joanne K. McGovern and her coworkers at Hahnemann University Hospital rejected unionization. Yet Tenet and CNA are acting as if the election never occurred and have announced a new election. You can bet there will be election after election until the workers are unionized. The National Labor Relations Board (NLRB) seems to be sitting back, having not ruled on the initial rejection by workers. Keep in mind that the NLRB is led by none other than Mr. Pro-Labor Craig Becker, whose confirmation was rejected by Congress, and who was later appointed by President Obama in a controversial recess appointment.
With union membership on the decline, these neutrality agreements are exactly how big labor will take on private businesses. The larger implications of this are scary, not only from an investment standpoint but potentially for your medical care. According to the American Hospital Directory, HCA and Tenet operate 18 of the 20 largest for-profit hospitals in the country.
Wall Street, unions, and politicians all have their eye on the golden ring. Expect more strikes by other local unions around the country that work for HCA, supported by politicians looking for votes, while management scrambles for more ways to pick the meat from this bone. You’d be smart to stay far away from the HCA IPO, which will be dead on arrival.