A while back, we posted about Phoebe Putney Health Systems, a hospital system in Georgia. The story then was that hospital executives had rung up lavish travel expenses connected with a hospital malpractice insurance subsidiary located in the Cayman Islands. When an Atlanta Journal-Constitution reporter then asked asked Phoebe Putney Chief Financial Officer (CFO) Kerry Loudermilk about these expenses. Loudermilk first said what is lavish "is in the eye of the beholder." He responded to further questions about Grove Pointe, "We own it. We'll manage it the way we damn well want." At the time, I commented that although the hospital system may own its non-profit subsidiary, the hospital executives own neither, and are not entitled to run either any way they "damn well want."
Pheobe Putney is back in the news.
First, the system, using the power of eminent domain through its Hospital Authority, attempted to seize the house of an elderly woman so it could expand its employees' day-care center (see story on AccessNorthGA). The women challenged the system in court. A jury found that Pheobe Putney wanted the house, it would have to pay five times what it offered, plus moving expenses. Meanwhile, in response to this case, Georgia Governor Sonny Perdue is advocating a state constitutional amendment to restrict the use of eminent domain to seize property.
Second, the Atlanta Journal-Constitution reported on a convoluted story of what happened to some people who tried to blow the whistle on Phoebe Putney's financial practices.
It started with faxes called the "Phoebe Factoids," and headlined with the "Top 10 Most Highly Guarded Secrets at Pheobe," which were sent anonymously to a variety of recipients in 2003 and 2004.
As the Journal-Constitution put it, "Pheobe officials were infuriated. The hospital system, through an attorney, hired private investigators who were former FBI agents and aggressively hunted the identity of the faxers. The system's chief executive officer recently compared the fax campaign to terrorism. 'We live in a society that has plenty of terroristic activities,' with hospitals identified as potential targets, said Pheobe CEO Joel Wernick. When an organization is 'bombarded' with faxes, it has an obligation to find out where they're coming from, he said."
Pheobe Putney asked the Dougherty County District Attorney to investigate. DA Ken Hodges convened a grand jury which subpoenad telephone records, but then turned over the records to Pheobe Putney. Apparently based on these records, Pheobe Putney identified local accountant Charles Rehberg as author of the faxes. The Journal-Constitution reported that Pheobe Putney's private investigators then confronted Rehberg, "the investigators blocked his pickup, Rehberg said, and threatened him and his family."
Rehberg was helped by a local physician, Dr John Bagnato. The financial information they found lead them to believe that the hospital and others were "overcharging the uninsured and aggressively seeking payment - therby violating their charitable obligations as tax-exempt organizations." They ended up consulting for attorney Richard Scruggs' lawsuit against not-for-profit hospitals who allegedly overcharged poor patients.
The Grand Jury first indicted Bagnato and Rehberg on felony aggravated assault and burglary counts, as well as misdemeanor counts for making harassing phone calls. The burglary was allegedly at the home of physician James Hotz.
But irregularities cropped up. The Journal-Constitution found out that DA Hodges "received political contributions from Pheobe executives and others connected to Pheobe, and that his wife had been hired by Pheobe Putney Memorial Hospital." Futhermore, the newspaper got statements from people who said that "Hodges' office investigated the faxes case as a 'favor' to the hospital system." Hodges denied connections "between the campaign contributions, his wife's job, and his subpeona actions. And he defended his practice of sharing information." But then "Albany media reported that a bill for the phone records was sent by Hodges' office to a law firm that represents Pheobe." Rehberg's attorney then charged that "Pheobe is financing part of the prosecution."
Furthermore, thew newspaper found out that "there was no police or law enforcement report of a burglary or assault at that [Hotz's] residence.... And the indictment listed no date for the burglary or assault." After Hodges recused himself from the case due to allegations above, Houston County DA Kelly Burke got a new indictment which omitted the felony charges.
Obviously, much of the above consists of charges and counter-charges, none of which have been tested in court. Yet I would submit that at best, the managers of Pheobe Putney Health Systems have used a heavy-handed approach that is ill-suited to its role as non-profit health care provider whose stated core values include "people come first," and "relationships are built on honesty and integrity." Accusing people who sent faxes about financial data of terrorism? Sending ex-FBI agents to investigate the faxes? Paying the District Attorney for records obtained by a Grand Jury?
To repeat, Pheobe Putney managers should be running the organization in accord with its mission to benefit the public, which may not necessarily be the way they "damn well want."
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