Disclaimer:- The quoted material is selective and not all inclusive. The extracts do not necessarily reflect the perspective of the original. Corporate denials and explanations have not been included. No claim is made that all of the matters referred to are true. The intention is to give the flavour of the material and an idea of the extent of the allegations. Can there be so much smoke without a large fire? This is a matter of public welfare and the interests of the pubic must be placed before those of the corporations.
I have suggested that most of the
entrepreneurs who founded and developed the health and aged care
corporate chains showed features of what I have called successful
sociopathy. I have explained this concept on another
web page. The overall conduct of
Vencor suggests a sociopath at the helm but Lunsford does not always
behave in a typical way. Make up your own mind!
I do not have early reports of Vencor and Lunsford. During the latter period he was certainly publicity shy. His public statements were usually prepared statements, probably vetted by lawyers and public relations experts. Fortunately many of the later reviews describe Lunsford's earlier behaviour and quote him.
To reach the man I examine his conduct and
the comments made by others as reported in the press. Some of these
later press reports suggest that in his earlier years he was more
outgoing. These later reports are revealing. They quote him.
Lunsford, Barr and Smith founded Vencor in
1985 with only three employees and one hospital. It went public in
1989. In just over two years its stock shot up 500 percent. In 1990
it made Forbes magazine's list of the nation's 200 best small
companies. Within 12 years it had grown to be a giant with 60 long
term hospitals, plus 292 nursing homes. It became a Fortune 500
company with more than 65,000 workers. Its excesses caught up with it
in 1998 and it spiraled rapidly into bankruptcy.
Lunsford was chairman and it is clear that he
was the driving force. The company's success was attributed to his
wisdom and intuition. In the eyes of the marketplace he could do no
wrong. With the purchase of Hillhaven he was right out in front
during the merger and takeover frenzy of 1996. A report in the New
Mexico Business Journal even suggested that Vencor might take over
Sun Healthcare and Horizon. It is clear that Lunsford made decisions
and others followed. All anyone saw was success - his magic touch.
It is now revealed that this success was based not on business skills but on a systematic and widespread conspiracy to defraud the health care system. This occurred in multiple ways and reflects an entrepreneurial willingness to capitalise on every weakness in the system of payment. Each of these infringements could probably be argued about and rationalised in some way by corporate staff - so that words like crime, fraud or illegal were never actually used in the discourse determining corporate policy. My view is that this is how staff were induced to identify with and carry out the fraud.
In addition to this the welfare of the citizens Lunsford had undertaken to care for was manipulated in order to make bigger profits. To ensure this doctors were paid kickbacks. Diagnoses were altered, high paying patients were over serviced, admissions and discharges were manipulated to improve profits, and low paying patients were shunned and sometimes ruthlessly dumped even though they were still seriously ill.
It is clear that Lunsford and his supporters saw health care as no more than a business. They provided a service for which they were paid. They had no further responsibility and if the patients did not pay enough then out they went. The thinking closely follows that developed by Tenet/NME in the 1980's and adopted by Richard Scott from Columbia/HCA in the 1990's.
Like Tenet/NME, Vencor were quite open about this and clearly saw nothing wrong with it. They were genuinely surprised at the public's horror. They operated within a single framework and were out of touch with the beliefs and thought patterns of the wider community. They were not aware of the way normal people thought and as a consequence there was no social control.
It is my view that they were equally unaware
that they were defrauding Medicare. It was all obscured in a world of
words and ideas where these asocial practices were desirable and in
the company's interests - the prime objective.
That Lunsford may have been susceptible to
control by social pressures is revealed by his willingness to admit
he was wrong both in purchasing Hillhaven and in his policy of
discharging Medicaid patients. He could be persuaded. Many
sociopathic characters would angrily reject the accusations and
develop explanations to justify their behaviour. He remained in
denial on many other issues.
The responses when nursing staff and patients accused Vencor of providing poor care was far more characteristic of sociopathic behaviour. They denied the allegations until forced to concede. They accused regulators of treating them unfairly. They aggressively challenged adverse findings in the courts. When the nurses complained about the care of patients Vencor accused them of doing so for personal commercial interest. Was Vencor being deliberately deceitful or did they really believe that this is the way it was? I suspect the latter.
Lunsford and also Smith and Barr explained away the failure of Vencor, not by acknowledging the fraudulent practices but by claiming that they were primarily entrepreneurs, and so had made mistakes in administration. They were good at growing the company but were not well qualified to run a large group of nursing homes. This gave them a way out and they resigned. Others in his position have hung on until they were pushed.
Lunsford relinquished his hold in stages. He
still plays a prominent if silent role in Ventas. This is where
Vencor's remaining capital assets reside.
What about Lunsford's personality? We know that like other corporate founders he paid himself a million dollar yearly stipend. He was supremely confident and always enthusiastic. He readily absorbed the sense of invincibility that the marketplace encouraged. He was a gambler and enjoyed horse racing. He developed a very inflated and unrealistic sense of his own infallibility. He had grandiose ideas for Vencor's future.
Despite the large debt incurred by purchasing
Hillhaven, he spent vast sums buying more companies and then planned
a palatial multimillion dollar showcase headquarters in Louisville.
Vencor bought the land and designed the building as it was sliding
down the slippery slope to bankruptcy.
Perhaps the most remarkable thing about Lunsford was his relationship with those who came in contact with him. His personal magnetism and persuasive presence became most apparent when the company collapsed.
This is a man who from all accounts oversaw a massive fraud which artificially and dishonestly inflated the prospects for Vencor. The company manipulated the care of the frail and vulnerable elderly to increase profits and many suffered as a consequence. As a result of this deceit vast numbers of people invested their money in the company. When the deceit was exposed they lost all their money.
To the nurses, to citizens groups involved, to their lawyers, to the relatives of many patients, and to ordinary shareholders he is evil, unprincipled, ruthlessly uncaring, and dishonest.
To those who have come in contact with him, even those who were deceived and who lost large sums he is a great guy - an unlucky genius who suffered at the hands of a capricious government. But for government ineptitude all would have been well. They can't wait for him to get back into business and most would back him with their money again.
Lunsford attempted to run for governor of Kentucky in 2003, a long time ambition. His positive account of his background tells us more about him. His track record at Vencor torpedoed his attempt. The opposition put family of past patients on their advertisements, saying what happened to them. He withdrew.
When Lunsford retires we learn his health care qualifications. He is a lawyer. His boardroom will take decisions which determine what care will be provided to patients.
Lunsford quits as Vencor CEO; Failed to heal troubles of firm he co-founded
The Courier-Journal (Louisville, KY.) January 23, 1999
Birthplace: Kenton County, Nov. 11, 1947.
Title: Chairman and CEO, Ventas Inc.; resigning as chairman and CEO, Vencor Inc.
Education: University of Kentucky, 1969; Salmon P. Chase School of Law, 1974.
Experience: Accountant, Alexander Gant & Co.; lawyer, Keating Muething & Klekamp, Cincinnati; Kentucky commerce secretary, 1980-1983; founded Vencor, 1985.
The Wall Street Journal touches on Lunsford the man and the organiser.
Leading the new business were Mr. Lunsford, a charismatic former Kentucky secretary of commerce with an interest in horse racing, and Michael Barr, who was a respiratory therapist. The hospitals were tightly regimented and enormously profitable. The company went public in1989 and its stock shot up 500% in just over two years.
Lunsford's close colleagues admire him. Even when he retires amidst evidence of fraud, mismanagement and disregard for patients they describe their positive experience of him.
"Bruce's entrepreneurial spirit has been the driving force behind Vencor for these many years," Vencor co-founder and longtime director R. GeneSmith said in a statement late Friday. "His vision and passion have enabled Vencor to become one of the premier long-term health care providers in the country.
Lunsford quits as Vencor CEO;
Failed to heal troubles of firm he co-founded
The Courier-Journal (Louisville, KY.) January 23, 1999
The new leader complimented Lunsford as innovative, noting that he invented long-term care hospitals.
In a criticism of his career after the bankruptcy he is described like this.
And Lunsford, 52, the brash, super-confident, always-in-the news former CEO who liked to quote Dizzy Dean - ''If you've done it, it ain't braggin' '' - has since dropped out of the limelight, been vilified by some disgruntled investors and seen his Vencor holdings decline in value from more than $ 70 million to just pennies a share.
His supreme confidence, his ambitions, and his willingness to gamble the wealth of others on his decisions is reflected in his US $1.9 billion purchase of Hillhaven. In spite of this enormous debt, the praise he received for his daring seemed to go to his head and he dug an even deeper hole to fall into by buying more companies.
It is clear that his self-confidence was excessive and that he deluded himself about his own abilities. Even when things looked bad he thought that his intuitive decision to split into two would work. He had a glib explanation, which was not factual. Despite this his presence, enthusiasm, and charisma was such that everyone went along with it.
''I told him that we had our
niche and now we're going into something we knew very little
about,'' recalled Mason Rudd, a retired investor and civic leader
who said he opposed the move. ''Bruce had his sights set on really
big stuff. He wanted to be a bigger player.''
In the view of analyst John Ransom, who followed Vencor for Raymond James & Associates in St. Petersburg, the deals that killed Vencor came two years later, in 1997, when Lunsford grabbed two more companies, TheraTx Inc. and Transitional Hospitals Corp., for a combined $ 1 billion in cash, pushing Vencor's debt to that amount.
In May of that year (1997), however, Lunsford was still decidedly upbeat. ''I don't want to be bragging, but things are instinctive with me,'' he said then. ''I recognize the way an industry is going.''
The perpetually enthusiastic Lunsford likened the move (splitting into two) to ''cloning the Fabulous Five,'' the famed UK basketball team of the late 1940s. But it just burdened Vencor with more debt - rent payments to Ventas - and the stock continued to nose dive.
While Lunsford is mum friends and colleagues tell us what he was like. They say it affectionately, a measure of the sort of person he was. That he betrayed them by indulging in fraud does not occur to them. Is an overconfident gambler who holds enormous sway over others and who will resort to fraud to build an empire the right person to provide health and aged services? Lunsford is representative of his peers.
But while government cost-cutting figures in most explanations of Vencor's downfall, some critics say Lunsford's very strength - his supreme self- confidence - also contributed to the slide as he continued to grow the company in the jaws of change.
''Bruce is a classic
entrepreneur, a gambler at heart'' who ''thought he was getting so
big he couldn't lose,'' said Ransom, the analyst. ''They made some
leveraged bets that turned out to be bad bets
Lunsford's closest confidants - some of whom lost millions on Vencor -say he is weighing his next move while trying to figure out what went wrong at Vencor and whether he could have done anything about it.
''Bruce feels very, very bad about Vencor because he's not used to losing, '' said Carroll, the developer.
The way friends see Lunsford's future after the bankruptcy also tells us much of the man. They all see this as a misfortune - that he was a great guy with great talent who was unlucky. This is undoubtedly how Lunsford sees it and he would have no doubt. There is no thought of fraud or lack of care. These friends also tell us a great deal about his personal magnetism and the way he carries people with him. Interesting that Lunsford should share my view that " health care is an industry whose time has come and gone".
And his supporters say that they have no doubt that he'll be back in another business venture. But Lunsford has ruled out a return to health care, they say.
''I think he thinks health care is an industry whose time has come and gone, '' said Larry Townsend, who recruited Lunsford into Brown's gubernatorial campaign and remains a close friend.
Confidence and enthusiasm, Carroll said, remain Lunsford's greatest assets.
Carroll recalled how Lunsford remained upbeat when the morning line on Vision and Verse plummeted - ultimately to nearly 55-1 - as the horses entered the gate for the 131st running of the Belmont Stakes.
''He's walking around saying, 'I still might have a shot,' '' Carroll said.
Lunsford's biggest backers say they wouldn't hesitate to put their money on him again.
''Mark this down,'' Geary said. ''He'll be back."
The market believed that Lunsford could do no wrong. Buying Hillhaven was not an irresponsible act that loaded the company with debt - it was an inspired decision! As the rest of the article below reveals market analysts believed that this is what health care was all about.
Will the Sun slip over the Horizon, or will the Horizon swallow the Sun? Or will Vencor, the company that acquired Hillhaven, look with heightened interest at Hillhaven's children and try to create one. big--very big--happy family once again?
Vencor became an icon for entrepreneurial corporate medicine - proof for all those medical naysayers like Professor Arnold Relman
You don't have to go back very far - a little less than three years - to find the time when Vencor Inc. was a giant in the health-care industry, and the only question was how big it could get.
Now, the question is whether the
company will survive. On Wednesday, the once-soaring nursing home
company failed to meet a deadline for filing its fourth-quarter
earnings statement for 1998.
Vencor had become the No. 2 nursing home chain in the country
and its future looked
prosperous. In the next two years revenues grew to $ 3.1 billion
and net income went from $ 48 million in 1996 to $ 130 million in
THESE WERE the glory days. Vencor was a hot stock, a highrolling company, a civic prize to be fought over. Cincinnati and Louisville competed to be the chosen city where the company would build its new headquarters tower, and Louisville officials were ecstatic when Vencor decided to stay.
Lunsford identified with this image*
When Vencor, an operator of
specialized hospitals, announced the acquisition of a big chain of
nursing homes three years ago, it billed the move as a master
stroke: The company would have an integrated health-care network,
providing a broad range of care to America's growing population of
What Vencor lacked in expertise it made up in ambition. Nowhere was that more evident than in its attempts to boost the number of residents who paid their own way, had private nursing-home insurance or had their stay paid by Medicare, the program for the elderly.
Lunsford had supreme self-confidence. By 1997 he had no doubt about the future of the company. At this time it was loaded by debt from the purchase of Hillhaven and other corporations and so vulnerable to any financial down turn. Several companies including Columbia/CA and Sun Healthcare were being investigated for the same practices in which Vencor indulged. In response to this the federal government was quite openly moving to a new funding system. Despite this Vencor decided on an extravaganza which was never realised.
When W. Bruce Lunsford, then Vencor's president, announced plans for the tower in the spring of 1997, he beamed.
''The architects achieved extraordinary things with the (riverfront) site, as it relates to the history of the city and the views of the river and the falls,'' Lunsford said at the time. ''We want this building to demonstrate . . . our intention to grow into the next millennium.''
struggling to stay aloft
The Courier-Journal (Louisville, KY.) April 4, 1999
The tower's design, unveiled in September 1997, seemed a fitting symbol for the company itself: bold, modern and swirling skyward.
Lunsford's idea of his own worth was exaggerated. While profits plummeted and while he cut nursing salaries and made the conditions for staff so intolerable that they went elsewhere, he rewarded himself royally and probably gambled some of this on the races he frequented. He left with a bonus.
The former chairman and CEO of long-term care company Vencor Inc. and its spinoff company, Ventas Inc., received more than $ 1 million in salary and bonuses in 1998, a year that ended with both companies in financial trouble.
Bruce Lunsford was paid $ 825,000 in severance when he was ousted along with several other executives at the end of the year
Political patronage secured by donations, marketing and lobbying is common to all of the successful corporations. Grateful politicians have come out of the woodwork to support them in droves frustrating the attempts to punish them for their conduct. It seems that Lunsford had close political connections and at one time had political ambitions himself.
Lunsford isn't seen much any more at political fund-raisers he once frequented, said state Senate Democratic leader David Karem. And Andrew ''Skipper'' Martin, Gov. Paul Patton's chief political adviser, said of Lunsford's political prospects, ''Bruce is severely damaged.''
But Martin, Brown and others said it would be wrong to entirely write off Lunsford's political future.
Vencor did not see things the way the rest of us see them. It had its own market orientation and it was totally confident about this. It was not aware that others thought differently. Policy made in boardrooms, and not clinical conditions determine the treatment which patients receive. This is only one of many examples in the corporate marketplace.
Vencor officials talked about their plans openly, deriding rivals' strategy of filling their beds with the plentiful Medicaid patients. In most nursing homes, patients who use up their private insurance or Medicare coverage stay put, and, if they have exhausted their assets, simply flip over to Medicaid coverage. But Vencor wanted to discharge such patients so it could fill the beds with others who had high-paying insurance coverage.
Administrators of individual nursing homes were taught to rethink the entire admissions process with this in mind. A strategy memo passed on to Georgia homes urged administrators to plant the seed in the minds of prospective patients and their families that a stay would be short-term. "Begin concept upon admission," the memo specified, and while giving families tours of the home.
Mr. Barr, as chief operating officer, bore down on this in a memo to regional officials in the summer of 1997. "We determined months ago that we did not want to admit low-paying Medicaid only patients," he wrote. "Please let your administrators know that it's time to get on board or leave."
The sort of practices that were obviously condoned and encouraged in Lunsford's empire were described in the Wall Street Journal. In many other businesses they may have been considered legitimate - but not when you have a responsibility to the community and its members. Dishonesty was encouraged
SAVANNAH, Ga. -- Laura Morgan's marching orders were simple. As a social worker at a nursing home owned by Vencor Inc., she was to ensure that as many beds as possible were filled with residents covered by generous private insurance or by Medicare.
Patients whose high-paying benefits expired, and who thus ended up on lower-paying Medicaid, were to be moved out as soon as possible.
One of her tasks was smoothing
the way with relatives. "I had to sit across from family members
and lie to them, manipulate them, tell half-truths," says Ms.
Morgan, who resigned in June after alerting state authorities to
To make it appear the home was complying with state rules, Ms. Morgan says, she would falsely indicate on certain records that families had requested a discharge.
Like Tenet/NME and Columbia/HCA Vencor had a report system monitoring compliance with these disturbing directives.
At Savannah Specialty Care Center, admissions director Hope St. Lawrence had to prepare a fresh patient census every morning, to be faxed to headquarters by 9:30. Then she rushed off to seek out new admittees from hospitals, clinics and elsewhere. She screened out as many as two out of three prospects. Just having insurance wasn't enough, she says. The insurance had to cover extensive therapy, and people already on Medicaid were excluded outright, says Ms. St. Lawrence, who resigned this summer.
Like both these companies and most other successful chains Vencor secured compliance with its disturbing practices by offering financial inducements and rewards - not only to doctors.
Mr. Norris (former administrator) says he received a memo in the spring of 1997 urging him to step up the effort to discharge Medicaid recipients. He says it suggested giving bonuses to employees who successfully evicted such patients. Mr. Norris brought Ms. St. Lawrence into his office and told her, they both recall, "I'm showing you this just so you know about it. This is illegal and this will never happen in my facility as long as my license is on the wall."
Like Tenet/NME regular meetings were held at which administrators and not clinical staff made decisions.
Vencor was criticised for this business before care approach but this had little impact.
This sweeping reversal, coupled with an apology the chief executive had already issued for evicting Medicaid patients at a handful of homes, vindicated critics of the company's intently profit-focused admissions policy.
Fortunately many of the staff in these companies do share the community's values. Once one person has come forward many more come out of the woodwork.
Sitting at her kitchen table on a recent evening, Ms. Morgan explains why she eventually alerted state officials to the evictions. Leafing through her records, she spots the receipt for a $100 bonus she says she received for discharging a couple she says were evicted improperly.
From another pile she pulls out a note in which the couple's children thanked her for her helpfulness during the transfer. "They don't know what really happened," she says.
Way back in the 1980's Dave Lindorff in his book "Marketplace Medicine" described his interviews with executives who clearly believed that their companies were providing excellent medical care and serving the community. His investigations revealed a different picture. There seems to be a barrier between the coal face and the corporate empire. Any unwanted information is blocked.
Andrew Turner and his staff also seem to be completely convinced that the care provided in their homes was superb and that they were serving the community. This is what they marketed and the profits were proof that this is what they were providing. The actual situation was very different. I suspect the same thing in Vencor - hence the denials, anger and appeal to the courts.
A critical component of Vencor's strategy was offering high-quality care, to attract patients who could afford to go anywhere they wanted. But its record on care is slipping, too. A Wall Street Journal analysis of government inspection records shows that the number of times Vencor homes have been cited for staff shortages, medication errors or other care problems has grown in the past year.
(the report goes on to describe
what happened in Mount Carmel)
(In Georgia) Resources determined that Vencor had violated state regulations in evicting 14 patients from Savannah Rehabilitation; it recommended a fine of more than $500,000. Vencor has asked for a federal administrative hearing to contest this.
Both Vencor's admissions strategy and its quality of care have come under withering attack. The company received unwelcome publicity for mass evictions of Medicaid residents at nursing homes in Florida and Indiana. In Wisconsin, North Carolina, Nevada, Indiana and other states, a series of inspections cited company homes for shortcomings in care.
That financial well-being and standards of care are closely related is suggested by the way that profits and standards fell similarly in Vencor. When profits are threatened costs are cut and this means cutting care.
In Vencor homes' most recent annual inspections -- which took place from mid-1997 to mid-1998 -- they had a combined 1,468 citations, nearly 23% more than a year earlier.
Business priorities come first even amidst revelations of steadily declining care. Falling profits demand cuts in staff and care.
The company said it planned to cut 1,000 jobs nationwide to save $ 100 million a year, and put on hold its plan to build a 23-story corporate headquarters on the Louisville waterfront.
Lunsford did show some insight when profits began to decline. He pushed out Michael Barr who seems to have been strongly supportive of the disastrous Medicaid fiasco. Lunsford reasoned that he did not have nursing home skills and persuaded himself that the problems in care were because senior Hillhaven staff had not joined Vencor in 1995. Current staff were inexperienced. He brought in Kuntz who had more experience in aged care.
"I believe we approached the nursing-home industry as a company with a little bit of arrogance and a little bit of naivete," Chief Executive Bruce Lunsford said
He later recognised that he was not personally equipped to rescue the company from the consequences of his own actions. He reorganised the company with new management and resigned from senior positions in stages.
Lunsford was reluctant to accept the situation that had developed by the end of 1998. Analysts were starting to predict bankruptcy.
W. Bruce Lunsford, Chairman and Chief Executive Officer, commented, "This quarter has been one of the most challenging in our history, and I am pleased to report significant progress in our turnaround efforts. - - - "- - - our cost reduction programs were implemented successfully in our three operating divisions and our corporate office. The improvements in our operating results demonstrate that we are managing."
Struggling Vencor to face
shareholders Year of problems hangs over today's annual
The Courier-Journal (Louisville, KY.) May 12, 1999,
But at the annual meeting on April 27 last year(1998), Lunsford didn't seem to foresee the effects that he would later describe as draconian. In fact, he told shareholders that ''the changes long term in the Medicare system will be beneficial.''
After the Medicaid scandal Lunsford did respond to the anger of the public and the criticism of regulators. While his statement is prepared, the decision to come clean is atypical.
"We are deeply apologetic for our lack of clear communication and mishandling of this matter," said Bruce Lunsford, the company's chief executive, in a prepared statement. "This has been a learning experience for us."
The reorganisation is soon accomplished
Vencor Inc., the Louisville-based long-term-care company, has completed its reorganization by naming presidents for its three divisions, including a nursing-industry executive from outside.
The company yesterday announced
the appointment of Donald D. Finney, CEO at HCMF Corp., as
president of its nursing-center division starting Jan. 4. Finney
has more than 17 years' experience in nursing-center
The Fortune 500 company has had a major shake-up at the top in recent months, following some missteps that caused its stock price to plummet - included underestimating how much its profits would be hurt by changes in Medicare rules.
Lunsford had his own explanation for his resignation. It was not about fraud or the cynical misuse of patients for profit. It was to do with the market and the sort of people required. He had been the right person at the beginning but not now.
The Courier-Journal (Louisville, KY.) January 23, 1999
Lunsford said the change of command partly reflects the natural evolution of Vencor from the entrepreneurial startup he co-founded with Michael Barr to the major concern company into which he built it. The two, he said, require different kinds of management.
Lunsford's co-founder shared this view and it was clearly accepted by the company and its supporters.
Barr, who co-founded Vencor with Lunsford, summed up his departure by saying at the time, ''From a pure business standpoint, I'm an entrepreneur . . . and I'm not necessarily a big corporate guy. It's probably time to have somebody like Eddie (Kuntz) come in and take over the reins.''
The marketplace simply cannot accept that Lunsford has lost his touch or that the company will go down. They look at the business and its performance. The fraud and misuse of patients does not pass the eyebrows.
Hilliard Lyons analyst Stephen O'Neil said he was mildly surprised that Lunsford would leave Vencor now, since he already had done the hard work of stabilizing the company's finances and adjusting operations to the government's new fixedrate guidelines.
''Given the progress they've made in the last six months, I view the situation as somewhat stable,'' O'Neil said. ''I didn't have any sense that Bruce was going to leave.''
The company and many analysts like a successful business. They discount the fraud and patient issues. They willingly accept the explanation that Vencor offers - that the financial problems are due to government's unfair alteration of the funding system. Vencor staff undoubtedly believe this and so does Lunsford. He gives his explanations.
''The drastic changes of policy by the federal government have really led to a need to have drastic changes in the direction of the company,'' Lunsford said. The changes ''were very challenging for guys who were hospital-oriented executives.''
The marketplace looks past fraud and deceitful practices while companies are making money. It has little impact on credibility until profits fall.
But Vencor's sagging earnings drew attention because of the company's stature as perhaps the nation's largest full-service, long-term carecompany, and its long history of success.
This ever hopeful position could not be sustained in the face of the figures
The report portrays a stark reversal in the fortunes of the company that entrepreneur Bruce Lunsford founded with one hospital in the mid-1980s.
It went from making operating income of $ 224.5 million in 1997 to posting an operating loss of $ 572.9 million last year.
Lunsford keeps out of the limelight but maintains his position in Ventas which is where all the money - Vencor's capital assets are.
The only official action taken at Ventas' meeting was the re-election of six members of its board of directors. They included Chairman Bruce Lunsford, who engineered the creation of Ventas as chairman of Vencor last year.
Lunsford was present at the meeting but did not speak.
Shareholders who are not close contacts don't share Lunsford's rosy interpretation of his stewardship. They read the meaning of the fraud and the Medicaid scandal.
One class-action suit, filed in Louisville, alleged that Vencor and its executives misled the public, artificially inflated the value of the company by acquisitions and underestimated the effect of Medicare changes. The suit was dismissed in January and has been appealed. Another suit makes similar allegations against Vencor founder W. Bruce Lunsford, who has left Vencor but remains chairman of Ventas' board.
Entrepreneur reached too far,
too fast -- Local hero's star faded along with Vencor's
The Courier-Journal (Louisville, KY.) November 21, 1999, Sunday
Lunsford also is a defendant in a growing number of lawsuits filed by angry shareholders who accuse him and other Vencor officers of selling off millions of dollars of stock in the months before going public with the bad news about how the dramatic federal cuts in Medicare reimbursement would hurt the company.
Over the years - and starting long before Vencor's Medicare problems - Lunsford sold off at least $ 9.1 million in Vencor stock. According to the most recent securities filings, as of Friday's stock market close, he owned $ 9.9 million worth of Ventas, the company he spun off in 1998, as well as $ 5 million in stock in Churchill Downs and $ 679,203 in Res-Care. Lunsford serves as a director of each company.
Lunsford may have been fired and no longer enjoys the luxury of a corporate jet service, but instead of facing a criminal conviction for involvement in defrauding Medicare he is flitting around the country to the races and enjoying the fruits of his years of defrauding Medicare. He shuns publicity.
Understandably he claims his world is shattered but there is no mention of the fraud or the allegations about care. Everyone still likes him. They expect him to be back in business soon. His criminal tendencies are ignored and his talents are still admired. He is admired for building a great company without considering how he built it.
It was an odd sight for a man
accustomed to flying in the comfort of his corporate jet, friend
Jerry Carroll recalled: former Vencor chief executive W. Bruce
Lunsford and his girlfriend scrambling to find an inexpensive
commercial flight to New York last spring to watch his horse run
in the Belmont Stakes.
But Lunsford is far from destitute.
He owns at least $ 15.5 million in large chunks of stock in various companies, including Ventas. This month he paid $ 2.1 million for a Claiborne Farm broodmare during Keeneland's November Breeding Stock Sale.
Citing Vencor's pending
bankruptcy reorganization, Lunsford declined to talk with The
Courier-Journal about his role in Vencor's tumble, or about his
Friends say he now passes his time reading; evaluating business proposals; rooting for his youngest daughter, a star athlete at St. Francis High School; golfing at Valhalla Golf Club; and in-line skating in Cherokee Park.
''I think he has been greatly humbled by this, like we all have,'' said Maria Levering, a former senior vice president at Vencor who helped Lunsford build the company and left last December just a few weeks before he did.
''He has suffered a great loss - a financial loss, a career loss, a community loss and a personal loss. He spent a great deal of his time and energy building a company and relationships that are no longer there.''
Those who know him, even though they have lost vast sums cannot think of Lunsford as a criminal who defrauded the system or as misusing patients and neither does he. He is a great guy and a gambler on the horses.
Lunsford's allies say he was a
victim of forces beyond his control. ''He has a perfect business
plan, then the government changed the rules,'' said friend Ed
Glasscock, managing partner of Brown Todd & Heyburn. The
allies note other health-care companies that are foundering in
bankruptcy court or teetering on the brink.
''It is frustrating seeing a company that was very efficiently run and very profitable vaporize before the shareholders' eyes,'' said James Trimpe, an investment adviser for Wheat First Union. ''The only consolation is that he suffered more than anyone.''
Geary and others say aggrieved
investors who snipe at Lunsford now are guilty of bad manners as
well as bad form.
'Regular guy' Lunsford weighs future options
With days no longer spent inside Vencor's corporate offices, Lunsford has more time on his hands to indulge other interests. On Sunday mornings, for example, he plays basketball at the YMCA with a group of ''regular guys,'' Hart said. ''Bruce is down to earth. He was born on the farm'' - a 120-acre family spread in Kenton County.
Horse racing remains a passion. The best horse in his stable, Vision and Verse, which he co-owns, finished out of the money in the Breeders' Cup Classic Nov. 6, but second in the Belmont Stakes and has lifetime earnings of $ 820,140.
Health care executive considering
The Associated Press November 26, 2002
Health care executive and former state commerce commissioner Bruce Lunsford said Tuesday he is considering a campaign for governor next year. Lunsford said he will not make a decision before Jan. 1.
-(Lunsford)- - is a co-founder of the long-term care company Vencor Inc. and still an officer in its spin-off company Ventas Inc., could be in a position to finance his own campaign.
Collection of court actions by Kirby
McInerney & Squire against various Health corps : Kindred
KMSLAW.com Dec 2002
Kirby McInerney & Squire has filed a class action suit in the United States District Court for the Western District of Kentucky, Louisville Division, charging Kindred Healthcare, Inc., and five of its senior executives, with violations of federal securities laws (as described below). The action asserts claims on behalf of all purchasers of Kindred Healthcare securities between August 14, 2001 and October 10, 2002 (the "Class Period"), and seeks to recover losses suffered by such investors. If you purchased Kindred Healthcare securities during the class period, you may participate in the suit.
During the Class Period, defendants reported quarter after quarter of improved financial results and acquisitions. In response, Kindred stock traded at over $45 per share during April 2002.
However, defendants failed to reveal that due to a dramatic increase in professional liability claims, especially in Florida, defendants were not properly reserving for these incurred claims.
Comment: Here is Lunsford's own resume of his background. He is at last trying to realise his political ambitions.
BRUCE LUMSFORD FOR GOVERNOR WEB SITE accessed 7/5/2003
Candidate for Governor
2003 Kentucky Democratic Primary
Bruce Lunsford grew up on a tobacco farm in northern Kentucky, where he learned about hard work and community. A product of the Kenton County public schools, Bruce excelled academically and in athletics, lettering on both the basketball and baseball teams.
After graduating from Simon Kenton High School, Bruce entered the University of Kentucky in 1965, paying his way through school by working on his family's farm and other farms in the area. Bruce, who majored in political science and minored in accounting, obtained his degree from U.K. in 1969. After graduating, he began working for the accounting firm of Alexander Grant and Company in Cincinnati. During this period, not only did he complete the training necessary to become a C.P.A. (he was certified in 1970), but he also entered the Ohio National Guard. He later transferred to the Fort Thomas U.S. Army Reserves, where he was a member for 5 1/2 years. While working full-time in accounting, Bruce entered the Salmon P. Chase College of Law and in 1974 earned his law degree. He then began practicing law at the firm of Keating, Muething and Klekamp, spending nearly five years there.
One of the defining moments in Bruce's life was his decision to join the 1979 campaign of John Y. Brown, Jr. Bruce, who identified with Brown's central theme of bringing the accountability of the business world to the decision-making process in Frankfort, worked tirelessly on the campaign. After Brown was elected, Bruce joined his staff as Legislative Liaison, assisting the administration in accomplishing an ambitious legislative agenda that helped redefine state government in Kentucky.
In 1980, Bruce was tapped by Governor Brown to serve as Kentucky's Commerce Secretary. At a time of severe economic recession, Bruce helped create more than 60,000 new jobs and $1.5 billion in new investments. Under Bruce's leadership, UPS and Delta Airlines located major hubs in the state, and Kentucky's first Asian office was opened in Tokyo helping lay the groundwork for the Toyota plant in Georgetown.
After leaving state government, Bruce joined the law firm of Greenebaum, Doll, & McDonald in Lexington. Shortly thereafter, he began exploring a career in business. In 1984, Bruce began his career as an entrepreneur by forming Vencare, Inc. and initiating operations with the purchase of one small rural hospital in Indiana. Vencare grew from a small company with three employees to one employing more than 50,000 people throughout the country, taking on a new corporate name, Vencor, along the way. In 1996, Vencor became a Fortune 500 company.
On a more personal note, Bruce is an individual of great energy and varied interests. He is an accomplished thoroughbred owner and breeder, and has served on many corporate, civic, and charitable boards, including the boards of Churchill Downs, Inc., National City Corporation, The University of Kentucky, Bellarmine University, and Centre College. He has also ventured successfully into the entertainment business with investments in regional theme parks, such as Kentucky Kingdom, and Themeparks, L.L.C., a company that specializes in developing and operating theme parks. As Chairman and President of Citation Capital, L.L.C., he invests in small, growth-oriented companies.
Lunsford's money couldn't offset Vencor
Associated Press May 19, 2003
In the end, all of Bruce Lunsford's money couldn't buy an antidote to Vencor, the company that enabled him to make it.
What Lunsford evidently failed to anticipate was the extent to which opponent Ben Chandler's campaign would be able to bulldoze over those legal niceties and fine distinctions. Chandler kept on saying that Vencor was fined and that Vencor was bankrupted.
The Chandler campaign took every Vencor faux pas and hung it on Lunsford. The clincher came last week. It was a commercial featuring a Louisville woman, Martha "Jeri" Stevens, talking about how her mother was "abused in a Bruce Lunsford nursing home" - Liberty Care Center in Casey County in 1997. Lunsford owned Vencor at the time.
"Bruce Lunsford didn't care that my mother was abused. ... She was just a dollar figure to him," Stevens says in the commercial.