healthy4u: hospital systems

More Stories of Million Dollar Plus Hospital Executives, but Now the NY Times Challenges the Talking Points

It is spring, time for birds to sing, flowers to bloom, and hospital executives to get more money.  As we do periodically, we have amassed a series of media accounts of the big to enormous compensation paid to top non-profit hospital leaders.  These reports follow a certain pattern, but this year's spring crop included something different. The Pattern In the groundbreaking science fiction series "Fringe," "The Pattern" was a series of apparently inexplicable events which eventually pointed to the existence of a parallel universe. <iframe allowfullscreen="" frameborder="0" height="315" src="//www.youtube.com/embed/i8DqLs7254E" width="560"></iframe> In non-profit hospitals, The Pattern of the discussion of executive compensation is this.  Nearly all non-profit hospitals must release minimal data on the total compensation of a few of the highest paid executives.  When these reports come out, sometimes the local media take a look, either at an individual hospital or hospital system, or at a number of local hospitals.  They almost inevitably find that some, usually most executives make what appears to be lots of money.  This could be hundreds of thousands of dollars at small community hospitals, or millions of dollars at larger hospitals and hospital systems.  Sometimes the reports end there.  Sometimes the reporters ask hospital representatives or local experts to explain the apparently exalted compensation figures.  The explanations are usually very similar, and so we have called this part of The Pattern The Talking Points. The Talking Points It seems nearly every attempt made to defend the outsize compensation given hospital and health system executives involves the same arguments, thus suggesting they are talking points, possibly crafted as a public relations ploy.   We first listed the talking points <a href="http://hcrenewal.blogspot.com/2011/09/talking-points-sans-original-thought-to.html">here</a>, and then provided additional examples of their use <a href="http://hcrenewal.blogspot.com/2011/09/more-repeats-of-talking-points.html">here</a>, <a href="http://hcrenewal.blogspot.com/2012/03/example-of-how-complex-takes-control.html">here</a> <a href="http://hcrenewal.blogspot.com/2012/12/health-care-hired-managers-not-playing.html">here,</a> <a href="http://hcrenewal.blogspot.com/2013/05/executive-compensation-as-legal.html">here</a>, <a href="http://hcrenewal.blogspot.com/2013/06/no-blues-but-lots-of-green-for-st-louis.html">here,</a> and <a href="http://hcrenewal.blogspot.com/2013/08/should-we-cry-for-non-profit-hospital.html">here</a>, and <a href="http://hcrenewal.blogspot.com/2013/08/the-long-con-charitable-hospitals-make.html">here</a>.  They are: - We have to pay competitive rates - We have to pay enough to retain at least competent executives, given how hard it is to be an executive - Our executives are not merely competitive, but brilliant (and have to be to do such a difficult job). The talking points are usually supplied by hospital public relations personnel, sometimes by hospital trustees or executives, sometime by various health care consultants.  The talking points are rarely questioned. So let us look at some recent media articles for The Pattern, grouped in chronological order, to illustrate. Jersey Boys On April 6, 2014, Crain's New York Business<a href="http://www.crainsnewyork.com/article/20140406/HEALTH_CARE/140409916/hospital-execs-receive-sky-high-payouts"> reported</a> some of the biggest yearly compensation figures seen for non-profit hospital CEOs.   <blockquote class="tr_bq">Ronald Del Mauro, the former president and chief executive of Barnabas Health, pulled in almost $22 million in 2012, the year after he retired from New Jersey's largest health system. Joseph Trunfio, president and chief executive at Atlantic Health, made $10 million. Never before have such outsized compensation packages appeared on Crain's <a href="http://www.crainsnewyork.com/data-lists/business-lists/details/30/2962924" target="_blank" title="Crain's list of top-paid health care executives">annual list of top-paid hospital executives</a></blockquote> The explanations fit the pattern.  First from a Barnabas spokesperson, <blockquote class="tr_bq">'When Mr. Del Mauro began his career, Saint Barnabas Medical Center was a stand-alone community hospital,' she said, adding that Barnabas is 'well positioned both financially and operationally, despite significant industry challenges. His retirement package is a function of over four decades of service ... and reflects his exceptional legacy.'</blockquote> He was just another brilliant executive, in other words. Then about Mr Trunfio, <blockquote class="tr_bq">In a statement, Karen Kessler, board chair of Atlantic Health System, said that while Mr. Trunfio's 'current agreement does not have these bonus provisions, his compensation is performance-based, aligned with industry standards and intended to assure we retain top executive talent to provide the best quality of care to the communities we serve.'</blockquote> There in italics were the competitive market rates and retention arguments, and a repeat ("top talent") of the brilliance argument. Meanwhile, on April 28, 2014, NJBiz had its own <a href="http://www.njbiz.com/article/20140428/NJBIZ01/304259991/What%27s-fair-pay-at-nonprofits?-When-it-comes-to-hospitals-a-proper-diagnosis-is-difficult">report</a> on non-profit executive compensation in the state.   Their summary included, <blockquote class="tr_bq">Heading up the list is Robert C. Garrett, CEO of the Hackensack University Health Network at $2.12 million, followed by Richard P. Miller, Virtua Health ($1.99 million); John K. Lloyd, Meridian Health System ($1.68 million); Barry H. Ostrowsky, Barnabas Health ($1.67 million); and Stephen K. Jones, Robert Wood Johnson Health System ($1.55 million). Several New Jersey multi-hospital systems paid several top executives more than $1 million in 2012. Hackensack, for instance, has two executives over the million-dollar mark.</blockquote> [It is not clear why the two different reports listed two different people from Barnabas - Ed] Then came The Talking Points, for example, from Hackensack Hospital, <blockquote class="tr_bq">'The pay for HackensackUMC's executives reflects its complexity and is consistent with those levels paid to executives in other similarly situated not-for-profit academic and integrated health systems,' Hackensack said in a statement. "The compensation philosophy is to provide market-competitive base salaries....</blockquote>  The bit about complexity implies the brilliance argument, since only a brilliant CEO could cope with such complexity.  Then we had two versions of the competitive market based payment argument.   Here is another version of the same thing, this time from one "Joel Cantor, director of the Center for State Health Policy at Rutgers University," <blockquote class="tr_bq">On the other hand, hospital systems are large, complex organizations. Ultimately, CEO compensation is driven by the market for senior talent.  </blockquote> My favorite version of the brilliance argument came from one Ms Betsy Ryan, president of the New Jersey Hospital Association, <blockquote class="tr_bq">They literally are on call 24/7, 365 days a year and they are running an institution where lives are at stake</blockquote>  More on that later..... Smatterings of Data from Connecticut and Pennsylvania There were a series of reports that simply noted large amounts, but did not look for explanations.   HartfordBusiness.com<a href="http://www.hartfordbusiness.com/article/20140512/PRINTEDITION/305099967/15-ct-hospital-execs-paychecks-top-1m"> recounted</a> a state report of the top 10 most highly paid executives of individual hospitals (but did not account for the pay given to executives of hospital system).  The figures started at $3.26 million for the CEO of Yale-New Haven Hospital, and finished with $1.48 million for the senior vice-president and chief of staff at the same institution. The Pittsburgh Post-Gazette <a href="http://www.post-gazette.com/business/businessnews/2014/05/15/Former-president-CEO-was-highest-paid-West-Penn-Allegheny-Health-System-employee-in-2012/stories/201405150395">reported</a> pay at the West Penn Allegheny Health System, including that given to a former CEO, $1.89 million, and to a former chief administrative officer, $1.29 million.     Then the Pittsburgh Tribune <a href="http://triblive.com/business/headlines/6100989-74/million-2012-upmc">noted</a> even bigger compensation given out at competitor UPMC. <blockquote class="tr_bq"> <div class="News-body-text">UPMC CEO Jeffrey Romoff got an 8 percent raise two years ago, placing his generous compensation package near the top of the nonprofit hospital industry. </div><div class="News-body-text"> </div><div class="News-body-text">The 68-year-old Romoff, who leads the largest integrated health system in Western Pennsylvania and one of the biggest in the nation, brought in $6.6 million in 2012, up from $6.1 million in 2011, according to tax documents UPMC made public on Friday. </div></blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">Also,</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> </div><blockquote class="tr_bq"><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">UPMC paid 30 other executives and doctors more than $1 million each in 2012, up from 21 employees who were in the $1 million club the year before.</div></blockquote> Wake Forest Baptist The Winston-Salem Journal <a href="http://www.journalnow.com/news/local/wake-forest-baptist-releases-annual-regulatory-filing/article_f0db42e0-dc9e-11e3-a040-0017a43b2370.html">reported</a> details of executive compensation at Wake Forest Baptist on May 16, 2014.  Its CEO, Dr John McConnell, had "total compensation [which] rose 0.8 percent to $2.06 million in 2012."  Then, however, "Donny Lambeth, the former president of N.C. Baptist, had a 52 percent drop in total compensation to $1.18 million."  Also, "Dr. Thomas E. Sibert, president of Wake Forest Baptist Health and chief operating officer, received a 10 percent drop in total compensation to $1.02 million."  Then, "Edward Chadwick, chief financial officer, had a 2.3 percent drop in total compensation to $956,465."  It is interesting that some executives actually saw small decreases.  Then again, the system lost $4.5 million for fiscal 2012-2013. The article also offered up the usual explanations, first provided by the hospital system itself, <blockquote class="tr_bq">there are few executives with the required skill set to manage and provide leadership for an integrated (center) such as ours</blockquote> There goes another version of the brilliance argument.  Then, <blockquote class="tr_bq">Its executive compensation packages, it said, 'are fiscally responsible, appropriate for the marketplace and an essential part of the effort to recruit and retain skilled executives and visionary leaders for the medical center.'</blockquote> Those included the competitive market rates and the retention arguments, plus the ante for brilliance was upped to the visionary level. The article ladled on one another version, this time supplied by "John Challenger, chief executive of outplacement consultancy Challenger, Gray & Christmas," <blockquote class="tr_bq"> 'Communities who want the best health-care system they can get should support paying the compensation levels required to attract top talent,' Challenger said. 'Cutting salaries will result in an exodus of top talent to systems that will pay it,...'</blockquote> So "top talent" = brilliance argument, threatening an "exodus" = retention argument. So there they go again, again. Something Different: the New York Times Challenges the Pattern  We have previously challenged the talking points.  For example, in August, 2013 we <a href="http://hcrenewal.blogspot.com/2013/08/the-long-con-charitable-hospitals-make.html">wrote</a>, <blockquote class="tr_bq">As we have <a href="http://hcrenewal.blogspot.com/2013/08/should-we-cry-for-non-profit-hospital.html">noted before</a>, there is little evidence in support of these talking points.  What evidence there is on the topic suggests there is no real free market in interchangeable CEOs, and that CEOs are not very mobile, especially not across different kinds of organizations (look <a href="http://hcrenewal.blogspot.com/2012/10/more-reasons-to-doubt-how-ceos-are.html">here</a>).  There is little evidence that hospital (or other health care) executives are particularly brilliant, or any more brilliant than multitudes of physicians, nurses, and other health care professionals who work hard to make their institutions run.</blockquote>Yet most discussions of executive compensation in hospitals, and indeed in health care, follow The Pattern. So it was refreshing in this season of outsized compensation reports is that the New York Times ran an <a href="http://www.nytimes.com/2014/05/18/sunday-review/doctors-salaries-are-not-the-big-cost.html">article</a> that challenged The Pattern, albeit with limitations.  The most obvious problem with the pattern is that the arguments are out of context, and not challenged in context.  However, in the NY Times, <blockquote class="tr_bq">Physicians, the most highly trained members in the industry’s work force, are on average right in the middle of the compensation pack. <div class="story-body-text story-content" data-para-count="134" data-total-count="471" itemprop="articleBody">That is because the biggest bucks are currently earned not through the delivery of care, but from overseeing the business of medicine.</div><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody"> </div><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody">The base pay of insurance executives, hospital executives and even hospital administrators often far outstrips doctors’ salaries, according to an analysis performed for The New York Times by Compdata Surveys: $584,000 on average for an insurance chief executive officer, $386,000 for a hospital C.E.O. and $237,000 for a hospital administrator, compared with $306,000 for a surgeon and $185,000 for a general doctor.</div></blockquote><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody"> </div><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody">Note that this comparison only refers to salaries, not total compensation, so</div><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody"> </div><blockquote class="tr_bq"><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody">And those numbers almost certainly understate the payment gap, since top executives frequently earn the bulk of their income in nonsalary compensation.</div></blockquote><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody"> </div><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody">We just saw examples of non-profit hospital CEOs making over $1 million to over $6 million in total compensation.  That would imply that non-profit CEOs may make from three times to over thirty times the total compensation of a surgeon, and from over five times to over thirty-five times the compensation of a general internist.  (And the ratio for such outliers as Mr Del Mauro above would be even higher.)  </div><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody"> </div><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody">So is a hospital CEO thirty times more brilliant than a general internist?  </div><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody"> </div><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody">That suggests also that we go back to another version of the brilliance argument found in one article above.  In the NJBiz article, the NJ Hospital Association President said, about CEOs, not physicians,</div><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody"> </div><blockquote class="tr_bq"><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody">They are literally on call 24/7, 365 days a year and they are running an institution where lives are at stake.</div></blockquote><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody"> </div><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody">They may be on call in a sense, but they are never on first call.  Their decisions may ultimately affect lives, and perhaps put lives at risk.  But they never have to make a decision about a patient that could literally cost that patient his or her life.  And they almost never have to be accountable for what happens to individual patients.  </div><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody"> </div><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody">It is easy to argue that physicians' responsibilities for life and death decisions are much more direct.  Explain, then, those pay ratios again.  </div><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody"> </div><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody">Actually, in an <a href="http://www.fiercehealthfinance.com/story/could-watson-replace-high-paid-hospital-execs/2014-04-21">opinion piece</a> about executive compensation in FierceHealthFinance, Ron Shinkman described the life of a typical seven-figure a year hospital executive,</div><div class="story-body-text story-content" data-para-count="418" data-total-count="889" itemprop="articleBody"> </div><blockquote class="tr_bq">While the days of seven-figure club members are long, they are also predictable--check the census and cash flow reports, confer with the medical staff, get updates on supplies, negotiate with payers, have some meetings on long-term planning. If it is a large hospital in a large market, those meetings are likely focused on site expansion and acquisition. If it is a medium-sized facility, tI expect they spend their time focused on finding a larger partner. Breakfast and dinner meetings and events switch focus to development and fundraising. There may also be some meetings on quality initiatives, but they are of nominal consequence. Members of the seven-figure club enjoy little to no accountability from their customers.</blockquote> So is executive compensation in hospitals, or other parts of the health care system, based on executives' brilliance.  Or is it based on their ability to be rentiers, rent-seekers, who can control the choke points of money flow, and make sure they get more than their share before what is left can go to real health care?  Of course, hospital executives and their ubiquitous spokespeople do not discuss what they do day to day.  Maybe they need to, and also need to address the implications of these statements in the NY Times article, given that the US has the highest health care costs of any developed country, but nowhere near the best results, <blockquote class="tr_bq"><div class="story-body-text story-content" data-para-count="372" data-total-count="4255" id="story-continues-3" itemprop="articleBody">And studies suggest that administrative costs make up 20 to 30 percent of the United States health care bill, far higher than in any other country. American insurers, meanwhile, spent $606 per person on administrative costs, more than twice as much as in any other developed country and more than three times as much as many, according to <a href="http://www.commonwealthfund.org/%7E/media/Files/Publications/In%20the%20Literature/2013/Nov/PDF_Schoen_2013_IHP_survey_chartpack_final.pdf">a study by the Commonwealth Fund</a>.</div><div class="story-body-text story-content" data-para-count="372" data-total-count="4255" id="story-continues-3" itemprop="articleBody"> </div><div class="story-body-text story-content" data-para-count="274" data-total-count="4529" itemprop="articleBody">As a result of the system’s complexity, there are many jobs descriptions for positions that often don’t exist elsewhere: medical coders, claims adjusters, medical device brokers, drug purchasers — not to mention the 'navigators' created by the Affordable Care Act.</div><div class="story-body-text story-content" data-para-count="189" data-total-count="4718" itemprop="articleBody"> </div><div class="story-body-text story-content" data-para-count="189" data-total-count="4718" itemprop="articleBody">Among doctors, there is growing frustration over the army of businesspeople around them and the impact of administrative costs, which are reflected in inflated charges for medical services.</div></blockquote><div class="story-body-text story-content" data-para-count="189" data-total-count="4718" itemprop="articleBody"> </div><div class="story-body-text story-content" data-para-count="189" data-total-count="4718" itemprop="articleBody">We had <a href="http://hcrenewal.blogspot.com/2013/08/the-long-con-charitable-hospitals-make.html">previously argued</a> (see above) against the talking points, and specifically that there is nothing to suggest that hospital executives are any more, much less an order of magnitude more brilliant than physicians or other health care professionals. But I confess as a physician I did not have the courage to extend that argument to a direct comparison of executive versus health care professional pay. The Times article, written by someone who is not a physician, did not have to worry about appearing self-serving.  I am glad, for it is high time to discuss the degree that the incentives produced by executive pay in health care have become perverse, and how to change these incentives to make health care leaders more accountable for health, and less focused on their own riches.  </div><div class="story-body-text story-content" data-para-count="189" data-total-count="4718" itemprop="articleBody"> </div>

More Stories of Million Dollar Plus Hospital Executives, but Now the NY Times Challenges the Talking Points

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20 May 2014

To Die in Texas - Dr Mahmood's Apparently Fatal Stealth Hospital System Collapses Nearly Anechoically

I would bet that most people in the US still think our health care system is highly regulated.  Some may thus conclude that the system is basically safe, because, for example, drugs have to be proven safe and effective to be approved by the government, and hospitals must be licensed and run by competent people who are thoroughly vetted.  Of course, some people still think that the US has, or had until recently, the best health care system in the world (look <a href="http://www.nbcnews.com/health/health-care/best-health-care-system-really-john-boehner-f2D11598594">here</a>). Furthermore, the view that less regulation is always better is no quite popular in the US and elsewhere.  For example, after the chemical spill threatened water supplies in the capitol of West Virginia, the Dallas News <a href="http://www.dallasnews.com/news/west-explosion/headlines/20131221-despite-crises-from-salmonella-outbreak-to-west-blast-rick-perry-s-pushed-freer-rein-for-business.ece">reviewed</a> Texas Governor Rick Perry's consistent attacks on government regulation.    <blockquote class="tr_bq">'American business in general, and American agriculture specifically, have had enough of bureaucracy at both the federal and state levels, but especially bureaucracy out of Washington,' Perry said at a congressional hearing. 'The men and women who feed and clothe this nation are suffocating under the weight of mounting federal regulations.' That was back in 1993, when Perry was Texas’ agriculture commissioner. Now Texas’ longest-serving governor, Perry has remained steadfast in his opposition to government regulations. </blockquote> Some who take such a neoliberal stance may say the health care system is over-regulated, and thus is inefficient and not innovative, leading to our high costs and poor access. However, an amazing case out of Governor Perry's Texas that was made public last year, and I regret I just heard about recently, suggests how little health care may be regulated, and how unregulated health care, whether or not it is efficient, may be deadly. As <a href="http://www.dallasnews.com/investigations/patient-safety/headlines/20130713-patients-died-amid-federal-state-regulatory-inaction.ece">reported</a> in the Dallas News, July, 2013, in the last few years there seems to have been an epidemic of quality problems in a number of seemingly unrelated small rural Texas hospitals.  The report focused first on one hospital, Renaissance Hospital Terrell After for-profit hospital corporation Renaissance Healthcare declared bankruptcy in 2008 (look <a href="http://www.bizjournals.com/houston/stories/2008/09/08/story6.html">here</a>), it sold its hospital in Terrell, Texas to RH Terrell Management LLC owned by one Dr Tariq Mahmood.  Almost immediately, however, there was trouble.  First Edwina Henry, the quality director, spied a doctor making questionable entries in patients' charts: <blockquote class="tr_bq">from her office, she had a clear view of doctors’ foot traffic through the medical records department. When she saw [Dr Tariq] Mahmood jotting in patient charts, she knew he wasn’t seeing patients. Mahmood himself had not been credentialed to treat patients — a process in which management vets backgrounds and competencies of doctors. Part of Henry’s job was tracking such evaluations. She also knew it was a breach of privacy laws to review patients’ medical records. 'I immediately questioned some of the clerks and [insurance billing] coders,' she said. They were deeply concerned, saying he was altering the patients’ records to help boost reimbursements for insurance claims, Henry said.</blockquote> When Ms Henry complained, things did not go well, <blockquote class="tr_bq">Henry made her confidential call to the bankruptcy court in early November 2008, alleging potential fraud and threats to patient care that were eluding government notice [Ed - note that the hospital was going through bankruptcy proceedings and had just been acquired by a new owner]. The court forwarded her complaint to the U.S. Justice Department, the Texas attorney general’s office and the state health department, officials confirmed. Later that month, the state health department sent an inspector to the hospital. However, the visit was brief, Henry said, and the inspector didn’t interview her or seek her help in obtaining records. Williams, the health department spokeswoman, told The News her agency’s records show the inspector was unable to substantiate violations at the time. Henry was terminated from Renaissance as part of a 'restructuring'.... </blockquote>Then the hospital was cited for turning patients away from the emergency department, <blockquote class="tr_bq">At Renaissance, two women in labor, one bleeding, were refused treatment. The inspection reports don’t reveal whether the women suffered complications because of the delays. A Renaissance employee told one of the women that if she 'could stand there and have a conversation with them then (she) wasn’t about to have a baby,' reports say.</blockquote> Then there were problems with infection control, <blockquote class="tr_bq">At Renaissance, no supervision over infection control could be found. For three months in the summer of 2010, no one was in charge of tracking infectious diseases or preventing their spread.</blockquote> The next year, the problem was blood transfusions <blockquote class="tr_bq">Inspectors returned to Renaissance in September 2011 to investigate a botched blood transfusion procedure. They found that a registered nurse had not supervised the patient’s care. In another case, an inspector witnessed an unsupervised vocational nurse administering blood to a patient, despite no evidence that she was competent to do so — another violation.</blockquote> In 2012, <blockquote class="tr_bq">During the summer, the Texas secretary of state had revoked Renaissance’s business charter for failure to pay franchise taxes. That office didn’t share the information with the health department; it isn’t required to do so. In September, state health regulators notified Renaissance that they were proposing a $35,050 fine for 13 violations, including the nursing supervision failures, dating as far back as 2010. Williams, the health department spokeswoman, could not explain why the fine process took nearly two years since the first violation. </blockquote> Finally, in 2013, patients started to die, <blockquote class="tr_bq">In January of this year, when state inspectors returned to Renaissance, they found nursing supervision failures yet again. This time, the failures had led to three deaths: All ER patients. All with severe breathing difficulties. All receiving little to no intervention as their conditions worsened.</blockquote> In particular, <blockquote class="tr_bq">[Eve] McCallum sought her own care after complaining of shortness of breath during a family dinner. McCallum had chronic obstructive pulmonary disease. When she was admitted, nurses were ordered to monitor her vital signs and oxygen levels. Her breathing soon improved, said her niece, Lou Ann Sims. 'We were fully expecting to pick her up the next morning,' Sims said. Instead, they watched helplessly as her condition deteriorated. On Christmas Day, a physician explained to McCallum’s family that she had to be transferred to the intensive care unit. Later, Sims witnessed a scene she can’t let go of: Her aunt lay connected to a ventilator while a nurse stood smoking a cigarette just outside the door. The nurse had propped open the door with an IV pole. The family immediately sought to have McCallum transferred to another hospital. But hospital officials told them 'this would be a lateral move and was not allowed,' according to a transcript of an interview the family later conducted with state officials. McCallum died two days later. Inspectors wrote that a licensed vocational nurse had been left in charge of her treatment, without a registered nurse’s oversight. There was no evidence an RN had assessed her condition on admission or was watching over her in the ICU. They could find no doctor orders to place her on oxygen, no order for medications administered to her, 'nor evidence of communication with the M.D.' Suspecting more than just care breakdowns at Renaissance, McCallum’s family reported her death to the Texas attorney general’s fraud-control unit.</blockquote> So partially in response to this egregious case, <blockquote class="tr_bq">By February, the state health department had moved to revoke Renaissance’s operating license, and CMS had ordered its federal funding terminated — only the ninth time nationally in the last three years CMS had taken such a step.</blockquote> Even those steps could not shut down the hospital, but city officials took that last step due to the failure to pay taxes. Other Hospitals Dallas News reporter Miles Moffeit found several other cases of severe problems at small hospitals owned by Dr Mahmood, with at least one patient death apparently resulting, . Shelby Regional Medical Center This hospital was owned by Tenet Healthcare, but was sold to another of Dr Mahmood's companies, Shelby Medical Holdings, in 2007 (look <a href="http://www.beckershospitalreview.com/hospital-management-administration/shelby-regional-medical-center-in-texas-closes-its-doors.html">here</a>).  In 2009, this hospital was also cited for providing insufficient treatment in the emergency department. In 2012, things were really falling apart, <blockquote class="tr_bq">In October 2012, inspectors were at Shelby chronicling dirty, clogged air-conditioners and failures to prevent ceiling plaster 'from falling into the patient food service line and contaminating food.' Those problems put patients’ safety in 'immediate jeopardy,' they wrote. As inspectors roamed Shelby’s halls in December, the power suddenly went out in four buildings, though not in the main hospital facility itself. The electric bill hadn’t been paid. They found other debts stacking up, too — as much as $190,442 owed to as many as 79 service providers. Signs of neglect were everywhere. Only three of 20 patient rooms inspected were 'fully functional for patient care,' they wrote. They found holes in walls, dirty and tattered curtains, and patients complaining of heat pouring from the faulty A/C system.</blockquote> Finally, in 2013, another patient died, <blockquote class="tr_bq">On Wednesday, CMS cut off federal funding to ... Shelby Regional Medical Center in Center in East Texas after regulators said a patient rushed there by ambulance never received treatment from a doctor. The ER physician wouldn’t leave his 'sleep room,' the inspection report said, resulting in the patient’s death. Regulators also cited the hospital for failing to vet backgrounds of doctors and nurses. </blockquote>Apparently soon thereafter Dr Mahmood shut the hospital down due to "legal issues that ... [he] is facing," <a href="http://lightandchampion.com/article/003856-mahmood-closes-shelby-regional-medical-center-staff-volunteers-time-until-doors-shut">per</a> the Shelby Light and Champion. Lake Whitney Medical Center Dr Mahmood apparently purchased this hospital from a struggling local hospital authority in 2007.   In 2009, it was cited for inadequate care in the emergency department, <blockquote class="tr_bq">At Lake Whitney, a nurse acknowledged to inspectors that she had shredded records of a patient who was denied care following a fall, according to a report. The 'patient wasn’t going to pay anyway,' the nurse was quoted as saying in the document.</blockquote> In 2010, there was evidence of major infrastructure problems, <blockquote class="tr_bq">At Lake Whitney, patients were served food on rusty 'over-the-bed tables that were a source of possible infections for open wounds.' Bulging ceiling tiles exposed pipes. Pavement outside a main hospital door was 'cracked and unlevel,' putting patients at risk of injury. </blockquote>As Dr Mahmood's legal troubles mounted, the hospital was sold to Frontier Hospitals Inc (look <a href="http://watchdogblog.dallasnews.com/2013/08/florida-company-takes-over-lake-whitney-medical-center-effectively-dissolving-embattled-owners-troubled-chain.html/">here</a>). Cozby-Germany Hospital  I have been unable to discover when Dr Mahmood purchased this hospital.  In 2010, it became apparent that the hospital was not properly licensed, <blockquote class="tr_bq">'The administrator reported the new owner had not notified (CMS) … and has not applied for hospital licensure with the state licensing agency,' a report said. [The owner] ... also was found to have appointed his own employees to the hospital’s governing board of directors, instead of independent outsiders.</blockquote> And there were more severe problems with credentialing, <blockquote class="tr_bq">At Cozby-Germany hospital, hospital inspectors discovered that the chief of staff and another doctor had expired medical licenses. There were no 'functional' nurse and doctor credentialing processes, and clinical policies had not been updated since 2008, they said. The hospital pledged reforms.</blockquote> But in May 2011, records show, Cozby hired one of Texas’ most notorious doctors, Rolando Arafiles. <blockquote class="tr_bq">At the time, Arafiles had been placed on probation by the medical board for allegations of harming nine patients, overbilling and improper coding at a Winkler, Texas, facility, according the board. He also was disciplined for intimidating the Winkler nurses who blew the whistle on his practices. In November, Arafiles would be convicted of two felonies linked to the retaliation and would surrender his license.</blockquote> In 2013, two local doctors purchased the hospital. The Vanishing Owner What made this series of cases all the more amazing is that it was really one interlinked case.  All these hospitals, plus a few more, had the same owner.  Yet no one, especially  no one in state or federal government knew that until 2013 when the facts were uncovered by Mr Moffeit. <blockquote class="tr_bq">[Dr Tariq] Mahmood, a Pakistan-trained doctor, obtained his Texas medical license in 1978. Since 2008, he has practiced medicine only at his Central Texas Hospital in Cameron, south of Waco, records with the Texas Medical Board show. Older documentation is not available. Over the last two decades, he has purchased at least six hospital companies and two home-health care agencies, according to filings with the Texas secretary of state. He also has invested his money outside health care, acquiring the historic Hotel Lawrence in downtown Dallas, property records show. In addition to Renaissance, Shelby and Central Texas Hospital, Mahmood owns the Lake Whitney Medical Center in Whitney and Cozby-Germany Hospital in Grand Saline. He sold Community General Hospital in Dilley around the time of his arrest in April. The hospitals have no common corporate identity and little or no website presence, making it difficult for anyone to know they are owned by Mahmood or are part of a chain.</blockquote> However, much bout Dr Mahmood was mysterious, and the deliberate cultivation of mystery might have slowed the response to this case. <blockquote class="tr_bq">Mahmood is rarely seen in the communities where his hospitals are located, say business associates and city officials. Sometimes they catch a glimpse of him passing by in a chauffeur-driven car. 'He’s almost impossible to track down' to discuss business matters, said Tom Elliott, a director for a nonprofit company that owns the hospital building in Grand Saline. 'He lets his people do the talking.' Mahmood is a mystery to many of his own employees. He works almost entirely behind the scenes, they say, focusing largely on the business side of his operations. He often is traveling or spending time at his 10,000-square-foot gated estate in Cedar Hill, they say. 'We see him maybe once a year,' said one of his hospital physicians. 'The employees say he doesn’t like confrontation. I say he just doesn’t like to communicate. He seems to live in a different world.'</blockquote> Aftermath  At some point, the shadowy Dr Mahmood may have to answer for all this, at least to some extent, <blockquote class="tr_bq">In April, federal authorities charged the 62-year-old Cedar Hill resident with defrauding Medicare and Medicaid programs through $1.1 million in false billings. Mahmood is accused of directing employees at his Central Texas Hospital in Cameron to alter underlying information in insurance claims from his other hospitals. 'In many cases,' the indictment alleges, these were 'for patients he had never seen.' Mahmood pleaded not guilty, and his attorney said he denies all charges. He has declined repeated interview requests from The Dallas Morning News. </blockquote> Note, however, that these are charges of financial fraud.  They do not obviously have to do with poor quality care, risks to patients' safety, or the deaths of at least three patients as discussed above. This case was so bad that even the current Governor of Texas, Rick Perry, a politician known for taking a small government, minimal regulation stance, at least said he was going to take some action, as <a href="http://www.dallasnews.com/investigations/patient-safety/headlines/20130719-perry-orders-investigation-into-oversight-of-troubled-rural-hospital-chain.ece">reported</a> again in the Dallas News, <blockquote class="tr_bq">The governor’s office has ordered a 'deep and comprehensive look' at health care facilities owned by Dr. Tariq Mahmood, whose chain of rural Texas hospitals avoided serious regulatory action despite years of endangering patients. The inspector general for the state Health and Human Services Commission and one of the agencies it oversees, the state health department, will conduct separate investigations, officials said Friday.</blockquote> And in February, 2014, the Dallas News <a href="http://www.dallasnews.com/investigations/20140206-texas-hospitals-chief-faces-fraud-charges-over-use-of-stimulus-grants.ece">reported</a> that the chief financial officer of the Dr Mahmood's stealth hospital chain was also in hot water, <blockquote class="tr_bq">The top administrator of a chain of hospitals that collapsed under the ownership of a North Texas physician faces charges that he defrauded the federal government of nearly $800,000 in stimulus funds. Joe White of Cameron rose from maintenance man to head administrator and chief financial officer over hospitals once owned by Dr. Tariq Mahmood. Now he joins Mahmood in facing the possibility of prison time. Like Mahmood, who pleaded not guilty, White is accused of identify theft and bilking the federal government of health care dollars. White has yet to enter a plea.</blockquote> Note that the CFO and apparently COO was not even a professional generic manager.  He was a former maintenance man  and operator of a Radio Shack store..  Dr Mahmood has not yet come to trial.  Many questions about the case remain unanswered:  -  Did Mahmood the only person besides his CFO cum maintenance man in charge of all this, or did he have other backers,  cronies, associates? -  What happened to the rigorous state investigation promised by Rick Perry? -  Given that what went on harmed patients, and hence was not just financial manipulation, are there any civil lawsuits pending?  Are there any other criminal investigations?\ Furthermore, despite its egregious nature, this case was amazingly <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic</a>  The only national recognition I could find was i<a href="http://runningahospital.blogspot.com/2013/07/hospital-slumlord.html">n Paul Levy's Not Running a Hospital blog.</a>  Seven months later, I could find nothing in the national media, nothing in medical and health care literature.  Despite the amazingly poor quality of care in evidence, despite the fact that patients died, I could find no cries of outrage from those who proclaim to support quality health care or patient safety.  Summary Dr Mahmood and his chief operating and financial officer collectively displayed leadership that was ill-informed (the COO/ CFO was a former maintenance man), incompetent (see the egregious health quality problems listed above), self-interested (note the size of Dr Mahmood's mansion versus how little was obviously spent on his hospitals), opaque and dishonest (note how Dr Mahmood's ownership of the hospitals was obscured), and allegedly criminal.  This leadership persisted over at least eight years until it culminated in cases of apparently needless patient deaths.   The amazing case of the stealth for-profit hospital system run by Dr Mahmood, and how its combined problems failed for so long to get systemic regulatory notice hardly suggest that our health care system is heavily regulated, or that current regulation can be relied upon to reassure patients that all is well and that the system is safe. In fact, in the case of Dr Mahmood, government regulators did not seem to even want to know too much about hospital ownership, <blockquote class="tr_bq">Top health regulators weren’t even aware Mahmood owned several hospitals until The News sought information about them earlier this year. Regulatory agencies aren’t set up to track problem hospital owners or hold them accountable. Nor do they look for patterns of care breakdowns inside hospital chains. 'We just don’t have that authority,' said David Wright, deputy regional administrator for CMS. The federal agency oversees the state health department’s inspections of federally funded hospitals. 'We can only address problems in stand-alone facilities.'</blockquote> Furthermore, it appears that modern regulators have decided to become hospital managers' and owners' best friends, <blockquote class="tr_bq">The process allows hospitals to avoid sanctions if they cooperate. Hospitals submit “corrective action plans” to remedy failures. It can take months for state regulators to bring penalties such as fines against a facility. In the case of Renaissance, it took years. 'We want to do what’s in the best interest of the patients, and our regulatory philosophy is to get hospitals into compliance,' said Carrie Williams, spokeswoman for the Texas Department of State Health Services. 'We’re not in the business of shutting down hospitals. We will give them some leeway and work with them.'</blockquote> Of course, this minimalist, light touch regulatory methodology may have made some sense in an earlier era when nearly all hospitals were small community not-for-profit organizations, non-profit academic institutions, or were run by local governments.  It seems quaint, and hopelessly out of date in an era when most hospitals are part of <a href="http://hcrenewal.blogspot.com/search/label/hospital%20systems">ever larger systems,</a> now often owned for-profit corporations, and when hospital system CEOs who are professional, and thus <a href="http://hcrenewal.blogspot.com/search/label/generic%20managers">generic managers</a>, not health care professionals, in an era of <a href="http://hcrenewal.blogspot.com/search/label/financialization">financialization</a> and "maximizing shareholder value," that is, making short-term revenue the most important outcome. Instead, the current minimalist regulatory system seems insufficient to prevent patients from dying of poor care allowed by poor leadership of health care organizations.  Much of the content of this blog has been about bad health care leadership, i.e., leadership that is <a href="http://hcrenewal.blogspot.com/search/label/ill-informed%20management">ill-informed</a>, incompetent, unsympathetic or <a href="http://hcrenewal.blogspot.com/search/label/mission-hostile%20management">hostile to health care professionals' values</a>, self-interested, <a href="http://hcrenewal.blogspot.com/search/label/conflicts%20of%20interest">conflicted</a>, dishonest, or even <a href="http://hcrenewal.blogspot.com/search/label/health%20care%20corruption">corrupt</a>.  In my humble opinion, health care regulation ought to be sufficient to promote competent, caring, unconflicted, honest leadership that is accountable for putting patients' interests ahead of self-interest.  Regulation needs to be more intense, and much smarter, geared to the reality of a health care system that is now largely for-profit in an era when management dogma puts revenue ahead of all other concerns. Maybe the deaths of some patients in Dr Mahmood's Texas hospital will finally let the air out of the mindlessly anti-regulatory bubble, and start some discussion of intelligent regulation to improve patient safety. However, that cannot happen if this case remains anechoic.  I regret it took me so long to find it, but now I have done my part to start some echoes.  But where are the media, where are the journal editors, and where are those who so loudly proclaim their interest in patient safety and health care quality? In particular, there are several prominent organizations that claim to promote health care quality and patient safety.  These organizations make these claims- <a href="http://www.jointcommission.org/topics/patient_safety.aspx">Joint Commission</a> <blockquote class="tr_bq"> For more than 60 years, The Joint Commission has been a champion of patient safety by helping health care organizations to improve the quality and safety of the care they provide. </blockquote> <a href="http://www.leapfroggroup.org/about_leapfrog">Leapfrog Group</a> <blockquote class="tr_bq"> The Leapfrog Group is a voluntary program aimed at mobilizing employer purchasing power to alert America’s health industry that big leaps in health care safety, quality and customer value will be recognized and rewarded.</blockquote> <a href="http://www.qualityforum.org/who_we_are.aspx">National Quality Forum</a> <blockquote class="tr_bq"> Transforming our healthcare system to be safe, equitable, and of the highest value will take time and the work of many, but the potential rewards are great. The National Quality Forum (NQF) is a nonprofit, nonpartisan, public service organization committed to this transformation. </blockquote> <a href="http://www.rwjf.org/en/about-rwjf/our-mission.html">Robert Wood Johnson Foundation</a> <blockquote class="tr_bq">Our efforts focus on improving both the health of everyone in America and their health care—how it's delivered, how it's paid for, and how well it does for patients and their families. </blockquote> These  organizations should the ones to start the conversation about improving rather than forever shrinking regulation.   I have not heard anything from them about the deadly hospitals of Dr Mahmood.  Are they listening now?  Will we ever hear from them?  Time will tell....   Note: the entire Dallas News series on the Mahmood hospitals can be found <a href="http://res.dallasnews.com/interactives/collapseofcare/">here</a>.

To Die in Texas - Dr Mahmood's Apparently Fatal Stealth Hospital System Collapses Nearly Anechoically

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18 Feb 2014

The Adventures of the Purloined Bequest, the Resident Heiress, and the Hidden Hospital System

The game is afoot again.  A series of recent articles in the media described a series of cases whose mysterious interrelationships Sherlock Holmes might have appreciated. The Purloined Bequest A singular <a href="http://online.wsj.com/article/SB10001424127887324324404579045331810905304.html">article </a>in the Wall Street Journal, entitled "Judge Rules in Case of Fortune Tied to Buffett," first made this case explicit, but some background is required to understand it. The story focused on Long Island College Hospital, in Cobble Hill, Brooklyn, New York.  [Full disclosure: this story got my attention particularly because I grew up nearby in Brooklyn, and was born at that hospital, which was also the local hospital my parents often used.]   LICH has long been the major community hospital for downtown Brooklyn. The story appeared to begin in 2011, per the WSJ, <blockquote class="tr_bq"> In 2011, Judge [Carolyn] Demarest approved the merger of LICH and SUNY Downstate on the condition it would keep the charitable hospital going. As part of the deal, the hospital transferred properties to Downstate estimated to be worth as much as $1 billion collectively, according to a previous court order.</blockquote> The merger was supposed to keep LICH in operation as a community hospital and provider of acute care to the poor.  However, things did not work out.  This year, however, Downstate announced plans to shut the hospital, leading to protests from Brooklyn residents and local politicians. <blockquote class="tr_bq">'It is clear that the premise upon which this Court authorized the transfer of assets has been defeated,' Justice Demarest wrote in her Aug. 20 decision, adding that Downstate had breached its contractual obligations. She cited a 'legal and moral responsibility' to correct her earlier error in approving the merger. She directed Downstate to return all assets to the hospital's previous owner, Continuum Health Partners Inc., which subsequently said it couldn't take the reins. The court is expected to review other proposals. </blockquote> The judge also discovered that hospital management had been raiding an large endowment fund intended for other purposes, <blockquote class="tr_bq">A New York state judge ruled this week that a struggling Brooklyn hospital must repay tens of millions of dollars it borrowed from an endowment set up by early investors with billionaire Warren Buffett. The ruling aims to rectify the previous use of the money by Long Island College Hospital, which is hurting financially and was scheduled to close. Mr. Buffett in July told The Wall Street Journal that his late friends, Donald and Mildred Othmer, would have felt 'betrayed' at the way the funds were spent.</blockquote> Apparently, <blockquote class="tr_bq"> The Othmers, natives of Omaha, Neb., who later lived in Brooklyn, were longtime friends of Mr. Buffett's, and each invested $25,000 with the billionaire in 1961. When they died—he in 1995 and she in 1998—they gave away a fortune estimated at $780 million, including the $135 million permanent endowment for the hospital. The Othmer wills stipulated the interest on the endowment could be used for operating expenses but the principal should be held 'in perpetuity.' In a series of court-approved transactions that began in 2000, the hospital borrowed from the funds repeatedly to meet short-term obligations and cover debts. The hospital argued that the money was necessary to keep the hospital afloat, which it said the Othmers would have wanted. The transfers depleted most of the endowment, a result that came to light after the Journal wrote about the situation in July.</blockquote> <a href="http://www.nytimes.com/2013/08/21/nyregion/judge-rejects-long-island-college-hospitals-ownership-deal.html">New York Times</a> and <a href="http://www.brooklyneagle.com/articles/dead-lich-could-net-suny-100-million">Brooklyn Daily Eagle</a> articles focused on the question of whether SUNY/ Downstate intended to close the hospital so it could sell its apparently valuable real estate assets in a now fashionable neighborhood, but not on how the hospital fell into these dire straits. There seem to be some lingering questions - -  If the losses and borrowing began in 2000, or earlier, who was responsible for them, given the current owners have only been in place since 2011? Note that the phrasing in the article above ("the hospital argued that the money was necessary to keep the hospital afloat") suggested that before SUNY took over, the hospital was independent.  However, the article mentioned, albeit only briefly in passing, that the hospital had a previous owner, Continuum Health Partners Inc. -  How were the losses explained when they occurred, and what was the rationale for  borrowing from restricted endowment as a response, instead of, for example, direct efforts to minimize losses or increase capital and revenue? Note that the article implied that when SUNY acquired LICH, it acquired some very valuable real estate.  Why did the previous management of LICH not consider selling off some of this real estate to resolve its debts? -  Did mismanagement of the hospital lead to excess losses, and did borrowing funds from the principle of the hospital's endowment to offset these losses amounted to more mismanagement?   Meanwhile, a second even more bizarre story about another New York City hospital almost simultaneously got media attention. The Resident Heiress The case first made it into the media in 2012, when the tabloid New York Post <a href="http://nypost.com/2012/09/02/beth-israel-medical-center-shook-down-heiress-huguette-clark-for-13-million-relatives-say/">reported</a>, <blockquote class="tr_bq">Beth Israel Medical Center milked reclusive copper heiress Huguette Clark for more than $13 million in fees, donations and even a priceless painting during her 20-year stay as a patient — and greedy executives angled for $125 million more, her relatives allege in shocking new court filings over Clark’s estate. The alleged shakedown was illuminated in an e-mail in which hospital board member and former CEO Dr. Robert Newman referred to Clark as 'the biggest bucks contributing potential we’ve ever had,' according to court papers. He told a colleague her 'potential has been overwhelming[ly] unrealized.' At one point, he suggested to Clark that she pay nearly one-third of her estimated $400 million fortune to keep the now-shuttered Beth Israel North on the Upper East Side open so she could keep living in the room she had refused to leave for 15 years despite being in good physical health, the papers allege. But instead of addressing Clark’s crippling anxiety, hospital honchos played on her fears, engaging in 'a concentrated effort, orchestrated at the highest board and executive levels,' to get her money, court documents obtained by The Post allege. Clark’s death last year at age 104 set off a battle over her estate. Her distant relatives claim lawyer Wallace Bock, accountant Irving Kamsler, private-duty nurse Hadassah Peri and the Beth Israel administrators manipulated the feeble Clark for her money. The nurse, who received cash and gifts from Clark, stands to inherit nearly $34 million and Clark’s priceless doll collection in the now-disputed will. Beth Israel is to get $1 million. The Paris-born Clark inherited her money from her father, William, a rail and mining baron and former US senator whose wealth rivaled the Rockefellers’. She went to Beth Israel North in 1991, when she was 85, after a doctor found her emaciated and ill in one of her three sprawling Fifth Avenue apartments. She spent the last two decades of her life in dismal hospital rooms with the shades drawn and door shut even though there was 'no medical basis for keeping her' past the first few months, documents show. Clark was 'the perfect patient' for the hospital, her relatives charge, noting, 'She required no medical care, possessed enormous wealth, paid over $800 a day for her room, and became progressively more dependent on the hospital.' 'Beth Israel had a plan to subtly, but ever so persistently, court Huguette for the purpose of garnering gifts and ultimately do a will in favor of the hospital,' court papers claim.</blockquote> This case also seems to be about wealthy donors and hospital executives.  Yet what makes it most bizarre are the circumstance of Ms Clark's hospital stay.  As a former intern, resident, fellow, and teaching hospital attending, I can attest that most hospital administrators are concerned, if not obsessed, with discharging patients quickly.  Hospital stays are currently paid by most insurers according to the patients' diagnoses, but not their length of stay.  Long stays cost hospitals money.  Furthermore, unnecessarily long stays use up resources that could better serve acutely ill and injured patients.  Yet Ms Clark stayed an astounding 20 plus years, without any obvious medical rationale.  No hospital official contested the fact that Ms Clark stayed that long in the NY Post article. Furthermore, in a 2013 New York Times <a href="http://www.nytimes.com/2013/05/30/nyregion/hospital-caring-for-an-heiress-pressed-her-to-give-lavishly.html">article,</a> the hospital's lawyer, defending a parallel attempt to recover the money donated to the hospital, wrote <blockquote class="tr_bq"> Beth Israel had provided Mrs. Clark with 'a well-attended home where she was able to live out her days in security, relative good health and comfort, and with the pleasures of human company.' Besides, he said, the amount of money she gave to Beth Israel was “not very large considering her vast wealth.”</blockquote> Furthermore, a member of the Beth Israel fund-raising staff wrote in a memo disclosed during litigation, <blockquote class="tr_bq"> She was well enough by then to go home to her spacious apartment at Fifth Avenue and 72nd Street, overlooking Central Park, Ms. [Cynthia L] Cromer said, but 'she asked if she might stay in the hospital longer: she feels comfortable and safe, and her apartment is being renovated.'</blockquote> Never mind that the fundamental mission of the hospital is to provide acute care for the sick and injured, not to provide comfortable retirement housing. But hospital managers are apparently on record acknowledging that the hospital was basically providing Ms Clark with services that are normally available in a retirement community, not services that acute care hospitals normally provide anyone   There is no evidence that the hospital ever provided similar services to any other patients.  The obvious mystery, then, is - why no one at the hospital, no doctor, nurse, or manager, or no visitor, regulator, accrediting agency, insurer ever questioned why the hospital was providing a long-term residence to a former patient? No answer to the question has appeared in any coverage I have seen of this case, including a September, 2013,.NY Times followup <a href="http://www.nytimes.com/2013/09/15/nyregion/the-two-wills-of-the-heiress-huguette-clark.html">article</a> on the occasion of the case nearing trial.  In the absence of a creditable explanation for this strange distortion of the hospital mission, - is there any other conclusion than that its purpose was to extract a large amount of money from a vulnerable, rich, but no longer acutely ill former patient? This would suggest an unusual but monumentally unethical kind of hospital mismanagement. So we have two recent stories about major, unusual, apparently severe mismanagement by hospital executives.  These stories were reported as if they were independent. However, buried in the original NY Post article, but unmentioned in either of the major NY Times articles, however, was a hint of how this case and that above of the purloined inheritance appeared to be linked. The Hidden Hospital System The NY Post article referred thus to the Beth Israel CEO who allegedly pushed Ms Clark for contributions, <blockquote class="tr_bq"> Newman, former CEO of Continuum Health Partners, Beth Israel’s parent organization, took the unusual step of offering to help Clark complete a will so 'some faceless bureaucrat of the government' wouldn’t get his hands on her estate, court papers say.</blockquote> Quick Watson, did you see that? Continuum Health Partners was the "parent organization" of Beth Israel Hospital during at least some of the time Ms Clark was in residence there.  Continuum Health Partners also was the "previous owner" of Long Island College Hospital during at least some of the time it apparently was suffering large losses and its endowment was being depleted.  So were both these stories really about the same organization, the same hospital system? Digging a little further, per its <a href="http://www.linkedin.com/company/continuum-health-partners/products">own LinkedIn page</a>, <blockquote class="tr_bq"> Continuum Health Partners, Inc. was formed in 1997 as a partnership of three venerable institutions — Beth Israel Medical Center, St. Luke's Hospital, and Roosevelt Hospital.</blockquote> So while the hospital system did not exist when Ms Clark first entered Beth Israel Hospital, the heiress' "care" was under the control of the organization apparently from 1997 to the day she died. Furthermore, as noted in a 2011 Chronicle of Higher Education article, <a href="http://www.innovativeresourcesgroup.com/archive/89-latest-and-greatest/314-from-mergers-that-didnt-stick-lessons-emerge-for-other-charities">available from </a>Innovative Resources Group Inc, <blockquote class="tr_bq"> If there was a honeymoon after the merger of Long Island College Hospital, in Brooklyn, with Continuum Health Partners, in New York in 1998, few remember it. The bickering began early and dragged on for years, but divorce didn’t seem inevitable until the doctors went public.</blockquote> So the hospital system called Continuum Health Partners took over Long Island College Hospital in 1998 and held it for 13 years.  Furthermore, apparently LICH was part of Continuum Health Partners during the time when its losses rose and the Othmer bequest was depleted.  For example, from the CHE article, <blockquote class="tr_bq">  Several physicians told a crowd gathered outside the hospital’s entrance in 2008 that Continuum had withheld money from the 150-year-old institution, needlessly cutting patient services and endangering the hospital’s future.</blockquote> Also in 2008, the Brooklyn Heights Blog <a href="http://brooklynheightsblog.com/archives/3845">reported</a> this response to a question about finances from the Continuum Health Partners CEO, Stanley Bazenoff, <blockquote class="tr_bq"> LICH faces an immediate fiscal crisis. Unless action is taken quickly, he said, LICH will not have cash on hand to meet payrolls and other current expenses. He ascribed LICH’s problem to three factors. First, the hospital carries a heavy debt burden–approximately $150 million in long-term bonds financed through the New York State Dormitory Authority and $25 million in short-term commercial paper–which results in annual debt service (including interest and amortization) cost of approximately $22 million. Second, LICH has an operating deficit, presently about $40 million on an annual basis,...</blockquote> Denis Hamill, a columnist for the New York Daily News, made this accusation in a February, 2013, <a href="http://www.nydailynews.com/new-york/hamill-lich-merged-death-article-1.1266344">editorial</a>: <blockquote class="tr_bq">Under Continuum, the once-profitable LICH ran up $300 million in debt from pure administrative malpractice. And then Brezenoff brokered the smelly SUNY Downstate merger, with state taxpayers absorbing the $300 million debt.</blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> So it certainly looks like there is an argument that Continuum Health Partners, under its CEO, Stanley Bazenoff, was responsible for the manipulation of pseudo-patient and rich heiress Hughette Clark to secure a large donation, and the nearly simultaneous depletion of Long Island College Hospital's finances, including a large bequest that was supposed to be untouchable.</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">Not surprisingly, Mr Bazenoff, described by Mr Hamill as <blockquote class="tr_bq">a ruthless powerbroker ... whose nickname at LICH is Darth Vader </blockquote> and <blockquote class="tr_bq">a quintessential member of what muckraker Jack Newfield called The Permanent Government of New York  </blockquote> also seems to have gotten rich in his position as leader of Continuum Health Partners, along with his other top managers.   The blog LICH Watch <a href="http://lichwatch.blogspot.com/2011/03/salary-scandal-at-hospitals.html">found</a> these results from the system's 2009 IRS 990 report,</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><blockquote class="tr_bq">here are some highlights, figures for Continuum employees who, hm, earned more than a million dollars for the year: Chandra Sen, MD, $2,109,204 Stanley Brezenoff, $2,014,413 Kathryn C. Meyer, Esq. $1,049,807 John Collura, $1,307,556 Gail Donovan, $1,365,354</blockquote>  A 2011 New York Post <a href="http://nypost.com/2011/03/16/nonprofit-hosp-bigs-megabucks/">article</a> stated,</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><blockquote class="tr_bq"> Stan Brezenoff, CEO of Continuum Health Partners, overseeing such hospitals as Beth Israel, St. Luke’s and Roosevelt, pulled in about $3.5 million. </blockquote>  So this leads to yet more mysteries, first about the individual cases when viewed as occurring within one large hospital system:</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">-  Why were Long Island College Hospital's finances addressed as if it were an independent entity, when it was in fact just a subsidiary of Continuum Health Partners? </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> -  Why was Continuum Health Partners role in the hospital's enlarging debt and depleting endowment not discussed?</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> Similarly,</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> -  Why was the bizarre treatment of Hughette Clark attributed to "Beth Israel executives," but not Continuum Health Executives, when Beth Israel was also just a subsidiary of Continuum Health? </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">Then there is the larger mystery,</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> -  Why have these two cases been discussed as completely independent, when they appear to be part of a pattern of conduct by Continuum Health Partners management? </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">Summary</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">While we continue to see cases, some amazingly bizarre, suggesting mismanagement and unethical management of hospitals and hospital systems, there seems to be an amazing lack of curiosity about how they occurred and what their implications may be.  This lack of curiosity is so profound that no one seems to have noticed that two vivid and strange cases getting prominent media notice in the same city and the same time involved the same large hospital system. </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">Health care organizations seem to become ever larger.  Such enlarging organizations can concentrate their power, dominate their "markets," and hence increase their revenues and the compensation of their top hired managers.  Without any countervailing force, they push seemingly inexorably towards oligopoly and then monopoly.</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">Furthermore, the cases of the purloined bequest and the resident heiress show that ever larger organizations with ever more complex structures are ever better at hiding the accountability of their top hired managers.  We have previously noted, e.g. <a href="http://hcrenewal.blogspot.com/2010/10/glaxosmithkline-subsidiary-pleads.html">a case</a> in which a subsidiary of GlaxoSmithKline pleaded guilty to crimes involving production of adulterated drugs, thus shielding GSK and its management from responsibility, how subsidiaries of large corporations may plead guilty to crimes, thus absolving their parent organizations and its managers of any blame. In the current cases, it seems that somehow a large health care system was able to avoid accountability by letting its component hospitals appear to be independent.  Yet it is the larger system that was booking the revenue and making millionaires out of its hired managers.  This seems to show how concentration of power into ever more complex organizations can be used to enhance the <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic effect</a>, making mismanagement and those accountable for it ever more obscure. </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">As we have said until blue in our collective faces, if we do not hold the real leaders of health care accountable for their actions and the actions of their organizations on their watches, we can expect continued misbehavior, and hence continued health care dysfunction.   </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div> It's appropriate to conclude with this, a video of Jeremy Brett in A Scandal in Bohemia, from the first season of the show as first shown on PBS. <iframe allowfullscreen="" frameborder="0" height="315" src="//www.youtube.com/embed/shLYcUVOMb4?list=PL2VjH97HFEqmNfN8aQ5qiv90kPM7ncZ7U" width="560"></iframe>

The Adventures of the Purloined Bequest, the Resident Heiress, and the Hidden Hospital System

The game is afoot again. A series of recent articles in the media described a series of cases whose mysterious interrelationships Sherlock Holmes might have appreciated.The Purloined BequestA singula…

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19 Sep 2013

The Long Con - "Charitable" Hospitals Make Multimillionaires out of Their CEOs

The CEOs of ostensibly charitable hospitals founded to serve the poor continue to become rich.   The latest reminders are in two articles from Maryland, f<a href="http://www.delmarvanow.com/article/20130812/WIC01/308110024/Inside-Maryland-hospital-CEO-pay">rom DelMarVaNow,</a> and <a href="http://articles.baltimoresun.com/2013-08-17/health/bs-hs-health-compensation-20130817_1_hospital-ceos-health-care-executives-compensation">from the Baltimore Sun</a>,.and one <a href="http://www.bostonglobe.com/business/2013/08/15/top-executives-earned-million-boston-teaching-hospitals-according-filings/story.html">from the Boston Globe.</a> All this diligent reporting showed multimillion dollar <a href="http://articles.baltimoresun.com/2013-08-17/health/bs-hs-health-compensation-20130817_1_hospital-ceos-health-care-executives-compensation">executive compensation</a>,  as usual not justified by evidence or logic, but also how executive compensation is becoming divorced from the ostensible charitable mission of non-profit hospitals.   Most Hospital CEOs are Paid a Lot So jin Maryland, we found via DelMarVaNow, <blockquote class="tr_bq">Peninsula Regional Medical Center paid its top executive and her immediate predecessor a total of $2.37 million in compensation in 2011 as the nonprofit hospital gained millions of dollars in profit.</blockquote> In particular, <blockquote class="tr_bq"> The analysis shows that R. Alan Newberry was the third-highest paid hospital chief in Maryland, even though he has not run PRMC since 2009. In the year after formally stepping down from the hospital’s top job, Newberry received $1.57 million, about $600,000 more than he had while still working full time.</blockquote> The Baltimore Sun summarized compensation given to multiple executives, <blockquote class="tr_bq"> Eleven executives earning seven-figure compensation packages including salary, bonus, retirement and other pay saw their total pay rise from as little as 0.13 percent to as much as 308 percent in the fiscal year that ended in 2012, according to tax filings. Another executive earning more than $1 million saw a pay cut.</blockquote> In particular, <blockquote class="tr_bq"> The state's highest-compensated hospital executive that fiscal year was Kenneth A. Samet, the CEO of the 10-hospital MedStar Health system, who earned $6.3 million. More than half — $3.5 million — was money earned in a supplemental retirement plan during his 23 years of service. He won't get the money until he retires. His base pay was $1.2 million, and he received $1.5 million as a bonus and incentives. The other top five highest-paid executives in Maryland are James Xinis, CEO at Calvert Memorial Hospital in Prince Frederick; Ronald A. Peterson, CEO of the Johns Hopkins Health Center Corp.; Robert A. Chrencik, CEO of the University of Maryland Medical System; and Thomas Mullen, CEO of Mercy Medical Center. Xinis saw his compensation package jump 307.8 percent to $3.5 million, $2.8 million of which was a required distribution of vested retirement funds from a plan he begin contributing to in 2003, the hospital said in a statement. Xinis has served as CEO for 26 years and plans to retire in the next 18 months, the hospital said. His base salary in fiscal 2012 was $309,557. <div class="mod-baltsunarticletext mod-articletext" id="mod-a-body-first-para">Peterson, who oversees six hospitals, earned a $3.5 million compensation package. Peterson's 86.5 percent pay increase largely reflected pension benefits he'd earned during 40 years at Hopkins. His annual base salary increased about $49,500 to $1.1 million in fiscal 2012. Chrencik, whose system has 12 hospitals, earned about $2.3 million. Chrencik's total pay grew 23.4 percent. Mercy's Mullen saw his pay rise 24 percent to $1.6 million for the fiscal year ending in 2012.</div><div class="float" style="clear: both; height: 1px; line-height: 1px;"><img alt="" height="1" src="http://articles.baltimoresun.com/images/pixel.gif" width="1" /></div><div class="float" style="clear: both; height: 1px; line-height: 1px;"><img alt="" height="1" src="http://articles.baltimoresun.com/images/pixel.gif" width="1" /></div> The one CEO earning more than $1 million who saw his compensation fall was Edward D. Miller, who retired in June 2012 as CEO of Johns Hopkins Medicine and dean of the university's medical school. His reported pay dropped to just over $1 million in fiscal 2012 from nearly $2.3 million the prior year, when he took a one-time retirement payout.</blockquote> Also, <blockquote class="tr_bq">According to Saint Agnes tax filings, [CEO Bonnie] Phipps received $1.9 million in the 2012 fiscal year, 4.4 percent more compensation than a year earlier.</blockquote>  Per the Boston Globe, local hospital executives also did really well <blockquote class="tr_bq">Chief executives at the Boston area’s largest nonprofit teaching hospitals drew pay packages of $1 million to $2.1 million in 2011, including salaries, bonuses, and compensation such as health and life insurance and retirement benefits. Topping the list locally was Gary L. Gottlieb, chief executive of Partners HealthCare System, the state’s largest hospital and physicians organization, who received total compensation of $2.1 million in 2011, according to federal tax documents released Thursday by the nonprofits.</blockquote> And, <blockquote class="tr_bq">The presidents of Partners-owned Massachusetts General and Brigham and Women’s hospitals also drew seven-figure packages in 2011, with Peter L. Slavin at Mass. General receiving a total of $1.7 million and Elizabeth G. Nabel at Brigham and Women’s a total of $1.9 million.</blockquote> Also, <blockquote class="tr_bq">Tufts Medical Center reported that Ellen M. Zane, who served as chief executive through September 2011, had total pay of $1.6 million that year. Eric J. Beyer, who took over from Zane in October, had total compensation of $744,722 that included pay for work as chief executive and at his previous job as president of the Tufts Medical Center Physicians Organization. James Mandell, chief executive at Boston Children’s Hospital, was paid a total of $1.5 million in 2011. That was down from the $2 million he earned the prior year when he received two separate incentive awards, according to a hospital spokeswoman. Mandell plans to retire next month and will be succeeded by Sandra Fenwick, the hospital’s president and chief operating officer. Total compensation for Boston Medical Center chief executive Kate Walsh was listed at nearly $1.4 million in 2011, an increase from $1.3 million in 2010. At Dana-Farber Cancer Institute, chief executive Edward J. Benz Jr. received total compensation of nearly $1.3 million in 2011, up from $1.1 million in 2010. Beth Israel Deaconess Medical Center paid three different top executives in 2011. Eric Buehrens, who served as interim chief executive from February to October, drew total compensation of just over $1 million for that role and other executive jobs. </blockquote> The Justification for this Pay is Stereotyped (and not Supported by Logic or Evidence) The Usual Talking Points The articles in combination provided the usual talking points as justification.  It seems nearly every attempt made to defend the outsize compensation given hospital and health system executives involves the same arguments, thus suggesting they are talking points, possibly crafted as a public relations ploy.   We first listed the talking points <a href="http://hcrenewal.blogspot.com/2011/09/talking-points-sans-original-thought-to.html">here</a>, and then provided additional examples of their use <a href="http://hcrenewal.blogspot.com/2011/09/more-repeats-of-talking-points.html">here</a>, <a href="http://hcrenewal.blogspot.com/2012/03/example-of-how-complex-takes-control.html">here</a> <a href="http://hcrenewal.blogspot.com/2012/12/health-care-hired-managers-not-playing.html">here,</a> <a href="http://hcrenewal.blogspot.com/2013/05/executive-compensation-as-legal.html">here</a>, <a href="http://hcrenewal.blogspot.com/2013/06/no-blues-but-lots-of-green-for-st-louis.html">here,</a> and <a href="http://hcrenewal.blogspot.com/2013/08/should-we-cry-for-non-profit-hospital.html">here</a>..    They are: - We have to pay competitive rates - We have to pay enough to retain at least competent executives, given how hard it is to be an executive - Our executives are not merely competitive, but brilliant. As we have <a href="http://hcrenewal.blogspot.com/2013/08/should-we-cry-for-non-profit-hospital.html">noted before</a>, there is little evidence in support of these talking points.  What evidence there is on the topic suggests there is no real free market in interchangeable CEOs, and that CEOs are not very mobile, especially not across different kinds of organizations (look <a href="http://hcrenewal.blogspot.com/2012/10/more-reasons-to-doubt-how-ceos-are.html">here</a>).  There is little evidence that hospital (or other health care) executives are particularly brilliant, or any more brilliant than multitudes of physicians, nurses, and other health care professionals who work hard to make their institutions run. True to form, the reporting from Maryland and Boston found that defenders of executive pay cited the talking points, but without any further logic or evidence.  Competition Re PRMC (from DelMarVaNow), <blockquote class="tr_bq"> 'We’ve looked at about 17 like institutions. Eight are smaller than we are; eight are larger. Every hospital is different, so you have to always take into account there’s some variation, but we’ve always stayed in the middle. Our goal has been to stay in that 60 percent level as far as compensation goes,' said Martin Neat, chairman of PRMC’s board of directors, which oversees executives’ salaries.</blockquote>Note that in this case, no justification was provided for constantly setting the CEOs pay above the median. Re Maryland, via the Baltimore Sun <blockquote class="tr_bq"> Hospitals argue that they have to offer competitive compensation to attract talent to run a complicated business.</blockquote> Re Maryland and particularly UMMS, via the Sun, <blockquote class="tr_bq"> The medical institutions say they hire independent consultants and look at the pay of executives at comparable health systems when making their decisions. </blockquote> Also, <blockquote class="tr_bq">UMMS hospital executives are compensated in line with national benchmarks,' [UMMS spokeswoman Mary Lynn] Carver said. </blockquote> Note that there was no justification for the comparability of these institutions, or why a national versus regional comparison was made. Retention Re PRMC <blockquote class="tr_bq"> Above all, PRMC’s board of directors seeks to ensure that the hospital attracts and retains the best leaders.</blockquote> Note that there was no evidence given that current leaders might leave were their compensation reduced.  Brilliance Re PRMC, <blockquote class="tr_bq">[Board Chairman Neat]  added: 'These are high-paid positions, but these are very capable people who could go elsewhere.'</blockquote> Re Maryland, from the Baltimore Sun <blockquote class="tr_bq"> Executives need to understand everything from the latest health technologies to regulatory changes, including health reform.</blockquote>So do doctors and nurses, so why do they not not get similar pay? Also, <blockquote class="tr_bq"> [Carmela Coyle, CEO of the Maryland Hospital Association, said,] 'Hospital executives are in charge of incredibly complex organizations,' she said. 'They are organizations that are open 24 hours a day and are highly regulated. These are really difficult, difficult jobs'.</blockquote> Note again the lack of comparison with the doctors and nurses who must staff the hospitals 24 hours a day, and make difficult decisions while caring for patients with sometimes life-threatening conditions.  How often does a hospital CEO get a call in the middle of the night, and how often does it require a decision in a life-and-death situation? Re Mercy Medical Center, <blockquote class="tr_bq"> 'As a result of Mr. Mullen's leadership, vision and skillful stewardship, Mercy has been an economic engine for the city, infusing additional jobs into the local economy,' the hospital said in a statement.</blockquote> When in doubt, use the v (for visionary) word.  Note that this begs the questions of how many other people were responsible for the economic benefits, and whether such benefits, rather than, say ability to provide good care to patients, should be the main consideration. Should Brilliance be Measured by Revenue? At best, some defenders of high CEO pay seem to argue that the main measure of CEO brilliance ought to be their hospitals' financial performance. For example, the DelMarvaNow article included, <blockquote class="tr_bq">Fiscal health is one of the most important considerations in determining [new CEO Peggy] Naleppa's pay, [board chairman] Neat said. </blockquote> Also, he was quoted, <blockquote class="tr_bq">'There's no question that the financial performance of the institution is going to affect what you're going to pay', Neat said.</blockquote> While, <blockquote class="tr_bq">Nationwide, hospital boards subscribe to a similar philosophy.  Financial health was cited by 100 percent of multi-hospital organizations in a 2006 survey as a factor in determining bosses' incentive plans.</blockquote> Similarly, the Baltimore Sun quoted Dr Stephen F Jencks, "who serves on the board of the cost review commission," <blockquote class="tr_bq">executives should be judged by whether they are running cost-efficient organizations</blockquote> However, CEO pay seems to increase even at financially challenged institutions,  as the Baltimore Sun noted, <blockquote class="tr_bq">The CEO pay question — always a hot-button issue — is generating debate again this year after a state panel spurned a push by hospitals for higher rates, instead approving smaller increases and calling on them to do more to curb expenses. Hospitals have sought rate increases in each of the past three years, and this year at least one Baltimore-area hospital responded with layoffs in an effort to trim labor costs.</blockquote> So, <blockquote class="tr_bq">'If they are laying off staff and decreasing what they invest in the community and executive compensation is increasing, that is a real question,' said Jessica Curtis, project director of the hospital accountability project at Community Catalyst, a national advocacy group that promotes wider access to affordable health care.</blockquote>Even if one accepts that the compensation of leaders of organizations that take care of sick and injured patients ought to mainly depend on the brilliance of their leadership as measured by how much money the organizations make, rather than the quality of that care, it is not clear that all these leaders are brilliant in that sense. The Charitable Mission and CEO Compensation Essentially all US non-profit hospitals and hospital systems have a history of a charitable mission to improve the health of their patients and communities, even if that means taking care of poor people who cannot pay for these services.  Nearly all justify their legal status as non-profit corporations by stating this mission.  For example, Peninsula Regional Medical Center, the main subject of the DelMarVaNow article, describes its mission thus in its <a href="http://www.guidestar.org/FinDocuments/2012/520/591/2012-520591628-094036fd-9.pdf">US tax filing</a>, <blockquote class="tr_bq">Peninsula Regional Medical Center is a not-for-profit 501 (c) 3 non-stock corporation founded in 1897 to serve the health care needs of the community.  The Hospital's primary purpose is to provide the highest [sic] primary, secondary, and selected tertiary health care services to residents of and visitors to the Mid-Delmarva Peninsula in a competent, compassionate, and cost effective manner designed to elicit a high degree of consumer satisfaction.  The Hospital's mission is to improve the health of the communities we serve....</blockquote> Yet it appears that this mission is honored mainly in the breach, at least when it comes to CEO compensation.  The DelMarVaNow article emphasized that hospitals' charitable functions are not seen as relevant by hospital boards when setting CEO compensation, <blockquote class="tr_bq">Despite the nonprofit status of the organizations they oversee, hospital boards don't appear to put weight toward the amount of free medical services and community outreach activities, good deeds collectively known as charity care, [executive vice president of Integrated Healthcare Strategies Kevin] Talbot</blockquote> Also, <blockquote class="tr_bq">The head of the consulting firm that helps PRMC's board establish [current CEO] Naleppa's pay said community benefit shouldn't be part of the equation. 'In my over 25 years of consulting on hospital compensation, I have never seen community benefit used as a factor in determining executive pay,' Rian Yaffe said.  'Community benefit has nothing to do with how difficult a hospital is to manage and lead.'</blockquote> However, community benefit is the mission of the hospital, and is justification for most US hospitals' non-profit status, which allows them to escape certain kinds of taxation, and for donors to make charitable, tax-advantaged contributions to the hospitals.   The Baltimore Sun listed financial but not charitable performance as a justification for the compensation of a particular executive, the CEO of Johns Hopkins Medical Center, who is <blockquote class="tr_bq">'held responsible for stringent qualitative measures,'  in such areas as financial performance, patient safety and service excellence, [Johns Hopkins] spokeswoman Kim Hoppe said in a statement.</blockquote> When asked by the Sun to comment, the advocacy group Community Catalyst stated <blockquote class="tr_bq">One of the factors that should be considered, it says, is the role of non-profit hospitals in the community and in providing charity care.  </blockquote> Meanwhile, while the hospitals gain advantages from ostensibly focused on the mission of providing community care and benefit, not only are there leaders not given incentives to uphold this mission, they are explicitly compared to leaders of for-profit organizations who have no such missions, and who are primarily tasked with increasing short term revenue in this era of "<a href="http://hcrenewal.blogspot.com/search/label/financialization">financialization</a>."  In the Baltimore Sun, <blockquote class="tr_bq">Hospitals note that they compete with private sector businesses where their executives could choose to work instead.</blockquote>Again, as noted above, there is little evidence that top hired managers are really that mobile, and less that a manager from one sector, e.g., non-profit hospitals, would be in great demand in another, e.g., a for-profit corporation. The Boston Globe noted an argument made that implied no one should complain about how much non-profit hospital executives make, since executives of for-profit corporations make even more. <blockquote class="tr_bq"> 'In a big successful teaching hospital, it’s very rare to see anything less than $1 million in total compensation for the chief executive, and $1.5 million to $2 million is the norm,' [managing director of consulting firm Compensation Resources Paul R] Dorf said. 'Executives at publicly traded pharma or medical device companies can make 10 times as much.' </blockquote>So if there is little evidence for the mobility of top hired managers, there is less for the desirability of managers of non-profit hospitals as heads of large pharmaceutical or medical device companies.  But furthermore, in trying to justify, albeit illogically, outsize CEO compensation, the defenders of this compensation have provided evidence that the leaders and stewards of non-profit hospitals may no longer care about the hospitals' fundamental mission.  This suggests that hospitals' overt declarations of their mission, especially when used to obtain more donations and tax benefits, may amount to the ethical equivalent of a "long con," that is, a long-term confidence scheme. Summary While F Scott Fitzgerald noted that the very rich are different from you and me, it may now be more appropriate to say that top hired managers are very different from you and me.  Again and again we see that they play by very different sets of rules than do other people who work in health care.  Notably, while they often emphasize cost cutting, and may be quick to lay off or outsource other employees, their compensation increases year by year no matter how well their organizations are doing.  While other employees, increasingly now including doctors as well as other health care professionals, have to answer to the hired managers, the hired managers only answer to boards of directors or trustees who often act like their cronies, perhaps because they are often also current or retired hired managers. Hired managers are subject to incentives that seem designed not to improve patients' and the public's health, but at best to improve the short-term revenue of health care organizations, and at worst to increase the wealth of hired managers.  Such perverse incentives risk promoting ill-considered, mission-hostile, or even corrupt management.  The sorts of people who aspire to be hired managers in such conditions are likely not the sort of people one would expect to really advance the health of patients or of the population. As a first step to restoring health care leadership to some state of reasonable accountability and responsibility, we need to challenge the rules that only hired managers play by.  It would be nice to see articles in the media about health care CEO compensation that at least attempt to question the usual talking points.  All of us could think about how we could challenge our local million dollar plus hospital CEOs to justify why they should be treated so differently from all other hospital employees. Since it seems that many hospitals no longer fit at least the spirit of the definition of not-for-profit organizations, even though they use this designation for financial advantage, we need policies to encourage them to uphold their mission, and that provide negative consequences if they do not.

The Long Con - "Charitable" Hospitals Make Multimillionaires out of Their CEOs

The CEOs of ostensibly charitable hospitals founded to serve the poor continue to become rich. The latest reminders are in two articles from Maryland, from DelMarVaNow, and from the Baltimore Sun,.a…

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23 Aug 2013

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